Austerity blog

January 26, 2024

California’s public sector staffing crisis

The Labor Center’s recent report Civil Service Vacancies in California 2022-2023 highlights the local effects of California’s statewide government staffing crisis. We found vacancy rates in several counties as high as 30% across wage levels and occupations.  Similar vacancy rates have been reported in cities, school districts, and state agencies. As a result, Californians have had to wait longer for basic public transactions, struggled to access critical services, and footed the bill for overtime and outside contractors to perform work normally performed by public employees. Public workers face higher workloads, mandatory overtime, and the stress of trying to provide services in a chronically understaffed environment. Workers testified to state legislators in 2023 about how understaffing, the high cost of living, and slow hiring efforts undermine morale, further damaging efforts to attract and retain vital public workers. Governor Newsom has included the elimination of vacant positions as part of a proposed $8.5 billion in spending reductions in the 2024-25 budget cycle. Many local governments have announced hiring freezes and are targeting vacant positions for reductions. These cuts come as federal pandemic recovery funds are expiring and revenue recovery is stalling in many places, student loan payments resume, and renter protections expire. The state can’t afford to ignore the pressing challenges of staff shortages in its efforts to resolve the budget deficit. The health of the state’s economy requires adequate public sector staffing, especially during economic downturns and recoveries. How did we get here? Without comprehensive data, untangling the many causes of high vacancy rates is difficult. Unfortunately, most government agencies lack systematic data on how long it takes them to post and fill positions, which occupations are hardest to fill, how applicant pools have changed, and other important metrics. The tight labor market of the past three years has produced smaller applicant pools, driven up private sector wages, and increased turnover as workers enjoy more opportunities. Since 2010, private sector wage growth each month—while still well below inflation levels—has significantly outpaced that in the public sector, in contrast to the 2008 Great Recession when public sector wages remained relatively stable. A record low ratio of job seekers to openings leaves employers to compete for a smaller pool of workers. California’s population has declined since 2020 for the first time in the state’s history, and the working-age population is projected to decline steadily over the coming decade. But the tight labor market and wage competition are not the only drivers of staffing challenges. Many occupations had a dwindling pipeline of new entrants long before the pandemic. Nurse, police, and teacher shortages have long predated the pandemic and have exploded since then. Social workers and mental and public health staff were already in short supply before the expansion of mental health programs in schools and counties exacerbated the gap in need. Staffing shortages are also the product of decades of austerity. Beginning with the adoption of Proposition 13 in 1978, California has a long history of underfunding public services and of cutting services during downturns without later restoring them. The long stretch of employment decline after the Great Recession, frozen government salaries and hiring freezes, followed by massive job losses in early 2020, drove many government employees to the private sector or early retirement. This steady chipping away of public budgets (including wage and hiring freezes during the pandemic) has deteriorated the job quality for workers who remain. As of November 2023 there are 35,800 fewer people working in local government than in February 2020. By comparison private sector employment in California has recovered well, growing by 3.5% over the same period. What can government do? Systemize and publish data on vacancies: Data on compensation, hiring processes,…

January 19, 2024

What Workers and Unions Stand to Gain from Recent Executive Orders on Artificial Intelligence

Given the glaring absence of national legislation in the U.S. regulating new technologies, the recent release of several executive orders on artificial intelligence (AI) at the federal level and in California is significant. President Biden’s executive order in particular is effectively the first national public policy on AI to be established in this country. Moreover, these orders have the potential to result in concrete progress on protecting workers and ensuring they benefit from emerging digital technologies. That potential stems not just from the government’s regulatory power but also from its large footprint as a purchaser of technology, a contractor with private sector businesses, and a provider and funder of public services.We believe that governments at all levels should play an incisive leadership role in establishing robust standards around the use of AI and other digital technologies, prioritizing the safety and well-being of impacted communities—especially low-income communities and communities of color—as well as public sector workers and other workers connected to public funding.Moreover, public sector workers stand to play a critical role in safeguarding the public good against potential harms of government’s use of technologies capable of autonomous reasoning and decision making. For this safeguard to be meaningful, workers must have the skills and authority needed to implement accountability strategies, as well as the right to bargain fully over technology design and impacts.Below we outline core principles for how government action on AI can benefit public and private sector workers, and comment on how two recent executive orders reflect those principles. Our goal is to help inform the significant workthat lies ahead for federal, state, and local governments in their efforts to model responsible use of AI.AI in the WorkplaceThe recent executive orders on artificial intelligence by President Biden at the federal level and Governor Newsom in California cover broad ground, outlining potential risks of AI and directing agencies to develop guidelines for responsible use. Impacted communities have a significant stake in how these executive orders are interpreted, including persons in the criminal justice system, patients in the healthcare system, students and teachers in public schools, and the public in general.Workers and their unions have a stake as well. Across the country, employers are increasingly adopting AI and other digital technologies such as electronic monitoring, algorithmic management, and task automation to make a wide range of employment and production-related decisions. These decisions can affect wages, benefits, work schedules, hiring and firing, discipline and promotion, the number and location of jobs, skill requirements, workloads, and workplace health and safety.Moreover, as governments introduce AI and related technologies into work processes, public sector workers will see their jobs fundamentally transformed, affecting the skills required to do their work, their interaction with clients, their autonomy over work products, and more. Research is raising concerns about negative impacts on mental and physical health, blurring of boundaries between home and work, invasions of worker privacy, inadequate training supports, and difficulty maintaining service quality when new technologies are rolled out. Introducing advanced technologies such as AI can exacerbate power imbalances in the workplace, leaving workers struggling to understand, challenge, or explain outcomes of algorithmic decision making. Finally, the efficiencies and cost savings enabled by technology may not accrue to workers, even as their jobs become less secure, more intense, and are paid less.Government Strategies to Ensure Responsible Workplace Tech1. Leverage the full scope of government spending to promote responsible use of AIDiscussions about government leadership on AI often focus on procurement as an important site for responsible use standards. But the net should be cast wider: federal, state, and local governments should leverage all of the avenues where…

January 12, 2024

California’s teachers are fighting for better schools

In an extraordinary year for labor, California’s teachers have been at the center of a revitalized movement that has successfully demanded better working conditions, family-supporting wages, and a seat at the table for important educational decisions. The toll taken by the COVID-19 pandemic, the stress of working in an increasingly strained education system, persistent state underfunding, and inadequate salaries and staffing have all invigorated teachers’ unions to fight for their members and their students. In early December, the Legislative Analyst’s Office issued a stark estimate of the state’s fiscal situation heading into 2024-25, which means teachers will once again need to fight alongside families and students to stave off huge cuts in K-12 funding.This fall, tens of thousands of teachers and school workers in Fresno and San Francisco won significant wage increases and more resources for their students. Both unions voted overwhelmingly to strike, but settled their contracts without walking out. These contract wins come on the heels of an Oakland teachers’ strike and Los Angeles educators’ solidarity strike with school workers last year and a Sacramento educator strike in 2022. Pre-pandemic strikes by Los Angeles and Oakland teachers that began the wave in 2019 included big wins for students, school staff, and the broader community.  Now, instructors at the California State University system are on strike for similar reasons.Teachers’ willingness to strike represents not just a resurgence of union power, but also their determination to call attention to the dire consequences of decades of California’s underinvestment in K-12 education. The debate over K-12 education often frames school budgets as a zero-sum choice between teacher pay, student needs, and fiscal solvency. But this is a false tradeoff—the challenges facing California’s education workforce and its students have been fueled by the state’s persistently inadequate funding. The damage done by Proposition 13 property tax reform over the last 45 years has never been overcome—changes to the state’s formula for funding education have simply redistributed a pie that is too small.As federal pandemic stimulus money runs out and state revenues decline precipitously, the structural inadequacy of California education funding is again jeopardizing the state’s students. Districts—which must adopt three-year budgets that show a minimum level of reserves—are threatening layoffs and program cuts even as they struggle to attract and retain qualified teachers and address persistent achievement gaps. These funding constraints come as the state should be investing more in education to address both the consequences of the pandemic disruptions and significant vacancy challenges across the state.For years, California has ranked near the bottom of the nation in its investment in K-12 education when adjusted for cost of living. Teachers, parents, and community groups, anchored by the grassroots alliance California Calls, attempted to address this longstanding crisis with a 2020 proposition ballot measure to reform the state’s commercial property tax system. Unfortunately, voters very narrowly rejected the measure. The impacts of this underfunding on students are measurable: California’s high school graduation rate is 23rd in the nation despite having one of the lowest graduation requirements.[1] California students test well below the national average on standardized tests and have some of the largest average class sizes in the country. The state faces persistent inequities in education outcomes that affect future economic wellbeing: 20% of Black students and 15% of Latino students did not graduate high school in 2021.This underfunding is one cause of persistently low pay for all school employees. Teachers across the country are underpaid relative to workers with similar levels of education and experience by an estimated 14%, and California is no exception. More than half of California’s teachers have at least a master’s…

February 5, 2021

Public spending must support everyone, not just the rich

Americans occupy increasingly separate economic spheres. Each year, more Americans struggle to afford housing, access quality education, pay for health care, and retire above poverty. A majority of Americans lack enough savings to weather a short spell of unemployment or a costly car repair. Our schools are more economically and racially segregated now than in the 1950s. Gaps in access to the Internet, paid sick leave, remote work, and health insurance have been ruthlessly exploited by the pandemic. Meanwhile, the vast majority of public spending — especially tax expenditures — benefits households in the top 20%, who hold nearly 90% of the nation’s wealth. Democrats have perpetuated this distortion; Biden’s tax pledge defines “middle class” as households earning up to $400,000 — the top 1.8% of taxpayers. Services on which most Americans rely — mass transportation, unemployment insurance, public schools, Social Security — have been steadily undermined with little fanfare. Anti-poverty policies do just enough to keep people from the brink. Wealth begets wealth, blessed by the federal tax code. If we are to sustain a meaningful democracy, the Democrats need a compelling campaign to fix our public spending so that it supports the majority of Americans on whose backs the economy has been resting. From Berkeley News, January 22, 2021: Berkeley scholars: Here’s what Biden should accomplish right away

April 14, 2020

How is this recession different from all other recessions?

I spoke with an sfgate.com reporter recently about how the COVID-19 crisis could impact Bay Area local governments. As always, there is a lot I said that didn’t make it into the article so here’s a bit longer ramble. I’m working on updating the numbers and data underlying these thoughts, so this is just some general concepts we should be thinking about. How is this recession different from all other recessions? The short answer is that every recession is different from every other recession—people (ahem, economists) tend to greatly overestimate our ability to predict how recessions and recoveries will unfold based on previous experience. The recovery from the Great Recession was quite different from previous recoveries (tl;dr: terrific stock market performance but very unsatisfying labor market performance from the perspective of workers). People with far greater expertise in labor economics / macroeconomics have already discussed how this crisis may unfold, although I think we really are in some uncharted territory here. The key differences I see as relates to local government impacts include: 1. The impetus The immediate trigger for the current slowdown is a public health order that has forced businesses across the economy to abruptly cease or reduce activity, regardless of their economic soundness. The Great Recession had several drivers, including inflated property values, complex financial instruments, stagnant wages suppressing actual consumer buying power, etc.—this all came to a head when financial markets famously collapsed in 2008, but many local governments had been seeing revenue slowdowns in the preceding months. In the current recession, the impetus is much more abrupt and steeper, although some of the underlying economic factors may impact the depth of recession and the recovery. The overall stagnation / decline of consumer power and labor market precarity is higher by some measures than before the Great Recession, but the immediate impetus for the slowdown is a public health order, which means that revenues will drop *very steeply* and that many businesses which were fundamentally sound and prospering in February will not exist in June or whenever the economy reopens. The consumer buying power that drove their revenues won’t have evaporated, but the businesses themselves simply won’t have the cash flow to stay alive. This all has implications for the timing of revenue losses and when / how we should expect to see revenues recover. (And of course, people work for those businesses, so the cycle of unemployment and business failure will repeat itself over the coming months.) 2. Uncertainty All recessions bring uncertainty about when the end will come, what recovery will look like, how people and firms and governments will respond, and how those responses will weave together and feed off each other. In this case, the uncertainty is also driven by scientific uncertainty: how quickly a vaccine can be produced. These scientific and behavioral and social uncertainties add a level of complexity specific to this circumstance. 3. The spending impact: In any recession, the biggest challenge governments face is declining revenues at a time when governments should be spending more money: on unemployment insurance, food aid, income supports, etc. COVID-19 has perhaps made this doubly true: we have unexpected costs managing a public health crisis, paying for scarce medical supplies, setting up temporary hospitals, closing up public parks, policing public health orders, housing vulnerable residents, along with all of the income support and other spending that accompanies an economic downturn. These spending imperatives to protect human life and health are atypical, and the federal government’s inaction (along with our complex healthcare system) make it very hard to estimate the total volume and distribution…

March 20, 2020

Beyond austerity

I started this blog—and chose the name—several years ago while finishing my dissertation. My intent was to write about my research on the shrinking public sphere and the persistent narrative of scarcity that characterizes governance in the U.S. I called it "beyond austerity" because I thought most scholarship on austerity was simplistic and that we needed to think about austerity more broadly. How do communities, and societies, decide what is enough? What constitutes plenty, or luxury? What do we each really need to thrive as individuals? How does it happen that music or art become seen as frivolous, rather than necessities? How do discussions about taxes reflect profound differences in how people think about security and relationships? How do we each normalize the amount of eduction, or money, or clothing, or healthcare, that we are entitled to, or that we resent others having? I began with an academic interest in how austerity is produced: who makes decisions about how to make do with less. Today, these questions are more pressing for me personally (being on a school board these days is all about implementing austerity). I decided to resurrect this site a few weeks ago because a job change gave me more time to write about how much our society reflects the weird combination of scarcity and plenty, and my own experiences observing how society is made up of so many invisible individual contributions—the "public" is so much more than government. And then the coronavirus pandemic took hold here in California. The Bay Area is less than a week into a full-scale shutdown, and every public entity is bleeding revenue: bus systems, BART, bridges, and soon local and state tax systems as incomes drop and the impact of reduced consumption decimates sales taxes. The importance and fragility of our public sector have been thrown into stark relief, as have the web of individual actions that keep our private sector—our restaurants, bookstores, volunteer programs—alive. How will this crisis make us think differently about what we each need to survive? About what, and who, is vital to a functioning society? About what is not necessary to keep our bodies alive, but is necessary for our spirit? And so for day one of this resurrection, I offer a possible answer to the latter:

August 19, 2016

Participatory Budgeting: not just for regular budgets

The Participatory Budgeting Project has a guide for communities that want to participate in decisions about the use of funds from Tax Increment Financing districts. The governance structure associated with Tax Increment Financing varies by state (and not all states have TIF), but there are potentially significant amounts of funding at stake. TIF districts capture the increased property tax increment in a set geographic area and use it to finance private or public projects. They use of funds often lacks transparency, and is often predetermined when the district itself is created. I’ve been following the move to participatory budgeting for a while, and this is an important acknowledgement by PBP that a lot of public money is outside even the difficult-to-engage standard budgeting process. Download their guide here: PB with Tax Increment Finance Funds

August 19, 2016

Why is recovery taking so long—and who’s to blame?

