NewGeography.com blogs

Residents in Los Angeles with home-based business received letters from the Office of Finance that said, “The following amounts are due and payable immediately: $4,363.81.”

People who work as independent contractors and had failed to register their businesses with the city’s tax and permit division by Feb. 28 received the letters in March.

The city calculated the number by estimating $200,000 in gross income for each business over the last three years – the annual average for city business taxes – added interest and late penalties and arrived at the $4,000-plus number.

The letters arrived at a time when many laid-off employees are working as independent contractors themselves. To add fuel to the fire, many who received the letters might have generated income less than the total amount of the tax.

Though the city has denied that the letters were any kind of “scare tactic,” the program stems from a 2002 push to identify unregistered businesses using records “disclosed to the city by the California Franchise Tax Board.” The program has added almost 100,000 businesses to the tax roll and generated $107 million in revenue.

This issue has a particular sting at the moment, particularly given LA’s 10% plus unemployment rates.

You could hear it in their voices – dejection, resignation and anger. Late last week, the National Weather Service announced a second crest of the Red River of the North, with predictions of a 75 percent chance the Red would crest at 41 feet and a 25 percent chance it will hit 42.8 feet in the second half of April. Not good for a community that through hard work and personal and community sacrifice averted a major disaster by continuing to sandbag, dike and fight an epic flood while not caving to a suggested mandatory evacuation of the community.

But this community/region is nothing if not resilient, tough and plain old stubborn. As people get back to work in the city (with commerce being shut down for roughly two weeks), they drive past and around semis continuing to dump clay to build and bolster dikes to hold back a projected second crest that could surge higher than the previous high-water mark. Led by an unflappable Mayor, flanked by a trauma physician Deputy Mayor, and supported by a community that cares about where they live, they seem to have put behind them the despair and with a new week comes new vigor and resolve to overcome this new threat.

This can-do approach and community drive is repeated in communities (Valley City, Olso, Drayton) up and down the valley as they confront record flooding. Starting with record fall rains, an early and deep freeze (prompting fast runoff) and heavy winter snows these communities and this region continue to see record high water levels and the threat of flooding. There have been losses – hundreds of homes reporting flood damage in Cass and Clay counties – and there may be more, but not without a fight.

Our colleague and frequent NewGeography contributor Wendell Cox of Demographia.com recently released the latest edition of his World Urban Areas and Population Projections publication.

This 5th comprehensive edition includes:

Ranking of the largest world urban areas (over 2,000,000 population).
Population, urban land area and density estimates for all 763 identified urban areas with more than 500,000 population, comprising 49 percent of the world urban population.
Population, urban land area and density estimates for 1,370 urban areas of all sizes, comprising 53 percent of the world urban population.
Population projections for the world’s largest urban areas in 2025 & 2030 (over 2,000,000 population).
Summary of United Nations world population projections and summary by gross domestic product, purchasing power parity (from 4th Edition)
Charts on urban density and prosperity (from 2nd Edition)
Documentation

Check it out.

The suburbs, generally a haven for luxury SUVs, regimented lawn sprinkling, and keep-up-with-the-Jones purchases, are not often considered the front-runner in environmentally friendly living.

However, the Australian Conservation Foundation’s 2007 Consumption Atlas published controversial research that suggested that “dense inner-city zones unleash more greenhouse emissions than car-loving fringe suburbs.” Suddenly, car use is not the prime factor in measuring efficient living, nor can incomes tell the whole story. ()

While it has been generally accepted that high human consumption is worse for the planet than lower consumption, the study’s main controversy is the fact that the ACF gave the problem a specific geography.

The quote:

Rural and regional areas tend to have noticeably lower levels of consumption . . . Higher incomes in the inner cities are associated with higher levels of consumption across the board.

The ACF has not only pointed their finger at their main supporters (inner-city professionals) but have also invited comments from a variety of sources. The Australian study questions the data used in the past to measure where the worst violators are located.

American consultant Wendell Cox—long an advocate of suburban development—found that the data suggested that “lower GHG emissions were associated with long distance from the (urban) core, detached housing, more automobile use and lower population density.”

A team from Queensland’s Griffith University Urban Research Program drew an altogether different conclusion that put simply is, “correlation does not establish causality.”

GHG emissions are a function of overall consumption and consumption based on low-density housing “doesn’t figure prominently in the composition of aggregate consumption.”

Urban sprawl cannot be used as an argument or attempt to point fingers at the Hummer drivers. Lowering greenhouse gas emissions will require a commitment by city dwellers and suburbanites alike if we are to alter our future carbon footprint.