We are enduring one of the slowest economic recoveries in recent history, and the pace can be entirely explained by the fiscal austerity imposed by Republican members of Congress and also legislators and governors at the state level. EPI’s Josh Bivens examines the reasons beyond our slow economic recovery (one that has progressively slowed with each recession). Given the degree of damage inflicted by the Great Recession and the restricted ability of monetary policy to aid recovery, historically expansionary fiscal policy was required to return the U.S. economy to full health. But this government spending not only failed to rise fast enough to spur a rapid recovery, it outright contracted, and this policy choice fully explains why the economy is only partially recovered from the Great Recession a full seven years after its official end. The question of why the economic recovery has been so tepid is a vital part of the presidential election discourse. Clinton says she will increase employment through a public investment program. Trump says he will cut taxes to spark employment growth (and further limit spending). Bivens argues that it’s federal policymakers who are most to blame, since structurally only the federal government can maintain spending levels in the face of revenue declines (through monetary policy and debt increases). State and local governments lack these tools (with some caveats around borrowing). But I think this lets state and local officials off too easily; many of them also embraced austerity as reason for pushing through tax cuts that will be almost impossible to reverse. And state lawmakers (which control the revenue options available to cities) lacked the courage to grapple with structural fiscal issues that each recession has made progressively stark. Source: Why is recovery taking so long—and who’s to blame?

May 3, 2016

From the annals of state austerity budgets…

To the Editor: Thank you for your editorial about Illinois and Kansas as examples of states where policy makers do more harm than good (“Sorry Tales From Two Statehouses,” April 25). Illinois’ record 10-month budget impasse is eroding much of its educational and social service systems. According to a poll of 444 Illinois social service providers, 85 percent are scaling back on the number of clients they serve.At least 3,200 homebound seniors have lost home-delivered hot meals. Service agencies have laid off experienced and talented staff members, perhaps never to get them back. Lutheran Social Services of Illinois, the state’s largest social service provider, announced that it would cut 43 percent of its work force. And all 29 Illinois agencies serving sexual assault survivors have instituted furloughs or left unfilled positions vacant, leaving survivors without essential services. The damage is permanent, not easily or perhaps ever remedied. Even when funding is restored, we won’t simply return to business as usual. Ours is a real-life example for governments considering a similar path. JOHN BOUMAN President, Sargent Shriver National Center on Poverty Law Chicago Source: Drastic Cutbacks in Illinois – The New York Times

May 3, 2016

Welfare and the politics of poverty

Great recap of the welfare reform travesty – in which Clinton admits that the poorest families in the U.S. are worse off after welfare reform. Also describes how state control, combined with fiscal downturns, pulled money away from the poor.

April 8, 2016

Water woes could sink Flint’s property values even more

The situation in Flint only gets worse: not surprisingly, residents are now worried about their property values, which have already fallen significantly over the past decade. The inability of many residents to sell their homes will only get worse as the reputation of the city’s water supply plummets. This means not only an ongoing crisis of lack of mobility for the city’s residents, who might want to move to better work opportunities, but a looming crisis for city’s already decimated property tax base. Residents will certainly request reassessments of their property values, which are tied to the true cash value of the home. “Given what’s going on there, I’d have to imagine there’s a plummeting in the fair market value,” said Nathan Resnick, a Bloomfield Hills lawyer who specializes in tax appeals and real estate law. “There’s going to be disparity” between what assessors say the properties are worth and what buyers are willing to pay. Morse said lenders are already skittish about lending in Flint and are asking appraisers to find comparable homes that have sold very recently rather than, say, eight months ago.”Eight months ago was a completely different market than what’s going on now,” Morse said. Source: Water woes could sink Flint’s property values even more Al Jazeera has also covered the story: https://twitter.com/ajam/status/718246152693374976

April 8, 2016

Defending public pensions

I’ve written a lot about how public pensions came to be blamed for the fiscal crisis looming (or already “crippling”) many cities and states. The National Public Pension Project has been working since 2007 to change the narrative about the value of public pension plans, and has an interesting website and blog. NPPC believes every American should be able to retire in dignity. We also know that there is no one more interested in strengthening the public pensions system than the public employees who are counting on pensions to retire. After all, public pensions are the only source of retirement for 30% of public employees since they do not receive Social Security. Pension plans also play a vital role in decreasing poverty among older Americans, according to the National Institute for Retirement Security. Across the country, public employees – who have faithfully contributed their life savings into the pensions systems — are at the mercy of public officials unfairly targeting their financial security for political gain. The NPPC is working to preserve the financial security of all workers for generations to come. Follow their blog or check them out on twitter: Got pension questions? We have answers! Tweet us & we’ll answer on the blog https://t.co/qsXRNlxXNx pic.twitter.com/cB8BVuvHvH — National Public Pension Coalition (@ProtectPensions) April 8, 2016

March 17, 2016

Crowdfunding for the Public Good Is Evil | WIRED

Important article about the slippery slope from an underpaid teacher crowdfunding for classroom supplies to a bankruptcy city crowdfunding to clean up its parks. Crowdfunding is great when it funds new products that aren’t getting supported by more conventional forms of investment: Public necessities, by contrast, are not awesome; they’re essential. Roads, health care, education: These are not the kinds of things that go viral and raise $2 million in less than a week. But if crowdfunding for the public good is allowed to continue unchecked, it’s not hard to imagine a future in which everyone votes on public works with their dollars—distorting priorities and giving those with deeper pockets more of a say. Of all the crowdfunding appeals I’ve come across on facebook, a solid 90% of them are for healthcare expenses (and more often than not for dire conditions, like cancer or a terminal genetic disease). This is depressing not just because healthcare is also a public good (and these appeals make clear the inadequacy of our healthcare funding structure), but because it puts people in the position of begging for money at the most desperate time in their lives. Their very survival is now hitched not just to their own healthcare-employment situation, but to the wealth of their family members, classmates, and facebook connections. I’d like to call that evil too. Source: Crowdfunding for the Public Good Is Evil | WIRED

March 17, 2016

BART gets real

Infrastructure may not be sexy, but you tend to notice when it crumbles around you. BART has been having all kinds of problems lately, and its twitter account manager isn’t pulling any punches. @tquad64 Planners in 1996 had no way of predicting the tech boom – track redundancy, new tunnels & transbay tubes are decades-long projects. — BART (@SFBART) March 17, 2016 @jalrobinson At the end of the day, we're just trying to illustrate the importance of public transit to the Bay Area – and America. — BART (@SFBART) March 17, 2016 @cliberti We have 3 hours a night to do maintenance on a system built to serve 100k per week that now serves 430k per day. #ThisIsOurReality — BART (@SFBART) March 17, 2016 We want semi-decent infrastructure without all the boring planning and funding that requires. Anyone who’s ridden a fixed rail system anywhere outside the U.S. has to suppress the shame of realizing your own country’s efforts at transportation are like a child’s haphazard train set. Do we care enough to fix it? Source: San Francisco’s transit system stopped being polite and got real about complaints on Twitter

April 23, 2015

When universities go bankrupt…

LSU and many other public colleges in Louisiana might be forced to file for financial exigency, essentially academic bankruptcy, if state higher education funding doesn’t soon take a turn for the better. Louisiana’s flagship university began putting together the paperwork for declaring financial exigency this week when the Legislature appeared to make little progress on finding a state budget solution, according to F. King Alexander, president and chancellor of LSU. “We don’t say that to scare people,” he said. “Basically, it is how we are going to survive.” … Being in a state of financial exigency means a university’s funding situation is so difficult that the viability of the entire institution is threatened. The status makes it easier for public colleges to shut down programs and lay off tenured faculty, but it also tarnishes the school’s reputation, making it harder to recruit faculty and students. … Lawmakers have yet to move any revenue-raising measures — either a tax hike or tax credit rollback — during the session. A Senate Finance Committee is scheduled to take up an inventory tax repeal Wednesday afternoon (April 22) that would produce additional revenue for the state, though passage is far from certain.

April 8, 2015

The Glitch in Colorado’s Weed Experiment – NYTimes.com

To be filed under the “be careful what you wish for” category of fiscal policy. Colorado scrambles to avoid having to refund all of the revenue from marijuana sales, because, well because SMALL GOVERNMENT! As an April 1 report in The Times explained, Colorado’s tax revenues have recently surged, thanks in part to the booming construction, oil and gas industries, in addition to some $58 million from the marijuana taxes. But not only revenues but overall state spending this year are expected to end up higher than the state estimated back when the marijuana tax was on the ballot. Under Tabor — which some in Colorado have likened to a fiscal straitjacket or a statutory version of the crazed space computer HAL 9000 — the state is therefore required to refund the marijuana money. It will be interesting to see how this turns out. Legislators are trying to pass a law that would get around this, but the constitutional amendment still stands, until voters agree to repeal it. Read: The Glitch in Colorado’s Weed Experiment – NYTimes.com.

February 2, 2015

The federal budget, battleground

So much to say about Obama’s budget, the geek in me actually wants to read the entire plan, but I have this pesky dissertation to finish instead. Budgets are inherently redistributive documents, in one direction or another. Obama’s proposal is being characterized as a bold effort to redistribute the benefits of the recovery to the middle-class. It may be that, at least in part, but that could mean a lot of different things to different people. One sentence that caught my eye is that Obama has left out “any pretense of trying to address the main drivers of the long-term debt – Social Security and Medicare.” And that he has outlined an ambitious set of goals rather than remaining “hemmed in… because of politics and balance sheets.” I’m not entirely sure what the NYT is getting at (that fixation on “entitlement” programs and debt is responsible for the absence to date of bold budgetary goals? what’s changed?). I look forward to these debates if indeed the (or any!) Democrats really stand up for the idea that government can do good, but that government has recently been redistributing wealth from the bottom and middle to the top. There’s a lot of deconstructing to do of the term “middle-class” and of “redistribution.” The government is always in the business of spreading wealth, the question is who wields the butter knife. Read: In Budget, Obama’s Unfettered Case for Spreading the Wealth – NYTimes.com.

January 26, 2015

Greek voters reject austerity

The Syriza party wins a major victory in Greece, forming an alliance with right-wing opponents to austerity (or, more specifically, to following the orders of Germany and the EU). I wish I had time to read much more about what’s happening in Europe, so I’ll just have to save it for summer beachside reading, post-dissertation. Mr. Tsipras’s victory represented a rejection of the harsh economics of austerity. It also sent a warning to the rest of Europe, where continuing economic weakness has stirred a populist backlash, with more voters growing fed up with policies that have required sacrifices to meet the demands of creditors but that have failed to deliver more jobs and prosperity. … “The Greeks have the right to elect whoever they want; we have the right to no longer finance Greek debt,” Hans-Peter Friedrich, a senior member of Ms. Merkel’s conservative bloc, told the daily newspaper Bild on Monday. “The Greeks must now pay the consequences and cannot saddle German taxpayers with them.” Read: AfterVictoryatGreekPolls, AlexisTsiprasIsSwornInandFormsCoalitionGovernment-NYTimes.com.

December 11, 2014

Informal Economy Budget Analysis

I just stumbled across this concept today (during the San Francisco Bay Area superstorm!): Informal Economy Budget Analysis. Pioneered by Women in Informal Employment: Globalizing and Organizing (WIEGO). In their words: Informal Economy Budget Analysis (IEBA) examines how government budgets address the needs and interests of different groups of informal workers. It also investigates what opportunities exist for informal workers (or their representatives) to participate at different stages of the budget process. IEBA was developed and tested in South Africa by Debbie Budlender, Francie Lund, Caroline Skinner, and Imraan Valodia as part of the Durban Informal Economy Policy Process: see Durban Informal Economy Policy Process. In 2009, WIEGO commissioned the analysis of government budgets from an informal economy perspective under the technical guidance of Debbie Budlender in one city in each of four places: Belo Horizonte in Brazil, Lahore in Pakistan, Metropolitan Lima in Peru, and Quezon City in the Philippines. I found out about it from the Inclusive Cities people. They have several links to WIEGO papers here. Excited to check this out. I’m not focused on the informal economy, but I like the idea of alternative budget analysis.

December 3, 2014

Watchdog: Borrowing Trouble – Chicago Tribune series

A great series finished last month on the Chicago Public Schools district’s engagement in complex bond deals, the lack of public oversight, and the high costs of many of those deals. I’ve been researching interest rate swaps for over a year, and I’m impressed with the thoroughness of the reporting here. THIS is why we need robust and well-staffed public newspapers. Read: Watchdog: Borrowing Trouble – Chicago Tribune. (I’m not sure how much is behind a paywall)

December 2, 2014

Detroit loses power, literally.

Detroit — A widespread power outage Tuesday that caused evacuations of buildings throughout downtown is “another reminder of how much work we still have to do to rebuild the city,” Mayor Mike Duggan said. Duggan, speaking at an afternoon press conference, said Detroit is in the early stages of a four-year, $200 million plan to upgrade the city’s electrical grid, which has not been modernized in decades. The outage, which started around 10:30 a.m., darkened traffic lights and buildings on the city’s municipal power grid, including hospitals and fire stations. Nine hundred “customer locations” and 740 traffic signals were affected, the city said. The city did not lose 911 dispatch service. All outages should be restored by late tonight, DTE officials said. They said the cable failure that caused Tuesday’s outages are not uncommon in large urban centers like Detroit. “This situation is not going to slow down our efforts to … restore the city,” council President Brenda Jones said. City officials said the city’s public lighting grid suffered a “major cable failure” that caused power to be lost at Joe Louis Arena, Coleman A. Young Municipal Center, the Frank Murphy Hall of Justice, the Detroit Institute of Arts and some buildings at Wayne State University. Power has since been restored in many areas, including City Hall and Detroit Receiving Hospital. Hospitals, that lost power operated on backup generators, city officials said. Read: Duggan on power outage: City still has work to do.

November 18, 2014

News of the unsurprising: tax cuts lead to budget deficits

November 18, 2014 – RALEIGH, N.C. North Carolina lawmakers are likely enjoying some downtime after the legislative session and midterm election, but experts predict a tough session waiting for them on their return to Raleigh. A report from the Office of the State Controller indicates tax revenues are down by almost $400 million compared with this same time last year – a six percent drop in revenue. Alexandra Sirota, director of the North Carolina Budget and Tax Center, says it’s not a problem the State Assembly will be able to ignore in January. “This is a serious issue,” she says. “It’s self imposed in that policymakers chose to reduce our revenue. Now they’re going to have to make choices about some pretty deep cuts.”

November 14, 2014

Kansas cuts taxes, guess what happens next?

There may be even bigger challenges coming. In addition to the likelihood the state will face another unpleasant revenue surprise in the spring, a pending court decision could obligate the legislature to add hundreds of millions of dollars a year to state aid to school districts. And bond rating agencies, which already downgraded the state’s debt this year, could be expected to react negatively to both of those events. The tax cuts were the leading issue in the Kansas governor’s race this year, and in addition to re-electing Governor Brownback, voters expanded the Republican supermajority in the state’s House of Representatives. This was a clear mandate for the policy of deep tax cuts. What remains to be seen is how the legislature, once the rainy-day fund is exhausted, will deal with the spending pressures they have created. Read: Kansas Announces Big Budget Gap; True Gap May Be Even Larger – NYTimes.com.

November 4, 2014

IMF critiqued internally for austerity response

BY ANNA YUKHANANOVWASHINGTON Tue Nov 4, 2014 Reuters – The International Monetary Fund ignored its own research and pushed too early for richer countries to trim budgets after the global financial crisis, the IMFs internal auditor said on Tuesday. The Washington-based multilateral lender, concerned about high debt levels and large fiscal deficits, urged countries like Germany, the United States and Japan to pursue austerity in 2010-11 before their economies had fully recovered from the crisis. At the same time, the IMF advocated loose monetary policies to sustain growth and boost demand in advanced economies, initially ignoring the possible spillover risks of such policies for emerging market countries, the Independent Evaluation Office, or IEO, said in a report that analyzed the IMFs crisis response. “This policy mix was less than fully effective in promoting recovery and exacerbated adverse spillovers,” the IEO wrote. The IMF advises its 188 member countries on economic policy, and provides emergency financial assistance to its members on the condition they get their economies back on track. The internal auditor said the IMF should have known that the combination of tight fiscal policy and expansionary monetary policy would be less effective in boosting growth after a crisis. Evidence showed that the private sectors focus on reducing debt made it less susceptible to monetary stimulus. In 2012, the IMF finally admitted that it had underestimated how much budget cuts could hurt growth and recommended a slower pace for austerity policies. But its auditor said the IMFs own research showed this relationship even before the crisis. Read: IMF gave richer countries wrong austerity advice after crisis – watchdog | Reuters.

October 19, 2014

We’re not in Kansas anymore – or are we?

Great clip from the Daily Show about tax cut strategies gone wrong, prompting Kansas Republicans to endorse the Democratic opponent of Sam Brownback, the current Republican Governor. The Daily Show Get More: Daily Show Full Episodes,Indecision Political Humor,The Daily Show on Facebook

September 23, 2014

“The Social Geographies of Recession and Austerity”

I just stumbled on this great list of resources from early this year, on a blog by Alison Stenning: Some really great blogs have emerged over the past few years as people have tried to document their own, and others’, struggles with austerity.  There’s an article about some of these blogs here. These are some of the most interesting and/or prolific: http://agirlcalledjack.com – Blog by Jack Monroe who has published particularly about food and food poverty; her Guardian columns (and recipes) are available here:http://www.theguardian.com/profile/jack-monroe http://katebelgrave.com – “Talking with people dealing with public sector cuts”. Kate Belgrave’s Guardian columns are here: http://www.theguardian.com/profile/kate-belgrave http://mumvausterity.blogspot.co.uk – Bernadette Horton, “a mum of 4 fighting everyday battles against austerity – and hoping to win!” Most of these bloggers also tweet; you can find them and follow them for more updates and links to other bloggers. Many of the major newspapers have developed sub-sections on their websites in which they document the effects of austerity from a number of perspectives. On Guardian Witness, you can find personal accounts of families living in poverty; you follow the link to Guardian Witness from this page. The Guardian is also home to Patrick Butler’s Cuts Blog. In 2008, The Telegraph’s went on a ‘Recession Tour‘ of a variety of UK localities. Much of the material that ends up on the (web)pages of our national newspapers comes from a range of different projects launched by a variety of think tanks, lobby groups, charities and so on. The projects I’m highlighting here are ones which focus on the everyday experiences of recession and austerity in communities. Real Life Reform is “an important and unique study that tracks over a period of 18 months how people are living and coping with welfare reforms across the North of England”. It has been developed by the Northern Housing Consortium with seven northern housing associations. There are two reports, one from September 2013 and another from December. A third report is due in the spring of 2014. You can follow Real Life Reform on Twitter @RealLifeReform. The IPPR have developed a Voices of Britain website (http://voicesofbritain.com), as a ”snapshot of the condition of Britain in 2013”. The Family and Parenting Institute’s work on Families in the Age of Austerity is another exploration of the effects of austerity on families. The Campaign for the Elimination of Discrimination against Women (CEDAW) Working Group for the North East produced this report on the impact of austerity measures on women in the North East. For an Irish perspective, have a look at http://irelandafternama.wordpress.com – a blog written mostly by geographers on Ireland’s experience of financial crisis and austerity. Head to the blog for the rest of the post, which also has links to academic works on austerity: The Social Geographies of Recession and Austerity | researchingrelationships. Also check out her own post about the costs of Austerity in Britain: https://blogs.ncl.ac.uk/alisonstenning/the-costs-of-austerity/ Looks like she isn’t writing more, but always nice to find someone with kindred interests…

May 25, 2014

The Body Economic: Why Austerity Kills

Subtitle: Recessions, Budget Battles and the Politics of Life and Death. By David Stuckler and Sanjay Basu —thebodyeconomic.com This book came out in 2013, and is frequently cited in discussions of austerity and the damage – short- and long-term – resulting from budget cuts, particularly at the national level. The book is organized in three sections: History, The Great Recession, and Resilience. The book focuses on the health impacts of budget cuts: not just cuts to health programs but broadly conceived impacts of austerity. The book begins by describing the New Deal’s response to the Great Depression in the U.S., to the bump in mortality following the collapse of communism in the Soviet Union (driven by stress, alcohol, despair, and poor nutrition), and the Asian Financial Crisis. The second and third parts of the book contrast Greece and Iceland (whose leaders rejected the IMF austerity prescription) The authors use a combination of health data and reviewing economic data and public policy. Analyzing health indicators along with economic ones is an important, but difficult, endeavour. Questions of causality and of data quality dog any enterprise like this, and would be enormously difficult at a sub-national scale. (I once spent months trying to figure out how to measure access to healthcare in U.S. suburbs, and eventually abandoned the effort). There may be many other explanations for the difference between Greece – plagued by suicides and an HIV epidemic after EU-imposed austerity – and Iceland. The authors’ valiant and unsuccessful effort to get Greek politicians to take action on the spike in HIV – which they link to rising heroin use, unemployment, and the end of needle-exchange programs – raises questions about the relationship between multinational governance, local democracy, and science that can’t be simply answered. But the overall claims are well argued and documented, and bolster a hypothesis that most people would agree with on its face: a poor economy fuels poor health. Of course, so can a growing economy, as evidenced by the U.S. The book’s U.S. segment features a common story of deferred healthcare leading to avoidable personal tragedy. The U.S. healthcare system has failed its citizens in good times and bad, but in recession more people may take such terrible gambles. This chapter is in the section on resilience, along with a chapter on the relationship between suicide and unemployment, and a chapter on U.S. homelessness that documents the rise of West Nile disease carried by mosquitos thriving in the pools of foreclosed and abandoned homes. There is an anecdotal feel to the book, but many of the stories provide a compelling illustration of the misguided approaches to economic crisis that dominant the U.S. and Europe, and the way that austerity can backfire. It would be great if this study fuels more research into the relationship between health and public spending, especially research that moves beyond anecdotes and enables broader policy recommendations for public health spending in times of both boom and bust.

May 10, 2014

Suburban austerity

Five decades after President Lyndon B. Johnson declared a war on poverty, the nation’s poor are more likely to be found in suburbs like this one than in cities or rural areas, and poverty in suburbs is rising faster than in any other setting in the country. By 2011, there were three million more people living in poverty in suburbs than in inner cities, according to a study released last year by the Brookings Institution. As a result, suburbs are grappling with problems that once seemed alien, issues compounded by a shortage of institutions helping the poor and distances that make it difficult for people to get to jobs and social services even if they can find them. In no place is that more true than California, synonymous with the suburban good life and long a magnet for restless newcomers with big dreams. When taking into account the cost of living, including housing, child care and medical expenses, California has the highest poverty rate in the nation, according to a measure introduced by the Census Bureau in 2011 that considers both government benefits and living costs in different parts of the country. By that measure, roughly nine million people — nearly a quarter of the state’s residents — live in poverty. The New York Times looks at suburban poverty in California, mentioning the lack of social services in the suburbs, but doesn’t dig too deep. I worked on a research project several years ago that asked me to try to conceptualize the material difference in suburban versus urban poverty. Many fine-grained indicators of financial insecurity are hard to map at a sub-metro level: health insurance, use of food stamps, etc. Although there has been a boom in literature about suburban poverty (and a hearty anecdotal understanding across the country that poverty is not an inner city issue), I haven’t seen much in the way of robust research on what this means for policy. This article is an example of a description that surprises less than it seems to think it will, and raises fewer questions than it should: Why don’t those suburbs, in some cases huge municipalities, offer services? Is the reliance on private charity really much higher in the suburbs, or are urban residents also drawing heavily on them? Researchers and journalists, take heed! Read: Hardship Makes a New Home in the Suburbs

April 24, 2014

The American Middle Class Is No Longer the World’s Richest – NYTimes.com

More and more coverage of American inequality, but I’m curious about how it’s often framed as the disappearance, or decline of the middle class. This article paints an interesting picture of American middle class decline relative to its counterpart in other countries, and paints a picture of economic crisis fueling the relative decline of Americans below the top income percentiles. Stagnant wages (relative to corporate profits) and America’s lost grip on education superiority are mentioned, but the role of government in mediating income distribution is only hinted at. Is this a story of austerity, or economic restructuring, or both? How Americans respond to their growing sense of falling behind, and of their children inheriting lower economic possibilities, will be driven by how they see government’s role in this story. Read: The American Middle Class Is No Longer the World’s Richest – NYTimes.com.

March 13, 2014

Bailing on Detroit – Jamie Peck

Jamie Peck, Geography professor at The University of British Columbia, has written quite a bit about neoliberalism, what he calls “austerity urbanism” and the ongoing saga of Detroit’s finances. He has an insightful blog post on how terms like bailout, responsibility, and federalism are serving to seal Detroit’s fate as a sinking ship, forced to go under in the name of civic individualism, while the state and federal government stand by and watch. These arguments are perfectly consistent with the conservative legal doctrine of fiscal federalism, where not only “each level of government,” but in effect each unit of government, must “internalize both the costs and the benefits of its activities.”[8]  This is the antithesis, effectively, of Keynesian redistribution, with its compensatory fiscal transfers and anti-cyclical stabilizers.  In contrast, the neoliberal version of fiscal federalism holds that cities, suburbs, and local-government entities must always be free to opt out, as in the logic of small-government suburbanism,[9] but they must never, in any circumstances, be “bailed out.”  This disaggregated, go-it-alone world is a world ruled by fiscal discipline, imposed across different tiers of government and between neighbors; (in)solvency duly becomes, rightfully, a local matter.  The new fiscal landscape can be crudely divided between free-riding, low-tax suburbs on the one hand, and indebted (or even bankrupt) cities on the other.  In the morality plays of austerity urbanism,[10]“irresponsibility” is perversely conferred on the latter, not the former. Read the rest here: Bailing on Detroit | cities@manchester. And check out many other great entries at cities@manchester

March 11, 2014

Chicago’s Credit Rating Downgraded by Moody’s – NYTimes.com

The pension battle in Chicago and Illinois will be fueled by Moody’s latest announcement: Moody’s Investors Service downgraded Chicago’s credit rating, citing the city’s unfunded pension liabilities. The agency announced Tuesday it was lowering the rating on $8.3 billion in debt to Baa1, from A3, putting it only three notches above junk status. Moody’s gave Chicago a negative outlook, indicating another downgrade could occur if there is no pension fix. Moody’s says the rating “reflects the city’s massive and growing unfunded pension liabilities.” It says those liabilities “threaten the city’s fiscal solvency” unless major revenue and other budgetary adjustments are adopted soon and are sustained for years to come. The lower rating means the city may have to pay higher interest rates. Moody’s said a commitment to raising tax revenue is a factor that could lift the credit rating. Read: Chicago’s Credit Rating Downgraded by Moody’s – NYTimes.com. Last year, Fitch Ratings downgraded Illinois just days after the state legislature adjourned (May 31) without passing pension reform. After the Governor threatened to withhold legislator salaries until pension reform was passed, the legislature rallied to pass legislation in November that was signed into law December 5, 2013. Litigation over terms of the reform is ongoing. For some local coverage of the “reform” effort in Illinois, go here.

February 26, 2014

To Pay for Infrastructure Repairs, Obama Seeks Tax Changes

ST. PAUL, Minn. — Caught between a gridlocked Congress and a Highway Trust Fund that will soon be broke, President Obama on Wednesday urged lawmakers to overhaul corporate and business taxes to pay for repairing and replacing the nation’s aging roads, rails, bridges and tunnels. … New legislation to pay for transportation projects is an urgent priority for both parties because the highway fund is nearing insolvency. Anthony R. Foxx, the transportation secretary, has said the fund could begin “bouncing checks” by this summer. That would force a halt to construction projects around the country, officials have said, and could undermine as many as 700,000 jobs. The president’s proposal, which he first suggested in a speech last summer in Chattanooga, Tenn., would eliminate business and corporate tax loopholes to finance a four-year, $302 billion transportation bill. White House officials declined to be specific, but said they would try to eliminate incentives for companies to ship jobs overseas. Read: To Pay for Infrastructure Repairs, Obama Seeks Tax Changes – NYTimes.com.

February 22, 2014

Woops!

The New York Times gets transcripts of conversations between the economists responsible for guiding the U.S. economy past the financial crisis, and failing. The hundreds of pages of transcripts, based on recordings made at the time, reveal the ignorance of Fed officials about economic conditions during the climactic months of the financial crisis. Officials repeatedly fretted about overstimulating the economy, only to realize time and again that they needed to redouble efforts to contain the crisis. Some of this stuff just gets to depressing to read in its various reiterations, but I did anyway (in no small part because my 7-year-old saw the photo of Geithner, Bernanke, and Paulson on the front of our paper and asked what the story was about.) The fumbling, the over-confidence, the ingrained reluctance to believe that the system could be failing, and the apparent aversion to stimulus (even after things got worse) are all laid out in phone calls and emails. By the end of the year, the Fed had cut interest rates nearly to zero and started to buy mortgage bonds in a further effort to stimulate the housing market and the broader economy. More than five years later, it is still pursuing both policies even as the economic recovery remains incomplete.Some Fed officials have argued that the Fed was blind in 2008 because it relied, like everyone else, on a standard set of economic indicators.As late as August 2008, “there were no clear signs that many financial firms were about to fail catastrophically,” Mr. Bullard said in a November presentation in Arkansas that the St. Louis Fed recirculated on Friday. “There was a reasonable case that the U.S. could continue to ‘muddle through.’ ” Read: Fed Misread Crisis in 2008, Records Show – NYTimes.com.

January 11, 2014

Michigan has nearly $1B more than expected for budget | Crains Detroit Business

State budgets have been rebounding much faster than most city budgets (for many reasons: spending cuts achieved through attrition are finally appearing on the balance sheet, income taxes have begun to recover faster than housing values, etc.). Accordingly, states that were experiencing “fiscal emergencies” just a few months ago are now facing surpluses as they begin to budget for the coming fiscal year. As could be expected, tax cuts are first on the table (despite the fact that it wasn’t tax increases but spending cuts that contributed most to the surplus). LANSING — Gov. Rick Snyder and lawmakers have nearly $1 billion more than expected when crafting Michigan’s next budget. The Snyder administration and economists today agreed the state will take about $975 million more in tax revenue from last fiscal year through the next budget year than was forecast eight months ago. The debate now will ramp up over what to do with the surplus. Tax cuts, more road repairs and extra money for education are on the table. Read: Michigan has nearly $1B more than expected for budget | Crains Detroit Business. (January 10, 2014)

December 28, 2013

Pensions for city workers can’t be cut, but pay can, judge rules in major San Jose case – San Jose Mercury News

The fate of San Jose’s pension reforms remains unclear after a recent court decision. SAN JOSE — In a landmark ruling that could help shape city budgets around the state, a judge invalidated key parts of San Jose’s voter-approved pension cuts but upheld other elements that could still save huge taxpayer costs. Santa Clara County Superior Court Judge Patricia Lucas’ tentative decision released Monday prohibits the city from forcing current employees to contribute significantly more toward their pensions, as called for in last year’s Measure B. But the ruling allows the city to cut employees’ salaries to offset its increasing pension costs. … City leaders may find it difficult to go through with the pay cuts, however. The City Council earlier this month approved 10 percent pay raises for cops, after police officers began fleeing the department for better-paying cities. The cop exodus has coincided with a huge increase in crime, above the California and national averages, while arrests have dropped in half in recent years. Read: Pensions for city workers can’t be cut, but pay can, judge rules in major San Jose case – San Jose Mercury News.

December 28, 2013

Police Salaries and Pensions Push California City to Brink – NYTimes.com

A California city that filed for bankruptcy in 2001 after a developer secured a $10 million judgment against it, Desert Hot Springs was featured in the NYT for its fiscal troubles. The city, Desert Hot Springs, population 27,000, is slowly edging toward bankruptcy, largely because of police salaries and skyrocketing pension costs, but also because of years of spending and unrealistic revenue estimates. It is mostly the police, though, who have found themselves in the cross hairs recently. “I would not venture to say they are overpaid,” said Robert Adams, the acting city manager since August. “What I would say is that we can’t pay them.” Public safety was once considered a basic urban service – perhaps the primary reason for incorporation. Police (and fire) pensions are more costly than others because workers are allowed to retire earlier, and because the city pays into a pension fund instead of social security, for which many public safety retirees are not eligible. It’s not hard use simple figures to paint police benefits as “generous” or “unsustainable,” particular in small, working-class cities like Desert Hot Springs. But the short-term gaps that emerge from bad policy and economic cycles belies the fundamental sustainability of well-managed pension funds over the long-term. The fact that so many cities are being dragged down by pension obligations speaks more to poor management and the ominous fiscal picture of cities in general. Police unions say the fault lies with state and local politicians who failed to adequately fund the pension system over the years, and inflated benefits during boom years. Others wonder whether such salaries and pensions were ever affordable, particularly in cities as small and struggling as this. In Desert Hot Springs, for example, for every dollar that the city pays its police officers, another 36 cents must be sent to Calpers to fund their pensions. Read: Police Salaries and Pensions Push California City to Brink – NYTimes.com.

December 20, 2013

What Washington Gives New York – Added Strain on the Social Safety Net – NYTimes.com

New York City’s commitment to preserving a social safety net is quietly heroic. When the federal government began slashing last March, officials with the Department of Housing Preservation and Development drained their reserves to keep building housing. They also preserved the rental vouchers that stand between tens of thousands of Lucy Delgados and homelessness. But the protective tarp gets pulled tauter and tauter. “Some tenants face having to move to smaller apartments, and what they pay monthly on rent could go from 30 to 40 percent of their income,” the housing commissioner, RuthAnne Visnauskas, says. “It’s harsh, and a lot of people are unhappy, including us.” Read: What Washington Gives New York – Added Strain on the Social Safety Net – NYTimes.com.

December 14, 2013

More than one way for a city to die

There has been a lot of press lately, nationally and locally, about the skyrocketing cost of living and doing business in San Francisco. While all that money keeps the city in better fiscal shape than most places in the U.S., it doesn’t necessarily improve the quality of life for San Franciscans. In fact, it kills city life for those residents forced out by evictions and rising rents. It also hasn’t infused money into public infrastructure, as evidenced by the controversy over private bus systems run by Google. “Community space” implies something that is open to, well, the community. Subverting of naming conventions to suggest public access and transparency, while providing neither, is troubling and increasingly pervasive. But this turning inward, despite the incessant drumbeat of “community,” is quickly becoming the rule rather than the exception. In my class on urban economics, we talk about the movement of firms back to central cities, explained by their desire to be near amenities that their workers value (in addition to other benefits of agglomeration economies). But increasingly, these firms then create private amenities out of semi-public spaces, which challenges our notion of what it is that makes cities desirable, to both firms and workers. These are not idle differences: the protests over how tech firms and workers use public space–including both physical spaces and the public spaces of governance. In “The Death and Life of Great American Cities,” Jane Jacobs wrote, “Cities have the capability of providing something for everybody, only because, and only when, they are created by everybody.” We’re losing that here. The further the tech sector gets from the reality of the problems it’s engaging with, the smaller piece of the problem they’ll end up actually fixing. Read: WhatTechHasn’tLearnedFromUrbanPlanning-NYTimes.com.

November 20, 2013

Report: Detroit bankruptcy caused by state cuts, shrinking tax base, not long-term debt | Detroit Free Press | freep.com

While we wait for the federal judge to rule on Detroit’s petition for bankruptcy, a Demos report enters the fray: WASHINGTON — A New York-based think tank released a report today questioning Detroit Emergency Manager Kevyn Orr’s assertion that the city’s long-term debt is responsible for its fiscal problems, or that pension contributions are at major hurdle for the city’s finances. Instead, the report by Wallace Turbeville, a senior fellow at Demos, a public policy organization, said Detroit’s decline into bankruptcy was caused by a steep decline in revenues partially due both to a shrinking tax base and deep cuts in state revenue sharing with the city. “By cutting revenue sharing with the city, the state effectively reduced its own budget challenges on the backs of the taxpayers of Detroit,” Turbeville wrote. “These cuts account for nearly a third of the city’s revenue losses between (fiscal year) 2011 and FY 2013. … Furthermore, the Legislature placed strict limits on the city’s ability to raise revenue itself to offset these losses.” It says a lot about what’s at stake in Detroit that Demos, an organization committed to reducing political and economic inequality, chose to question the factors that have been blamed for Detroit’s struggles for decades, but especially in the past few years: unions and an “addiction to debt” (Orr’s words). I haven’t had a chance to read the report yet, but I hope it’s able to break some of the conservative grip on the narrative about urban fiscal crisis in Detroit and elsewhere. Read: Report: Detroit bankruptcy caused by state cuts, shrinking tax base, not long-term debt | Detroit Free Press | freep.com.

November 10, 2013

Peter Marcuse on Participatory Budgeting

I’ve just discovered Peter Marcuse’s blog on critical planning, and the post at the top is on participatory budgeting. Marcuse’s 1981 article “The targeted crisis: on the ideology of the urban fiscal crisis and its uses” has been instrumental in framing my dissertation, so I’m excited to see that he’s turning his attention to city budgets, a topic that gets woefully little attention. I won’t attempt to summarize Marcuse’s comments, it’s worth a full read: Blog #39 – Participatory Budgeting – Potentials and Limits | Peter Marcuse’s Blog.

November 9, 2013

How Austerity Kills

Over a year ago I saved an article that caught my eye – Businessweek, of all sources, reporting on a study connecting austerity and a spike in HIV in Greece: HIV infections among drug users in Greece jumped more than 20-fold in fewer than two years, fueled by a lack of needle exchange and methadone programs, according to the European Centre for Disease Prevention and Control. The ECDC, the European Union agency that monitors infectious disease, reported 314 cases of the AIDS-causing virus among injecting drug users in the first eight months of this year. That compares with 208 for all of 2011 and no more than 15 cases a year from 2001 to 2010, the ECDC said in today’s report. While the extent to which Greece’s economic crisis has contributed to the outbreak is unclear, austerity measures and high unemployment may fuel new infections in Athens and beyond the capital unless programs to provide methadone, clean needles and condoms are expanded, the Stockholm-based ECDC said. “The current economic turmoil will continue to have adverse effects on HIV prevention not only in Greece, but also in other parts of Europe,” the ECDC said. “The cost of prevention to avert HIV infections will be less than the provision of treatment to those who become infected.” HIV Soars Among Greece’s Drug Users Amid Austerity – Businessweek. This story contrasts with the relative lack of coverage in the U.S. of social service cuts. (I wonder if the CDC here would draw such a connection, between funding and the spread of disease. The report titles on their website are all very dry.) Just this year, a study was published suggesting that people with HIV in London made different treatment choices as a result of economic austerity (their word). And now there is a book out – “The Body Economic: Why Austerity Kills” by economist David Stuckler and physician Sanjay Basu (the authors were recently interviewed by Amy Goodman, which you can read here.) The authors wrote an op-ed in the New York Times last spring about “How Austerity Kills:” If suicides were an unavoidable consequence of economic downturns, this would just be another story about the human toll of the Great Recession. But it isn’t so. Countries that slashed health and social protection budgets, like Greece, Italy and Spain, have seen starkly worse health outcomes than nations like Germany, Iceland and Sweden, which maintained their social safety nets and opted for stimulus over austerity. (Germany preaches the virtues of austerity — for others.) As scholars of public health and political economy, we have watched aghast as politicians endlessly debate debts and deficits with little regard for the human costs of their decisions. Over the past decade, we mined huge data sets from across the globe to understand how economic shocks — from the Great Depression to the end of the Soviet Union to the Asian financial crisis to the Great Recession — affect our health. What we’ve found is that people do not inevitably get sick or die because the economy has faltered. Fiscal policy, it turns out, can be a matter of life or death. (emphasis mine) The whole op-ed is worth reading, especially the $293 million budget cut the CDC took as a result of the sequester. The greatest damage austerity can do is hamper our ability to monitor and understand its pernicious effects. Read: How Austerity Kills

October 25, 2013

Reparations From Banks – NYTimes.com

After five years, the banks are starting to be held to account. Last week, JP Morgan: The government’s attempts to hold banks accountable for their mortgage practices may finally be paying off. On Friday, JPMorgan Chase agreed to pay $5.1 billion to the regulator of Fannie Mae and Freddie Mac to resolve charges related to toxic mortgage securities sold before the financial crisis. That amount had been negotiated as part of a broader $13 billion settlement — yet to be finalized — between the bank and state and federal officials over the bank’s mortgage practices. JP Morgan will pay a total of $13 billion in fines to the government, and apparently has not secured immunity against criminal prosecution. And this is just one bank: Countrywide, Bank of America, and many others were even more implicated in (and enriched by) the fraud that led to the mortgage meltdown, and subsequent collapse of property markets and local budgets. Think of this amount in relation to the $14 billion in debt that Detroit is trying to get out from under, a number often tossed out ($14 billion!!) as if it’s catastrophic, an amount far beyond bailouts or creditor negotiations. Read: Reparations From Banks – NYTimes.com. 10/25/13

October 20, 2013

Bankruptcy for Ailing Detroit, but Prosperity for Its Teams – NYTimes.com

The Detroit slide into bankruptcy is like describing an elephant: hard to know where to start. The narratives circulating about Detroit are all fascinating, sometimes irritatingly (but predictably) simplistic but I think the reporting has improved with time, as reporters are forced to look for new angles. Here’s the New York Times’ latest piece: Detroit’s glittering sports teams operate in a different economy than does the rest of the city. Because of billionaire owners, lucrative television deals, dedicated fans and public subsidies, the city’s teams have few of the problems that have dragged their hometown into the largest municipal bankruptcy filing in the nation’s history. Read: Bankruptcy for Ailing Detroit, but Prosperity for Its Teams – NYTimes.com.

October 13, 2013

Here Is Every Foreign Country That Gets More Federal Aid Than Detroit – Next City

There’s a lot to say about these kind of comparisons (do we really want to get people to pit struggling cities against (in some cases) struggling countries?) but the raw numbers are interesting. Even more interesting would be a historical comparison of federal aid to Detroit and other U.S. cities (spoiler alert!). I Here Is Every Foreign Country That Gets More Federal Aid Than Detroit – Next City.

September 29, 2013

The Racial Dot Map: One Dot Per Person for the Entire U.S.

Just for good old mapping fun. The Racial Dot Map: One Dot Per Person for the Entire U.S..

September 28, 2013

Rich people, poor people

Mayor Bloomberg’s interesting framing of how rich people bring more money to the city’s budget, which helps the many poor people living in the city (yes, despite all the frenzy about hipsters in NY, 46% of New Yorkers’s live under 150% of the federal poverty threshold, or less than $35,775 for a family of four). “Other cities have much lower inequality levels,” Mr. Bloomberg’s press secretary, Marc LaVorgna, said, citing Detroit and Camden, N.J. “Are those better places for low-income families to live? Or would they be better off if they had more wealthy people, and a larger income gap, to provide a larger tax base to support a police department that keeps low income communities safe, funds good public schools and pays for a vast social services network like we do in New York City? New York City is one of a handful of major cities that levy a local income tax on money earned by city residents, but Bloomberg is also talking about the spending that wealthy people do in the city. The latter claim is arguably tenuous (much has been written about whether wealthy people spend more in a local economy than middle-class people, given the nature of consumption patterns). But the tax benefits of income taxes in particular are important, and Bloomberg is right to point out that the more money New Yorkers in (especially rich New Yorkers, since the more you earn the higher your tax rate). Income taxes are also more progressive then property taxes, and less subject to abrupt fluctuations in the property market. In New York for 2013, personal income taxes were the second highest source of tax revenue, after property taxes, and above sales taxes. So…income inequality driven by the growth of income at the top can be spun as “good” for the city budget, but even a mayor like Bloomberg might want to think twice about using the words inequality and good too close to each other.

September 26, 2013

The Radicalism of Today’s Austerity in One Chart | Economic Policy Institute

The Radicalism of Today’s Austerity in One Chart | Economic Policy Institute.

September 14, 2013

Left with nothing | The Washington Post

Cities struggling with vacant properties can use their ability to place liens on properties that fall behind on their taxes, a terrific way for cities to reclaim properties not being used by their owners (usually property speculators). Flint and Cleveland have used this, as have other so-called ‘shrinking’ cities. But in this terrible twist, Washington DC is outsourcing the function of placing a lien on homes to investors who are then aggressively foreclosing on homes, most of whom are poor, elderly, and Black. This great story profiles some of the most egregious examples (a man who owed $134 in property taxes lost all of his equity and is now in a nursing home). This is exactly what cities should not be in the the business of doing: persecuting low-income residents and wholesale clearing of those who have invested in their homes and neighborhoods for generations. Left with nothing | The Washington Post.

September 14, 2013

Daily Reminder of Texas State Budget Cuts – NYTimes.com

Texas’ hostility to public investment is starting to come home to roost in tangible ways. Great piece in the New York Times about how falling transportation funding manifests itself in gravel roads, one of the few places where spending cuts are felt by nearly everyone.  Transportation is not the state’s only underfinanced program, but it is in a unique position when talking about the consequences of its budget. Health and human services agencies don’t get to talk about how many more people will get sick or die if their financing is cut. It is somewhere between difficult and impossible to tie public school performance to state financing, if only because so many other variables muddle the numbers. Regulatory agencies don’t wave around projections on how many industrial plants won’t be inspected and what the consequences might be. You have to admire the honesty of the transportation people. This is what you spend, and that is what you get. Cut spending, cut expectations. Easy as pie. They seem to be in one of the rare areas of state government where the people involved are allowed to say right out loud what a budget decision will actually mean. Others have to say they will do more with less, a way of saying that they either didn’t need as much money to do the job as they first thought or that they hope the corners they cut to save money won’t cause anyone any trouble — or at least any trouble that will get noticed by voters and politicians. Read: Daily Reminder of Texas State Budget Cuts – NYTimes.com.

September 13, 2013

Rich Man’s Recovery – NYTimes.com

I’m too jet-lagged to write much about this, and am coming late to the lively discussion over Saez & Piketty’s latest piece about rising income inequality. The dramatic rise in earnings and wealth inequality between the 1% and the rest of the country is important, and as Krugman says, demoralizing for most Americans. But there’s another piece to this, which is that the economic recovery is only in the private sector. Coming through the San Francisco airport yesterday, I waited for over an hour to pass through the border. The line for non-citizens was several hours long. It’s clear that the wealth of the U.S. is monopolized by individuals (and corporations), and little of it is evident in our infrastructure, public services, or public spaces. So not only are non-rich Americans seeing their earnings stagnate or shrink, they are surrounded by a country that spends less (after you account for inflation and population growth) on public goods year after year after year. Since rich people can often bypass public goods entirely (private schools, private security, the fast-track airport line), dwindling public investment in this country affects the poor and middle-class much more. Read: Rich Man’s Recovery – NYTimes.com.

August 17, 2013

Thousands of Marylanders are losing homes in second wave of foreclosures – The Washington Post

Cities have been devastated by falling property taxes, fueled by both falling property values and a growing number of properties for which no property taxes are being paid. Property taxes continue to fall as the valuations catch up to the new market values, and now a long-predicted “second wave” of foreclosures is likely to damage the property tax base even further, not to mention devastate homeowners and neighborhoods at the center of this second wave. For the past year, the growing “shadow inventory” of homes in or on the edge of foreclosure has loomed over Maryland’s housing market. Homeowners and policymakers, especially in hard-hit areas such as Prince George’s, feared that once it was unleashed, it would depress home prices and prolong a housing slump.But the second wave of foreclosures is unlikely to be as devastating as the first one, experts said, because it coincides with a housing recovery that is making it easier for banks to offload distressed homes. Small consolation for the actual homeowners, of course. via Thousands of Marylanders are losing homes in second wave of foreclosures – The Washington Post.

August 13, 2013

Detroit, bankruptcy, and the national pension fixation

The post I wish I had time to write: how easily people can imagine taking away a retiree’s pension, how small those pensions usually are, and how controversial the assessment of Detroit’s (and everyone else’s) actual pension problem is (for starters, Morningstar says Detroit followed industry practice for its pension plan right up until the bankruptcy filing). Read: Municipal Workers in Bankrupt Cities Facing Financial Nightmare « naked capitalism.

June 21, 2013

More than one million join Brazil protests – Americas – Al Jazeera English

Brazil, afire with urban protests: More than one million join Brazil protests – Americas – Al Jazeera English.

June 21, 2013

Local journalism: Las Vegas

I’ve been thinking recently about how broadly I conceive the term “urban austerity.” Austerity conjures up not just scarcity, cutbacks, severity, but also the people who are outside that scarcity; the people who impose it, who argue for its necessity and who decide which parts of the city need to be well-funded, shored-up, and which can be jettisoned. The image of the austere city is one that matches this great reporting on inequality from Las Vegas: “Notes on inequality and the screwing of the little guy in Las Vegas”  Las Vegas City Life (June 2013) Las Vegas is one of those American cities where intense inequalities of wealth and status aren’t just obvious, they are rubbed in your face. Wealth and power brings with it the luxury of $1,000 bottle service, stretch limos and the right to hire a private police force to roust the homeless out of your neighborhood.On the other side of the economic fence, and sometimes just a block or two away, are grinding poverty, failing schools and life on the margins. CityLife looks at five areas in which the little man, the one without the limos and the bottle service, fares here. Read: Notes on inequality and the screwing of the little guy in Las Vegas | Las Vegas CityLife.

June 20, 2013

What the end looks like

The New York Times is stepping up its coverage of Detroit once again, as the city’s emergency manager issues dire warnings to creditors and seems to be paving the way to bankruptcy. There was a flurry of stories about the possibility of the Detroit Institute of Art perhaps being liquidated to help pay off Detroit’s debt (the museum is one of the largest municipally owned museums in the country, and includes several masterpieces, including Diego River’s frescoes). The museum is owned by the city, but funded primarily by an endowment and by a property tax levy approved by voters in 2012. Much of the coverage of Detroit (in the NYT and elsewhere) has focused on these possibilities of cultural asset purging, but there has been far less coverage on the human implications of cutbacks, or of the assets not valued by the rising upper-income population of the city. The school district began selling off buildings last year with little notice. DETROIT — As this debt-ridden city lurches toward a possible bankruptcy filing, residents and workers have been locked in a grim faceoff with creditors over how to preserve what remains of their services and benefits. Contributing to the municipal anxiety is the possibility that some of the city’s cultural treasures could be sold off, including masterpieces in the Detroit Institute of Arts and the Belle Isle park in the Detroit River. … In a Chapter 9 bankruptcy — which is highly unusual, especially for a big city — it would be up to a judge, if asked, to decide on a request to sell assets like the art or cars. Even if a judge is so inclined, some creditors might be loath to appear too hard-nosed by going after municipal treasures. “They’re going to want to take everything they can out of the city’s assets, but they won’t want to take the heart out of the body,” said James V. McTevia, a corporate turnaround expert who runs McTevia & Associates in Bingham Farms, Mich. It will be interesting if other aspects of Detroit’s heart get similar treatment from creditors in their desire not to appear too “hard-nosed.” Or perhaps the ire of poor residents and retirees isn’t something they’re worried about. Read: Anxiety in Detroit Over a Prized Car Trove – NYTimes.com.

June 19, 2013

Whole Foods opens in Detroit, threatening stereotypes everywhere | Grist

What is the opposite of urban austerity, or the institution that puts a landscape of abandonment and neglect in stark relief…Whole Foods? Recipient of $5.8 million in public money (I guess when you’re about to go bankrupt, what’s a few million?), opening on the same week as the city’s impending bankruptcy starts to take shape. Read: Whole Foods opens in Detroit, threatening stereotypes everywhere | Grist.

June 18, 2013

In Embattled Detroit, No Talk of Sharing Pain – NYTimes.com

Detroit, currently under the governance of an emergency manager, seems destined for bankruptcy or mass default (it has already begun to default on some of its credit payments. Either scenario will be groundbreaking in municipal finance and in the power relationships between bankers, retirees, cities, and states. The impending battle between people living on fixed retirement incomes (many of whom still live in Detroit, in houses that have likely lost the overwhelming majority of their purchase price) and investors who say they banked on the reliability of municipal bonds. So what’s at stake in how this plays out? Public finance experts have warned that broad societal problems could follow a loss of faith in municipalities’ commitments to honor their pledges. In a major report on the state of the muni market last year, the Securities and Exchange Commission warned that communities would find it increasingly costly to raise money, throwing into question the time-honored practices of building and financing public works at the local level. It’s interesting, but not surprising, that the “broad societal problems” that could result from tens of thousands of retirees, mostly African-American, suddenly losing their retirement (and the implication for other retired public employees) is not framed. And perhaps this kind of local financing is something we as a country should move away from, given how much it focuses risk in individual cities. Losing their pensions will mean real pain for retirees, and a cascade of pain for the neighborhoods and city they live in. Someone needs to be talking about that. via In Embattled Detroit, No Talk of Sharing Pain – NYTimes.com.

June 11, 2013

China state auditor warns over local government debt levels | Reuters

China’s state auditor warned on Monday that debt levels among local governments are rising and the financial burdens and risks are not being properly managed, adding to concerns over the health of the country’s financial system. Sounds familiar. Read: China state auditor warns over local government debt levels | Reuters.

June 4, 2013

San Francisco throws good money after bad

After wading through article after article about cities that can barely afford to pave their roads and keep libraries open, this is the kind of piece that makes me cringe. A sailing race for billionaires convinces the city to play host and pour all kinds of money into piers, advertising, you name it. Surprise, surprise, the event isn’t going to make the city nearly as much money as everyone cheerfully promised it would years ago. There’s always some excuse (the economy! Americans don’t like sailing!) but it’s always the same old story. How cities keep falling for this is beyond me. If Larry Ellison were a real stand-up citizen, he would use some of his $40 billion to make up the difference between what he said the city make in profits and what actually materializes in their coffers. Gambling with public money is what these entrepreneurs do best, and there are always willing bettors. Read: America’s Cup Sailing Race Faces Challenges in San Francisco – NYTimes.com.

May 20, 2013

Report says poor are moving to nation’s suburbs – SFGate

Some of my colleagues have been talking about this for years, but it takes time for the data to reflect what people intuitively perceive: that the return to the city by wealthier residents, driven by many factors, has driven out poorer residents to the suburbs. Suburbs are in many cases less equipped to deal with poverty, provide fewer supportive services, such as public transportation. Of course, there are also more opportunities for homeownership, often better public schools, and more jobs. As more data becomes available, on the consequences of this reshaping on local governments (both in central cities & their suburbs), the shape of austerity across the metro area will become much richer. The number of those in poverty living in suburbs jumped 67 percent between 2000 and 2011, a much larger increase than in cities, researchers for the Brookings Institution said. Suburbs, however, still have a smaller percentage of the poor than cities do. Read: Report says poor are moving to nation’s suburbs – SFGate. National Center for Suburban Studies at Hofstra University Los Angeles Times http://lat.ms/12FKPNm

May 14, 2013

New York City’s libraries: open less than Detroit’s!

It’s no secret that libraries are getting squeezed by repeated budget crises (threatened cuts, then partially restored funding, over several years adds up to libraries that spend more and more time closed). New York City’s proposed budget is yet again threatening big cuts to library funding, in a city where already 30% of libraries are closed on Saturday and only 8 (!) are open on Sunday. And I’m always interested in how places index their own fiscal misery: “In fact New York City’s libraries already rank well behind Columbus, Ohio; San Antonio, Tex.; Toronto; Chicago and Detroit in average hours per week,” said Linda Johnson, president and CEO of the Brooklyn Public Library. Yes, even behind Detroit. Read more: http://www.nydailynews.com/new-york/albor-ruiz-public-libraries-patrons-oppose-city-budget-cuts-article-1.1337577#ixzz2THfMoSRw Read: Albor Ruiz: New York City’s public libraries need their patrons to stand up against mayoral budget cuts   – NY Daily News.

May 13, 2013

Bill Seeks to Tie Municipal Borrowing to Public Pension Disclosure – NYTimes.com

There are many policies floating around to reform the muck that is municipal finance these days. A group of U.S. representatives from California are pushing a bill in Congress that would require states and cities to disclose the “true cost” of their pension plans, and whether they can pay those costs. California, of course, is home to raging debate over whether bankrupt cities like Stockton can continue to make pension obligation payments while defaulting on payments to other creditors. Paul Ryan (R-Wisconsin, former vice-presidential candidate) is also co-sponsoring the bill. “The key to addressing this problem is shining a light on the financial health of pension systems and making clear that federal taxpayers will not pick up the bill for reckless mismanagement,” said Mr. Issa, whose district includes prosperous communities in San Diego County, which has had pension trouble, and Orange County, which declared bankruptcy in 1994 after its aggressive investments soured. Orange County, of course, did not collapse because of pension agreements but because of overzealous entrepreneurial activities. And San Diego can be seen as many different governance failures, including rampant anti-tax sentiment, not just a pensions problem. The real debate, however, is over how governments present pension liabilities to potential investors: The new bill would not use the tax exemption so much to narrow the federal deficit as to force municipalities into giving the world an unvarnished look at their pension plans. Until now, the accounting rules have permitted governments to factor in actuarial assumptions and smoothing techniques that greatly lowballed the benefits’ cost. A similar bill failed in 2011, but it’s unclear what its chances are now. And it may matter less whether this bill passes than how ratings agencies calculate pension liabilities. The missing part of this equation, of course, is the cost of other liabilities: such as property tax exemptions to private companies, state corporate tax credits, and other liabilities that don’t show up as direct expenditures, and often escape being discussed as expenditures at all. Read: Bill Seeks to Tie Municipal Borrowing to Public Pension Disclosure – NYTimes.com.

May 11, 2013

Austerity never works: Deficit hawks are amoral — and wrong – Salon.com

I’m finally getting around to reading Robert Kuttner’s great article on austerity and, more specifically, risk and moral hazard. The idea that government (and individuals) must be punished in order to shock them into “living within their means” is so ingrained in our national discourse that its proponents hardly need to articulate it any longer. We glamorize those in the corporate and financial world who take bold risks, who embody the entrepreneurial ideal, but in reality they take those “risks” knowing full well that the consequences, the punishment, will land elsewhere. Take a closer look at moral hazard ex ante from ex post and you will find that blame is widely attributed to the wrong immoralists. Governments and families are being asked to accept austerity for the common good. Yet the prime movers of the crisis were bankers who incurred massive debts in order to pursue speculative activities. The weak reforms to date have not changed the incentives for excessively risky banker behaviors, which persist. The best cure for moral hazard is the proverbial ounce of prevention. Moral hazard was rampant in the run-up to the crash because the financial industry was allowed to make wildly speculative bets and to pass along risks to the rest of the society. Yet in its aftermath, this financial crisis is being treated more as an object lesson in personal improvidence than as a case for drastic financial reform. Aside from laying bare the true moral questions at stake, Kuttner critiques the way the national discourse talks about public debt. Of course, “Exaggerated worries about public debt are a staple of conservative rhetoric in good times and bad” and the current historical moment is no exception. Read: Austerity never works: Deficit hawks are amoral — and wrong – Salon.com.

March 25, 2013

Court to Decide on Pensions in Stockton, Calif., Bankruptcy – NYTimes.com

    Wall Street is taking America’s biggest pension fund to court this week, for a long-awaited battle over who takes the losses when a city goes bust — workers and retirees, municipal bondholders, or both. California is being closely watched as battles in San Bernardino and Stockton look to reshape how pensions are treated in municipal bankruptcies. Bondholders may be emboldened by Rhode Island’s successful attempt to prioritize bondholders over other creditors, thus placing risk more squarely on cities, their employees and retirees, and taxpayers throughout the state. Read: Court to Decide on Pensions in Stockton, Calif., Bankruptcy – NYTimes.com.

February 2, 2013

Transparency and budget cuts: a winning combination?

There has been a lot of talk about making public data more readily available, and of involving the public (most obviously in the participatory budgeting movement). These two strategies sit in curious counterpoint to the equally popular trend of treating municipal finances as increasingly complex and needing expert (i.e. private sector) intervention. Anyway, here’s a small-city effort that combines transparency and public involvement to find things to trim in the budget: The Naperville city government had already centralized the accounts needed to finance all aspects of the city, but information was often inaccurate or even missing. The city enlisted help from Spikes Cavell Analytic Inc, a Herndon, Va.-based company that, according to its website, provides, “collaborative analytics for the public sector.” In other words, the company works in collaboration with municipalities and other agencies in the public sector to upload financial information and organize it to make it more understandable. “Once we’d uploaded our contracts and we became able to analyze them alongside our spend data,” said Mike Bevis, Chief Procurement Officer in Naperville, on the company’s website. According to Bevis, the new way of viewing data helped them to identify savings opportunities. Spikes Cavell uses a program called the Observatory, a network of tools used to interpret data specifically designed for the public sector. Through the network, agencies can upload contracts and other information into the system. The Observatory captures the data and provides a detailed analysis that help agencies better track their spending. The collaboration with Spikes Cavell will also allow Naperville residents to see how each dollar is spent through through a different website that allows the government and the public can track municipal spending. Read: Naperville, Ill. Program Opens Up Data on Spending – Next City.

February 2, 2013

Sports stadiums: an inevitable drain on city budgets?

Behind the rhetoric about public employees bankrupting cities, there are a few silent drains on city budgets (and now London faces the likelihood that its hopes for a post-Olympics windfall, like nearly every other city in history, won’t materialize.) Sports stadiums are perhaps the biggest single subsidy packages doled out, and nearly every study shoes that they don’t pay off fiscally in the long run. Here’s a good synopsis: With all this evidence that public subsidies for sports teams and their stadiums are not justified on the basis of economics or civic pride, why are they still doled out? With a limited supply and a more or less credible threat of leaving a city, sports teams are able to appeal to the risk-averse part of city leaders’ brains: People forget about $100 million lost here or there, but the departure of a sports team will be written in a mayor’s obituary. Efforts to end the subsidization of stadiums via the federal tax code — by limiting the exemption for municipal bonds used for stadiums — are promising in an era when these exemptions are under close scrutiny. But a previous effort to do just that backfired and, in fact, helped create the situation we are in today.The real solution would be weakening the bargaining power of the teams or strengthening that of mayors. With the breakup of professional sports monopolies unlikely and a non-compete agreement among mayors unenforceable, the future will likely hold more stadiums built with public money. read: URBAN NATION: Money-Wise, Stadiums and Super Bowls Don’t Benefit Cities – Next City.

January 24, 2013

States budget cuts leave poor in a fix – SFGate

California has apparently “fixed” its budget deficit, but at what cost? One of the fallouts from the unfolding budget crises in cities and states has of course been cuts to social programs. But the scale of those cuts often gets masked by the noise of political fighting. One could be forgiven for not being able to keep track of the dismantling of many programs, and the continual backward slide in funding for things like schools and healthcare. Is the damage done? Have we arrived at a “new normal” in which cities and states just don’t pay for these things anymore? Social service advocates say the damage from billions of dollars in cuts over several years has already been done and in some cases will get worse. Cash grants to welfare recipients have been cut by 12 percent over the past three years, according to the Western Center on Law and Poverty in Sacramento, which advocates for low-income Californians.As of this month, the maximum cash grant is $638 for a family of three, the organization said – which is 40 percent of the federal poverty line.”For the families who have been dealing with the cuts, nothing has changed – theyre still being denied services,” said Michael Herald, a legislative advocate for the group. “Its nice that the budget is balanced, but it doesnt mean a lot to them.” via States budget cuts leave poor in a fix – SFGate.

December 15, 2012

It’s Official: Austerity Economics Doesn’t Work : The New Yorker

The sheen is starting to fade from the idea of austerity, and the U.K. is explicitly admitting as much. Cassidy claims that the U.S. has served as a “control” case, with the Obama Administration pursuing a Keynesian approach to Britain’s neoliberal one. I think that’s a debatable characterization of what the U.S. federal government has been doing, but we are perhaps Keynesian relative to someone, in this case Britain (and much of Europe). With all the theatrics going on in Washington, you might well have missed the most important political and economic news of the week: an official confirmation from the United Kingdom that austerity policies don’t work. In making his annual Autumn Statement to the House of Commons on Wednesday, George Osborne, the Chancellor of the Exchequer, was forced to admit that his government has failed to meet a series of targets it set for itself back in June of 2010, when it slashed the budgets of various government departments by up to thirty per cent. Back then, Osborne said that his austerity policies would cut his country’s budget deficit to zero within four years, enable Britain to begin relieving itself of its public debt, and generate healthy economic growth. None of these things have happened. Britain’s deficit remains stubbornly high, its people have been suffering through a double-dip recession, and many observers now expect the country to lose its “AAA” credit rating. … With Republicans in Congress still intent on pursuing a strategy similar to the failed one adopted by the Brits, this is a story that needs trumpeting. Austerity policies are self-defeating: they cripple growth and reduce tax revenues. The only way to bring down the U.S. government’s deficit in a sustainable manner, and put the nation’s finances on a firmer footing, is to keep the economy growing. Spending cuts and tax increases can also play a role, but they need to be introduced gradually. Read: It’s Official: Austerity Economics Doesn’t Work : The New Yorker. In May, Osborne had announced an extension of the “era of austerity” through 2018, as the party’s target for national debt reduction seemed increasingly unachievable. Unfortunately, rather than change course then, he tightened the screws further in hopes that the same strategy would produce different results: Osborne’s midyear budget statement was the moment for him to relax austerity and introduce convincing measures to stimulate the anemic levels of investment and growth that now threaten long-term damage to the economy. Unfortunately, Osborne continued to play the role of Iron Chancellor, arguing that to loosen fiscal policy now would spook markets, drive up the U.K.’s low borrowing costs, and put it on “the road to ruin.” (Business Week, Bloomberg View: Why Austerity in Britain Has Run Its Course, 12/6/12) Bloomberg’s piece has a couple of interesting tidbits. First, it says Osborne has laid out a too-small set of spending programs, with the financial community urging greater spending: The scale of the projects, however, is too small to be significant. The Ernst & Young Item Club, an independent group that examines U.K. budgets, figured that the £5 billion infrastructure package might increase growth by 0.2 percent. It recommends a package of similar spending worth £14 billion. We don’t argue with Osborne’s original decision to embrace austerity—the hole that the banking crisis blew in the U.K.’s finances was huge. Yet a lot has changed over the past two or three years, and Osborne should recognize it. If he sets out a clear plan to bring down debt in the medium term, the benefit of his bid for credibility is that markets will probably believe him and understand the need to…

December 9, 2012

Los Angeles: doing less with less

The deep local budget cuts made over the past few years are starting to take a toll on local services, although . Los Angeles fire chief was called to the carpet to explain slow response times in Los Angeles (only 61% of emergency calls meet national standards for response times), and he put the issue squarely back in the city council’s lap: “The simple answer is money,” Cummings told the council. “The way we improve response times is by putting more resources in the field.”Mayor Antonio Villaraigosa and the council cut the LAFDs annual budget by $88 million–from $561 million in 2008 to $473 million in 2011–after the economic downturn. Read: L.A. fire chief says more money needed to speed up 911 responses (latimes.com).

December 3, 2012

NYT series on subsidies, part 2 (Texas)

The New York Times is running part two of its series on state and local corporate welfare. Today’s piece focuses on Texas, the biggest grantor of such subsidies, and a state at the forefront of both radical cuts to education spending and aggressive state tax cuts that have left both the state and local budgets in real crisis. The free flow of tax breaks and subsidies in Texas makes it particularly fertile ground to examine these economic development deals and the fundamental trade-off behind them: the more states give to businesses, the less they have available in the short term to spend on basic services, a calculation made more stark by the recession. To help balance its budget last year, Texas cut public education spending by $5.4 billion — a significant decrease considering that it already ranked 11th from the bottom among all states in per-pupil financing, according to recent data from the Census Bureau. Yet highly profitable companies like Dow Chemical and Texas Instruments continue to enjoy hefty discounts on their school tax bills through one of the state’s economic development programs. Today’s article also describes the role of private consultants, who seek subsidies for companies and convince local government officials that companies won’t locate in their districts without such subsidies. Many of these same companies are simultaneously at work aggressively blaming public employees and social spending for budget deficits, deficits often created by the kind of bad deals described in this series. Nationwide, a whole industry of consultants has grown up around state efforts to lure companies with incentives. Companies like Ernst & Young, Deloitte and Automatic Data Processing, a payroll company, have divisions dedicated to helping companies search for the best deals. These companies often get a cut of the deals that are made, and also have political relationships with the state treasurers who must approve them. The article hits on all of the key themes: the complicated role of local governments (including school boards) in approving abatements that they believe will be supplemented by state money, which doesn’t fully materialize. The lack of scrutiny of specific deals when they’re approved, the zero sum game for the state and national economy, the companies’ view that they must maximize tax breaks or risk shareholder revolt. And through it all, the unstated assumption that companies deserve tax breaks for making business decisions, and that they won’t make those decisions without the tax breaks. It reflects the idea that taxes serve no purpose except to penalize the private sector; sadly, there are only one or two actors in the series who seem to recognize that the tax benefits they receive would otherwise have been spent on the schools their own workers send their children to. In a time of economic recession, growing poverty, and booming population, Texas chose an economic development strategy that cut $5.4 billion from its state education budget, on top of the hundreds of millions of dollars lost by local school districts. It would be great to see more articles that highlight those kind of choices, instead of blaming everything on lousy economic data or public workers. Texas Business Incentives Highest in Nation – NYTimes.com.

December 2, 2012

Economic development, or blackmail?

The New York Times is running a terrific series on tax breaks and other subsidies given by governments, especially local and state governments, to corporations that promise jobs and revenue, despite the patent failure of such subsidies to improve the economic situation of communities. This first part of the series features GM, among other companies, and its successful demand for local tax subsidies during every year of its existence. Series: “The United States of Subsidies” Read: As Companies Seek Tax Deals, Governments Pay High Price – NYTimes.com.

December 2, 2012

Following the money

It’s no secret that local governments give billions of dollars to companies in the form of tax breaks and other benefits, in both good times and bad. But policymakers are loathe to tally up the real costs of this approach to economic development. Today the New York Times launched a series of articles on such subsidies as the top cover story in both the printed paper and today’s website. A Times investigation has examined and tallied thousands of local incentives granted nationwide and has found that states, counties and cities are giving up more than $80 billion each year to companies. The beneficiaries come from virtually every corner of the corporate world, encompassing oil and coal conglomerates, technology and entertainment companies, banks and big-box retail chains. The Times analyzed more than 150,000 awards and created a searchable database of incentive spending. The survey was supplemented by interviews with more than 100 officials in government and business organizations as well as corporate executives and consultants. A portrait arises of mayors and governors who are desperate to create jobs, outmatched by multinational corporations and short on tools to fact-check what companies tell them. Many of the officials said they feared that companies would move jobs overseas if they did not get subsidies in the United States. Over the years, corporations have increasingly exploited that fear, creating a high-stakes bazaar where they pit local officials against one another to get the most lucrative packages. States compete with other states, cities compete with surrounding suburbs, and even small towns have entered the race with the goal of defeating their neighbors. Today’s article digs into G.M., still the country’s biggest recipient of such incentives (not including the federal bailout), despite breaking its job creation pledges in Michigan cities (a few of them now embroiled in the controversy over Michigan’s now-repealed Emergency Manager legislation). Tomorrow’s article will look at Texas, the biggest granter of subsidies and one of the states I’ve been looking at closely for its draconian cuts to education, cuts driven in large part by state tax cuts and subsidies pushed by the state’s Republicans. The database created by the Times draws on the work of many nonprofit researchers, including Good Jobs First, which maintains its own database [and used to employ me!]. Read Part 1: As Companies Seek Tax Deals, Governments Pay High Price – NYTimes.com.

November 30, 2012

Detroit: urban austerity as art form

Life at the outer limits of urban austerity: Burn, a new documentary about Detroit’s fire department, tells a story that could perhaps echo throughout many U.S. cities: At a certain point in a city’s decline its financial resources are so diminished that life-or-death services like policing and firefighting have to be cut back at the expense of public safety. … A starting firefighter in Detroit, we learn, earns only $30,000 a year. There have been no raises for 10 years. Most members of the brigade have to supplement their incomes with second jobs. Because there is almost no money for basic repairs, Company 50 struggles to make do with damaged equipment whose parts are sometimes held together by duct tape. A new fire engine would cost upward of $700,000. The controversial proposal by Detroit’s Fire Department earlier this year about leaving vacant buildings to burn also feature in the film: Not all agree with his decision to let certain fires burn once it is determined there are no people living in the structures. But Mr. Austin emerges as sympathetic figure. A scene of him sweeping his own office because there are no funds for janitorial services illustrates how desperate the situation has become. They are all in it together. Read: ‘Burn,’ Directed by Tom Putnam and Brenna Sanchez – NYTimes.com. Two other articles about Detroit echo the same theme: How Detroit Became the World Capital of Staring at Abandoned Old Buildings (Mark Binelli), in the New York Times magazine this weekend, and A Battered City, Through Local Lenses (Mike Rubin), April 27, 2012, with looks at Detropia, Burn (above), and Deforce,

November 29, 2012

The Myth of the Exploding Welfare State

A great piece from Martin Eiermann in the Huffington Post last month about the assumption (“myth”) that the welfare state (public spending, entitlements, etc.) is blamed for fiscal crisis at all levels of government. The same narrative prevails in U.S. politics, especially as we teeter over the “fiscal cliff.” Five years have passed since the advent of the current crisis, and while the beast has since morphed from a financial crisis into a confidence and debt crisis, some mantras have become so deeply engrained into our collective psyche after loud proclamations and endless repetitions that they feature is almost any discussion about the future of the economy or, for that matter, the future role of the state. They have assumed the status of self-evident truths and have reduced public discourse to the squabble over fitting solutions. The mantra itself is taken for granted. … The argument is always the same: In light of heavy public debt, such welfare expenditures have allegedly become unsustainable. For too long, the people have apparently lived above their pay grade and have relied on the state to provide for them (cue in Romney’s “47 percent” comment here) without considering whether the benefits are financially sustainable. The welfare state entrenched promises and entitlements that it cannot guarantee any longer. The cuts, we hear, are no vicious payback campaign against the working class but simply a reminder of harsh realities. Read: The European Magazine: The Myth of the Exploding Welfare State.

November 19, 2012

Mayors go to Capital Hill to urge action on the “fiscal cliff”

Mayors from Minneapolis, Philadelphia, and other cities visited Washington, D.C. to talk with lawmakers about the effects of “sequestration” on cities. “Too often,” says Mayor Rybak of Minneapolis, “a line-item cut in Washington one year will lead to an expense in a city the years after.” Scott Smith, the Republican mayor of Mesa, Ariz., is worried how to keep municipal bonds tax-exempt. If that is eliminated, he says, it will raise the city’s borrowing costs for investments and curtail its ability to carry out crucial projects. “It not only hurts quality of service, but also is a job killer,” Smith says. The across-the-board cuts mandated by the sequestration agreement pose a challenge for mayors and locals, who are forced to prioritize essential services. “What the federal government seems to be saying is, Everyone needs to get a haircut, without any sense of what the national priorities are, or any sense of whether you can treat these investments as equal, either in their impact in the short term or in the long term,” says Bruce Katz, the director of the Metropolitan Policy Program at the Brookings Institution. Read: As Fiscal Cliff Approaches, U.S. Mayors Warn of the Toll on Cities | TIME.com.

November 19, 2012

Economists urge “Jobs and Growth, Not Austerity”

Campaign for America’s Future is circulating a petition against austerity measures: About 350 economists and experts have signed a statement calling for “presidential leadership — and congressional action — to spur jobs and growth, not dangerous austerity.” The statement warns Washington leaders to heed the lessons of European countries that have tried to cut their way to growth, “inflicting austerity on a weak economy leads to deeper recession, rising unemployment and increasing misery.” The press release from November 14 is here. The timing, as the newly-reelected President Obama heads into negotiations over the “fiscal cliff”, also coincides with the growing use of the term “austerity” by commentators on the prospect of deeper cuts in the new year. Read the petition and see signatures here: Jobs and Growth, Not Austerity – Campaign for Americas Future.

November 16, 2012

The Austerity Bomb

The “fiscal cliff” is definitely the worst term for a constructed policy impasse, but I’m not sure how I feel about “austerity bomb.”  Brian Beutler at Talking Points Memo used the term in an article earlier this week: Automatic, across-the-board reductions to domestic and defense spending, combined with the looming expiration of the Bush tax cuts, will dramatically consolidate the budget in the next calendar year, if Congress does nothing. And despite bemoaning deficits throughout the Obama years, the GOP’s suddenly come around to the view that cutting government spending is a job killer. … If all the fiscal tightening scheduled for the beginning of the year is allowed to take effect, it will take a huge bite out of the projected deficit for the coming fiscal year. Unfortunately, it’ll take a similarly large bite out of GDP — enough to threaten a new recession. And the resulting job losses would reduce tax revenues and increase spending on jobless benefits enough to undo billions of dollars in direct deficit reduction. Republicans are focused on maintaining defense spending, but that’s not the only spending that matters, according to the CBO study cited by Beutler. Krugman highlighted the term in his next column, pointing out that the fiscal cliff frames the problem (and the solutions) in a particular way: The cliff stuff makes people imagine that it’s a problem of excessive deficits when it’s actually about the risk that the deficit will be too small; also and relatedly, the fiscal cliff stuff enables a bait and switch in which people say “so, this means that we need to enact Bowles-Simpson and raise the retirement age!” which have nothing at all to do with it. Austerity brings to mind the unfolding disaster in Europe, an acknowledgement of the kind of deprivation already being visited on local governments in the U.S. The Washington Post is adopting the term “austerity crisis,” eloquently framed by Suzy Khimm (and affirmed by readers of Wonkblog, Ezra Klein’s policy blog on the Post). The fiscal cliff itself would mean huge deficit cuts come January 1. The deficit isn’t the crisis, it’s austerity that would be imposed by the cuts, austerity that most observers (including the CBO, and anyone reading the news about Europe) think could plunge the economy into recession. As Khimm writes: The essential dilemma, as both the U.S. and European countries like Greece have begun to discover, is that weak economies don’t respond well to immediate austerity measures. The deficit hawks arguing for a bipartisan “grand bargain” or similarly ambitious deficit-reduction plan want to replace the kind of austerity that we’re facing now with austerity that takes effect further down the road, not undo it altogether. Others simply want to put austerity off for at least a year by extending all the tax cuts and suspending the sequester. All of these solutions affirm one underlying truth: The reason the fiscal cliff is so scary is that it’s an austerity crisis. I’m no expert on federal spending, tax policy, or deficits (I study cities, which aren’t allowed to run deficits). But I’m very interested to see how the conversation changes once there is more public discussion of austerity: the austerity already imposed and the austerity to come. We’re well beyond discussions of efficiency and government waste and the metaphors we’ve used to cover up the drastic cuts of the past four years. As Salon summarized the trend: “Austerity metaphors matter.” It will be interesting to see if they start circulating outside the world of newspaper columnists. How would the idea of austerity poll?

November 2, 2012

What I’m doing this month

November is a month of heavy focused writing for me, which is all about public accountability so I thought I’d post it on here: Six key rules: • Decide on a goal that’s word, time or task based (and stretches you) • Publicly declare said goal (this gives you a push from the start) • Draft a strategy (planning in advance will focus you) • Openly discuss your problems and progress • Don’t slack off • Declare your results at the end My goals are to write for 5 hours a day on work days (Monday through Thursday), plus enough extra writing to add up to 30 hours a week. And to write 30,000 words total, which is 1,000 words a day! Gulp. If I do that, I should end up with a solid chapter to use for fellowship application in the spring, and to show to my committee. I’ll have to check back here December 1 and report how it went!   Academic Writing Month and the social landscape of academic practice | Higher Education Network | Guardian Professional.  Announcing AcWriMo! » PhD2Published.

October 31, 2012

Michigan’s Emergency Manager Law: Good for banks, not so good for people

Michigan’s Emergency Manager law is a big part of my dissertation, so I haven’t written about it much here. But after wading through the overwhelming media support for Proposition 1, which will affirm the Emergency Manager law passed by Republicans in 2011, a rare piece on the underlying issues caught my eye: Those who like the emergency manager approach — like the Mackinac Center — don’t like the prospect of bankruptcy for a simple reason: Municipal bankruptcy under federal law requires real sacrifices from bondholders and bankers — not just residents and workers. Unlike emergency managers, bankruptcy courts have the power to bring creditors to the table. That can lessen cuts in services like police and fire departments, and public transportation. But compromise and sacrifice by creditors is something the emergency manager law was explicitly designed to prevent. Jordan is from Flint, which has had a particularly volatile experience with the law, and he is part of the lawsuit that led to the law being suspended, paving the way for Proposal 1. I’ll have more to say once the voting (and perhaps my dissertation) is done, but I wanted to highlight his article now. via Guest view of Paul Jordan: Why you should vote ‘No’ on Proposal 1 | MLive.com.

October 31, 2012

Disasters and governments: all politics is local

Mitchell L. Moss writes for CNN.com about the relationship between urban policy and disasters. Much has been made of how the disaster will affect the national election, but as Moss points out it’s Mayor Bloomberg, Governors Cuomo and Christie, and other mayors who will deal with the fallout from Sandy. And he also points out that people experience disasters locally. t takes a disaster to remind us how much we depend on our local and state governments. In the middle of a presidential campaign, Hurricane Sandy has put Barack Obama and Mitt Romney on the sidelines, reminding us how much we count on mayors and governors to protect us, to rescue us and to keep our streets, buses, subways, airports and commuter rails running. After a season of debates about the deficit, taxes and health care, Americans have discovered that they cannot survive without government: to provide clean water, reliable transportation systems, and emergency services when floods, fires and power outages force them to abandon their homes. There is one simple lesson we can learn from Hurricane Sandy: We cannot ignore the essential infrastructure that moves people, information and goods. These systems are under the control of mayors and governors — not presidents, senators or members of Congress. More than two-thirds of the funds spent on transportation come from states and localities, not from the federal government. And with todays current emphasis on cutting the federal deficit, states will need to do more since the federal government is clearly in retreat, at home and overseas. I hope that the awareness of our collective reliance on government doesn’t fade as quickly as such realizations usually do. via Sandy debunks nanny state – CNN.com.

October 24, 2012

Off the deep end

The “fiscal cliff” is one of my least favorite metaphors for an actual policy-making disaster. As the precipice nears, state governments are, naturally, starting to panic (California has its very own fiscal cliff also coming in January 2013, if a key ballot measure fails). NBCNews.com has a story on this panic: “States are closely linked to what the federal government does. There’s a severe correlation between the two that gets left unnoticed.” And cities of course, are closely linked to both state and federal policies, both because laid-off state employees live in cities, and because when states panic (as California is doing now), they often try to trim budgets in anticipation, and at this point that trimming often cuts into programs that cities need. Races for state political office often hinge on candidates’ plans for dealing with a fall off the fiscal cliff, so that austerity policies became topics for debate, and “sensible” state policy, even before the crisis becomes anything more than a high-stakes game of chicken. The fiscal cliff is not the inevitable outcome of a very real recession; it is a policy moment created by a set of political choices, and will be remedied by a political compromise. Everyone knows that. Obviously, the question of how the federal budget gets balanced is an important question, and not easy to predict. But the metaphor of the cliff gives a whiff of natural disaster, of an inevitable slide toward fiscal crisis rather than a politics of slowly strangling government at all levels. Read NBCNews: State budgets in jeopardy as nation nears fiscal cliff – Bottom Line.

October 23, 2012

Austerity, then and now

I saved this article almost a year ago, but I came back to it while thinking of how things in Europe have unfolded over that year, and how austerity has become a more loaded term across the Atlantic, even as it . Cowell begins by lamenting (I think, his tone is hard to gauge) that Europeans of Tony Judt’s generation were accustomed to austerity measures in the aftermath of World War II: rationed food, clothing, and furniture. A shared sense of sacrifice made more palatable by the fact of the war’s end. The language of austerity now both draws from and contrasts with that notion of austerity. Today, it is not war that we need to recover from, but “profligate” spending, a padded welfare state, a “fool’s paradise,” as Cowell calls it. But apart from disagreeing with the picture painted of what brought us to this point (Cowell mentions bankers only toward the end), I think the idea that people are outraged at losing a lifestyle that couldn’t be afforded in the first place is wrong. I think people are outraged that this iteration of austerity offers no notion of a brighter future, nor of a collective sacrifice. In Mr. Judt’s day, austerity guaranteed a minimum level of access to basic supplies, the harbinger of better days; now, austerity is about the removal or diminution of jobs, pensions, comforts and benefits that have accrued since then — the herald, thus, of much darker times. Although Americans (both we the people and our representatives) are still unwilling to talk openly about austerity as a national policy, I think we are equally guided by our own postwar history. My generation, for the first time in U.S. history, can expect to have less financial security (and perhaps even a lower life expectancy) than our parents, the children who grew up in the emerging affluence of post-WWII America. Read: Austerity in Europe Brings Bitterness Unknown in Postwar Era – NYTimes.com.

October 20, 2012

“The Municipal Sandwich”

The municipal bond market’s view of city budget woes, via Goodwin Procter’s take on the Pew report about struggling cities (which is worth reading): A recent report issued by The Pew Charitable Trusts American Cities Project describes how the Great Recession has sandwiched municipalities between an increased demand for services and an inability to raise the revenue required to meet the cost of current services or legacy obligations. This problem is widespread and comes at a time when state aid to local governments has also declined. According to the report: State aid to local governments fell by $12.6 billion in FY 2010, with additional cuts in 2011 and 2012. Simultaneously, local governments lost $11.9 billion in property tax revenue in FY 2010. The stark reality faced by municipalities is that services must be cut and legacy obligations reined in.  Privatization of services, regional partnerships, layoffs and budget cuts appear to be the only way that municipalities can begin to operate in the black.   While municipal defaults and bankruptcies remain rare, bankruptcy, or the threat of bankruptcy, will continue to be a useful tool for municipalities that must force compromises and lessen their debt load.  And, for the truly troubled few, it will remain the only way out of the current financial crisis. Emphasis mine. There are of course other ways out of the mess, including other approaches to debt reduction or increasing revenues. But better to use the threat of bankruptcy to “force compromises.” via The Municipal Sandwich | GoodwinProcter – MuniBK. Pew’s report: “The Local Squeeze: Falling revenues and growing demand for services challenge cities, counties, and school districts“, published by the American Cities Project.

October 15, 2012

Analysis: Aid recipients welcome IMF’s shift on austerity | Reuters

I think this one’s worth including in its entirety: (Reuters) – Graduates of IMF emergency loan programs accepted the Fund’s admission that it miscalculated the cost of austerity with a mix of schadenfreude and frustration that the change came too late to spare them economic pain.

October 15, 2012

IMF changes its tune on austerity

For many, the word austerity is inextricably linked to the international development community: IMF and World Bank policies that required austerity policies – often draconian in their social impacts – in exchange for development financing and other aid. The IMF is now grappling with a different part of the globe: the withering crises of the European Community. Plumer writes on Wonkblog that the IMF’s chief economist has been studying the relationship between “fiscal consolidation” (aka austerity) and economic growth. And he has released findings that suggest the link may be reverse: pursuing austerity policies may reduce economic growth. Woops! There will no doubt be much ballyhooing (and much cheering) while the economists hash out what the numbers really mean. For now, though, as both Kate McKenzie and Matt Yglesias point out, it’s quite significant that the IMF has shifted its stance on austerity so dramatically. In the 1990s, the fund was famous or infamous, if you prefer for ordering countries with debt troubles to tighten their belts. But now the IMF is urging countries in the euro zone, such as Netherlands and France, to loosen up a bit. Matt Yglesias suggests a couple of corresponding responses: In the US we should be avoiding a disastrous payroll tax hike and probably creating slush funds for our budget-strapped state and local governments. This may all same (and actually is) quite wonky and theoretical. But the wonky stuff of economics feeds directly into government policy, so even an acknowledgement that the IMF is questioning the presumption that austerity promotes economic growth is, Plumer suggests, “a big change in attitude.”   Read: IMF: Austerity is much worse for the economy than we thought.

October 4, 2012

Sprawl and fiscal crisis

The recent bankruptcies of Stockton and San Bernardino have again highlighted the fragility of many California cities’ finances. In each case, the burden of public pensions has been blamed for the financial problems. However true that may be in the short run, the pension blame game masks another, deeper problem for the state’s taxpayers: the hidden but crushing cost of sprawl. … One California planning director calls this a cycle of addiction. Each new development project generates huge new revenues — impact fees upfront and greatly increased property taxes once the project is built. But the impact fees never cover the cost of the infrastructure and, because of Proposition 13, the buying power of property taxes declines dramatically over time. Sooner or later the new project is running a deficit instead of a surplus for taxpayers. The only way to forestall a financial problem is to approve another sprawling development. And another. And another. Sooner or later, however, the real estate market crashes, this development Ponzi scheme collapses and taxpayers are left holding the bag. That’s what happened in California starting in 2008. Although I think sprawl is as simplistic an explanation as pensions (and I think Fulton himself would nuance the discussion in a longer piece), there’s an important kernel here: the incentives created by local tax structures, municipal boundaries, and development financing. The ultimate costs of sprawl are externalized, by local governments, by individuals, by our entire economy. But the long-term costs of development are pretty easy to track, and the policies that create incentives for cities to continually seek new, dedicated, revenue streams, even at the expense of more money than those streams will ever amount to, are not difficult to identify. Right now, municipal governments are internalizing the costs of healthcare and retirement, and the costs of private development. There’s no doubt that there are systemic problems contributing to cities’ problems, but I think we’re a long way from having a real discussion of what those problems are. Read: Sprawl is another reason for California cities’ financial crises – Los Angeles Times.

October 4, 2012

The euro zone crisis: The tightest purses | The Economist

Not urban, but a look at national degrees of “austerity” by the numbers. The Economist looks All the numbers are as a per cent of GDP and all represent tighter policy. 2012                 2013 France                                      1.1                    2.1 Germany                                 0.3                   0.5 Greece                                     2.2                    2.8 Ireland                                     1.1                    2.1 Italy                                          3.3                     1.3 Netherlands                           1.1                     1.4 Portugal                                   3.1                     2.0 Spain                                         3.5                     2.4 Over the two years, Spain clearly has the biggest squeeze, with Portugal and Greece not far behind. But note that Francois “anti-austerity” Hollande is imposing the third-strongest squeeze next year.  In terms of projected deficits, Ireland is the clear outlier, at 7.5% of GDP next year but Portugal, Greece and Spain would all be on course to breach the old Maastricht 3% limit. via The euro zone crisis: The tightest purses | The Economist.

August 9, 2012

Nuances of crime in a time of austerity and fear

  First Recession, Then Crime and Fear – NYTimes.com.

August 3, 2012

Fitch weighs in on Michigan’s Emergency Manager law

Fitch Ratings issued a press release on the situation with Michigan’s Emergency Manager law (right now the court is weighing whether to put on the fall ballot a measure to repeal the current version of the emergency manager law, under which Detroit’s consent agreement with the state). Ratings agencies have been vocal about Detroit’s troubles, and instrumental in affirming the State’s position that Detroit is in irrevocable fiscal trouble. As Detroit’s fiscal stability agreement has several features that rely on the existence of PA 4, most notably the ability to suspend collective bargaining, the repeal of PA4 could weaken or nullify the agreement. This may have an adverse effect on the city’s ability to continue the reforms already begun under the agreement and therefore stabilize and improve its credit quality. We also believe the prospects for financial stability among entities assisted by emergency managers now, or those that might need them in the future, are unclear. Fitch will continue to monitor this evolving situation and report back when more details and analysis will become available. via FitchResearch.

August 3, 2012

Local Finances in New York State

New York’s State Comptroller has issued a report on local government finances that sounds a strong alarm. Local governments across New York State are collecting less in taxes, burning through their cash reserves and running up deficits. Differing visions emerge of where this leaves local governments, and the state: As he has in the past, [Comptroller] DiNapoli urged local governments on Wednesday to embrace multiyear financial planning and to resist fiscal trickery as they seek to balance their budgets in the short term. The report said that poor record-keeping and other questionable accounting practices were serving, in some cases, to mask the extent of the governments’ financial distress. But Richard L. Brodsky, a former assemblyman who was a writer of a recent report on the troubled finances of Yonkers, said cities that had improved their financial planning and forsaken gimmicks found that within the next few years, they would be unable to close their projected budget gaps. Mr. Brodsky predicted that “New York will see what California has already seen,” with localities simply unable to make the budget math work. “You’ve got an unsolvable problem,” he said, “which logically takes you to the consequences of that, which are bankruptcy, bailout or control board. That’s where the mayors are. That’s the conversation they’re having.” Read: N.Y. State Comptroller Warns of Perilous Local Finances – NYTimes.com.

July 30, 2012

Muni Bond legislation

As the Libor scandal unfolds, scrutiny turns to other bond markets, including the municipal bond industry’s price-setting institutions. The Municipal Market Data index (MMD) sets rates that “influence a much smaller market than Libor, but it is one that is crucial to how cities and states across America borrow money to maintain roads and bridges and provide essential services such as public education.” The rating process has long been a black box (and ratings agencies closely protect both their methodologies and their reports, the former are secret and the latter are available only to investment agencies, making it difficult for outside parties, or even the governments being rated, to review). “[T]he market is largely controlled by big financial institutions that have resisted providing customers with information about how bonds are priced.” But it’s not just a lack of transparency, but allegations of corruption that have prompted the current investigations: Christopher Taylor, the executive director of the Municipal Securities Rulemaking Board until 2007, said that during his years at the agency he heard frequent complaints that the opaqueness of the M.M.D. rates allowed them to be “manipulated” by banks that hold many municipal bonds. … The scrutiny of the M.M.D. rates comes as a number of other events are drawing attention to the transparency and fairness of the municipal bond market. On Monday, three former bankers at UBS went on trial in Manhattan on charges that they had colluded to steer municipal bond transactions to specific banks in exchange for kickbacks. With so many cities struggling to fund basic services, and facing rising costs of borrowing that exacerbate their current fiscal outlook, scrutiny of the mechanisms that control cities’ ability to borrow money couldn’t come at a more necessary juncture. Read: Muni Rates Examined for Signs of Rigging – NYTimes.com.

July 11, 2012

Thousands of towns face budget squeeze in downturns wake – Economy Watch

Sean Mulvey, the newly appointed finance director for the town of East Greenbush, N.Y., is trying to solve a riddle facing cities and towns across the country. Though property tax revenues in the Albany suburb have yet to recover from the worst housing collapse since the Great Depression, fixed expenses like long-term contracts, debt interest and pension costs are squeezing the town’s budget. To make matters tougher, New York state recently enacted a law limiting tax increases by local governments and school districts to no more than 2 percent or the rate of inflation, whichever is less. “Our reserve funds have been helping to take of care of some of the problem, but they’re starting to come to the point where we are looking to refresh them if possible,” said Mulvey. “If there’s a pot of gold around here, I’d love to have someone show it to me.” So would many of the roughly 20,000 cities and towns still struggling to balance their budgets more than five years after the housing collapse began eroding property tax revenues, the main source of funding for most local governments. Despite recent signs of a bottom in the housing market, the outlook for local government finances “remains negative for the fourth straight year in 2012,” according to Moody’s Investors Service, which rates the creditworthiness of cities and towns hoping to borrow money in the bond market. The perplexing move towards limiting local tax increases just as federal stimulus money disappears and states pass their own shortfalls onto municipal governments does not augur well for city finances this year. Looks like the perfect storm will hit just as property taxes catch up with falling real estate prices. Read: Thousands of towns face budget squeeze in downturns wake – Economy Watch.

July 10, 2012

Scranton, Pa., slashes workers pay to minimum wage – Bottom Line

Unions representing civil servants in the city of Scranton, Pa., are girding for battle after the mayor announced recently that he would be cutting pay for police, firefighters, garbage collectors and other public workers to minimum wage. … The lawsuit will be among several legal actions the unions may take after Doherty made the announcement last Friday that the city’s 398 workers would be paid $7.25 an hour because the city was running out of money. Read: Scranton, Pa., slashes workers pay to minimum wage – Bottom Line.

June 20, 2012

Public Workers Face Continued Layoffs, and Recovery Is Hurt – NYTimes.com

With the economy expanding, albeit slowly, state tax revenues have started to recover and are estimated to exceed prerecession levels next year. Yet governors and legislatures are keeping a tight rein on spending, whether to refill depleted rainy-day funds or because of political inclination. At the same time, costs for health care, social services, pensions and education are still rising. Fourteen states plan to resolve their budget gaps by reducing aid to local governments, according to a report by the National Governors Association and the National Association of State Budget Officers. So while the federal government has grown a little since the recession, and many states have recently begun to add a few jobs, local governments are making new cuts that outweigh those gains. More than a quarter of municipal governments are planning layoffs this year, according to a survey by the Center for State and Local Government Excellence. They are being squeezed not only by declining federal and state support, but by their devastated property tax base. “The unfortunate reality is our revenue streams have not rebounded,” said Timothy R. Hacker, the city manager of North Las Vegas, which has cut its work force to 1,300 from 2,300 and is about to lay off 130 more. “Shaking this recession is becoming increasingly difficult.” via Public Workers Face Continued Layoffs, and Recovery Is Hurt – NYTimes.com.

June 2, 2012

“Cities Facing Worst Fiscal Situation Since 1980”

The Pew Charitable Trust report, outlining the bleak context in which I’m trying to devise a dissertation research strategy. 2012 looks to be one of the worst years in the cities I’m studying since the early 2000s. City officials and the vast majority of workers are deeply entrenched in an ongoing recession, despite the fact that the “recovery” is officially old enough to be in preschool. For the first time since 1980, both property tax revenue and state aid to local governments are declining at the same time. While cities and counties used to be able to count on at least one of those remaining positive, this current state of double decline is creating the most significant strain on the finances of local governments in a generation. And things probably aren’t going to get much better any time soon. Local governments, for the most part, are combating these funding shortfalls by cutting spending. As a result, local services like public safety, trash collection, welfare and social services are being greatly reduced or even eliminated in some places. Since 2008, about a half million public sector jobs have been eliminated, according to the report. Half of those were either teachers or other school officials. The report notes that 17 states since 2008 have reduced their per-student funding by more than 10 percent. And though some federal stimulus funding has prevented further cuts, that funding will expire later this year, leaving local governments with few options for avoiding even deeper cuts. Local governments, though, have few options to counteract these reductions in revenue. For example, 46 states have laws that greatly restrict how much local governments can raise taxes. And the fiscal problems facing local governments will likely be here for at least a few years, according to the report. Because some cities don’t assess their property taxes annually, the negative impacts of the housing market crash haven’t been fully felt. “A lot of the downturn of the housing market is still working its way through the system and will be reflected in property taxes this year and next year,” Zahradnik says. Moody’s Analytics predicts that average property tax revenues will decrease by another 4.4 percent during 2012. Read: Cities Facing Worst Fiscal Situation Since 1980 – Jobs & Economy – The Atlantic Cities, June 2 2012

June 1, 2012

The Austerity Agenda – NYTimes.com

Another Krugman article about austerity, mostly in Britain, where austerity continues to hold sway even as much of continental Europe is embroiled in debates over it: Unlike the governments of, say, Spain or California, the British government can borrow freely, at historically low interest rates. So why is that government sharply reducing investment and eliminating hundreds of thousands of public-sector jobs, rather than waiting until the economy is stronger? Krugman answers the question by suggesting that running policy agenda that’s being disproven, all over again, we should consider  the policy agenda as the end in itself: So the austerity drive in Britain isn’t really about debt and deficits at all; it’s about using deficit panic as an excuse to dismantle social programs. And this is, of course, exactly the same thing that has been happening in America. … The big question here is whether the evident failure of austerity to produce an economic recovery will lead to a “Plan B.” Maybe. But my guess is that even if such a plan is announced, it won’t amount to much. For economic recovery was never the point; the drive for austerity was about using the crisis, not solving it. And it still is. This is part of what I’ve been finding in my exploration of urban austerity: that the idea of crisis, which underlies the very notion of austerity, becomes the central driver of policy, policies that seem less about recovery than about punishment. read The Austerity Agenda – NYTimes.com.

May 30, 2012

Vallejo, California, austerity model

Vallejo becomes the model for post-bankruptcy urbanism – is this the future some people would like to see in American cities?: VALLEJO, CALIF. — The first couple of years were ugly. After this working-class port city became the largest in America to declare bankruptcy in 2008, crime and prostitution surged as the police force was thinned by 40 percent. Firehouses were shuttered, and funding for libraries and senior centers was slashed. Foreclosures multiplied and home prices plummeted. But then this city of 116,000 began to reinvent itself. It started using technology to fill personnel gaps, rallying residents to volunteer to provide public services and offering local voters the chance to decide how money would be spent — in return for an increase in the sales tax. For the first time in five years, the city expects to have enough money to do such things as fill potholes, clear weeds, trim trees and repair tennis courts. … The dire conditions, however, have made California a laboratory for how to run cities in an age of austerity. Declaring bankruptcy used to be a last resort for cities, not only because it would cripple their ability to borrow for years to come but because of the blow to their reputation. But that attitude has started to change as more cities have found themselves facing fiscal catastrophe; bankruptcy offers an opportunity to start over with a clean slate. … Vallejo is in a markedly different situation. While it still faces some serious challenges — crime continues to be a problem, and the housing market remains depressed — the city’s finances are doing so well that a federal judge released it from bankruptcy in November.   “We’re seeing a lot of cities around us that are where we were five years ago,” Gomes said. “Some of those cities were laughing at us back then. It’s nice to be on the other side of it.” While its general-fund budget of $69 million for 2012-13 is a far cry from the $85 million at its peak in the 1980s [for roughly the same number of people!], Vallejo is in much better financial shape than many other cities around the country. Assistant City Manager Craig Whittom, who has worked in Vallejo since 2003, said the bankruptcy may have been the best thing to happen: “It was effective at helping us re-create ourselves and change the culture so that we could restart from a stronger financial footing.” What is Vallejo really like now? It seems that the “clean slate” that makes bankruptcy appealing is not about future economic prosperity, but just about shrinking the role of government. I’d love to dig into the budgets from the 1980s and figure out what Vallejo’s residents have lost over the past decades. Sounds like a good excuse for a trip inland. Read: Vallejo, Calif., once bankrupt, is now a model for cities in an age of austerity – The Washington Post.

May 16, 2012

Foreclosure Relief Money Diverted by Governors

Hundreds of millions of dollars meant to provide a little relief to the nation’s struggling homeowners is being diverted to plug state budget gaps. In a budget proposed this week, California joined more than a dozen states that want to help close gaping shortfalls using money paid by the nation’s biggest banks and earmarked for foreclosure prevention, investigations of financial fraud and blunting the ill effects of the housing crisis. California was awarded more than $400 million from the banks, and Gov. Jerry Brown has proposed using the bulk of that sum to pay the state’s debts. Read: States Diverting Mortgage Settlement Money to Other Uses – NYTimes.com.

May 14, 2012

And meanwhile in Greece…

Rising to the fore as the country’s second-most popular party was Syriza, a coalition of left-leaning parties that promised to keep Greece in the euro and, among other things, increase wages, halt public sector layoffs and repudiate Greece’s debt. For the guardians of the monetary union in Europe — not to mention Greece’s political establishment — it is the most dangerous of notions. The fear is not so much that Syriza’s platform becomes policy. … The fear is more the view that Greeks are beginning to feel that they need not buckle to Europe’s terms. For if the Greeks come to accept that there may be an easier route to recovery, perhaps the Irish, Portuguese and the Spanish and Italians may also reach a similar conclusion. Which is why Germany’s foreign minister said on Friday that Greece must proceed with the agreed-upon cuts — a quite drastic 5 percent of its gross domestic product — or not receive any more bailout money. Analysts estimated that Greece has about 2 billion euros in cash left, which should allow the government to function until late July or August. Without the next bailout tranche of about 31 billion euros, the country would quickly default and eventually be forced out of the currency union. But Greek voters, unsurprisingly, are increasingly questioning such ultimatums. The parallel language between Greece – EU and Detroit – the State of Michigan is interesting, although in Detroit’s case austerity was a disciplinary condition for maintaining (reduced) autonomy, while Greece is offered the choice between austerity and isolation . via For Many in Greece, Austerity Is a False Choice – NYTimes.com.

May 14, 2012

Tens of Thousands Protest Austerity in Spain – NYTimes.com

European cities continue to see huge protests over austerity, perhaps now bolstered by political gains in France and elsewhere. U.S. media coverage of Greece and Spain continues to be sparse, and there has been little follow-up after the French election.   Tens of Thousands Protest Austerity in Spain – NYTimes.com.