While the study itself has prompted much discussion and debate, if the object is to cut down on greenhouse gas emissions, singling out suburbia might not be the first order of business. Spurious data and indeterminate causality make for an argument destined to fail for the lack of a supportable conclusion – unless we wish to overturn logic entirely, which some seem determined to do in furtherance of their long-held anti-suburban agenda.

The success of Treasury Secretary Geithner’s Public-Private Investment Partnership Program depends on getting private investors interested in buying junk bonds off the banks’ balance sheets. Now it seems that at least one hedge fund is giving the plan “two thumbs-down.”

The New York Post is reporting that Bridgewater Associates, one of the few that might qualify for Treasury’s program, decided that “the numbers just don't add up.” Besides being a bad investment, the fund’s founder raised questions about conflicts of interest – something we find surprising. Hedge fund managers are supposed to be those free-wheeling, unregulated, we’ll-buy-anything investors – always willing to take a risk and suffer the consequences of the market outcomes.

Bridgewater’s concern is that Geithner’s junk bond plan includes hiring asset managers – who will also be investors. There are clear conflicts of interest because these managers will "have both the government and the investors to please and because they will get their fees regardless of how these investments turn out," wrote Bridgewater founder Ray Dalio. Imagine, a hedge fund worried about collusion among asset managers? Maybe it takes one to know one?

The real question is why Geithner would set up a program putting US taxpayer money in the hands of unregulated hedge funds and then go to Europe a few days later and blame the global financial crisis (at least in part) on hedge funds and their lack of regulation? Dalio is right: it just doesn’t add up.

The financial services sector (finance, insurance, real estate, management) lies at the heart of the economic crisis and recession. This is the sector that doubled in its share of the labor force over the last 30 years, creating vast but uneven wealth. It is instructive to see which American cities are most culpable in these excesses.

New York dominates, as it has for centuries, especially if we include neighboring Fairfield county, CT (Bridgeport, Stamford, Greenwich), based on its very high share (20 %) of resident employees in finance. This does not include the very high share of incomes that financial services represents in the New York area, as discussed in our recent report on the city’s middle class.

But Washington, DC has by far the highest share; there are also high shares in neighboring Baltimore and Richmond. These figures illustrate the rising relative power of center of government in the contemporary political economy. Los Angeles is roughly equivalent, but with a slightly lower share than New York. Chicago, the economic capital of the interior, tops off the big four centers of control.

The next tier of five major regional capitals, all also Federal Reserve cities, are Dallas, Atlanta, Philadelphia, Boston and San Francisco, with Boston and San Francisco among places with the highest shares in finance. They are followed by four regional capitals on the path to financial stardom – if you can use that term today – including Miami, Houston and Seattle and Phoenix, as well as another federal reserve city, Minneapolis.

Several major metropolitan areas are far less important in finance than in earlier times. These include the Rust Belt cities of Detroit, Cleveland, St. Louis, Pittsburgh and Cincinnati. These, in turn, are being challenged by the growing smaller metro areas and regional capitals of Denver, Portland, San Diego, Sacramento and Tampa-St. Petersburg.

Finally smaller, often growing metropolises with high shares in finance include, most obviously Charlotte, but also Austin, Columbus, Madison, Raleigh, Des Moines and Olympia, WA, all state capitals and/or university towns. But the highest shares, after Bridgeport are located smaller areas in Florida, Palm Coast and Fort Walton Beach.

The national conversation in the wake of President Obama's introduction of a mortgage relief plan has centered on "fairness" and the conditions to qualify for a mortgage modification. This misses the point. The effects of "innovative" mortgage products were felt far more broadly than the relationship between a single buyer (responsible or not) and his particular mortgage broker (despicable or not). To illustrate the point, meet Mrs. Conservative And Responsible Mortgage Neighbor ("Carmen" for short).

In 2003, Carmen bid on a home and took a 30 year fixed mortgage with 20 percent down.

Fast forward to today. Carmen has enjoyed her home and made all of her payments to the bank on time. Unfortunately, her home has dropped in value to the point where it is now significantly underwater . Her investment portfolio has fared just as poorly, losing 40 percent of its value in the last 18 months. All the while, her mortgage obligation has slowly amortized lower.

If Carmen were to turn to her investments to pay off the loan today, she would come up short. Worldwide deflation has resulted in every asset in our little vignette having fallen by 40 percent. Carmen's debt burden, however, remains the same,, struck in yesterday's dollars.

How does the current mortgage relief plan – which certainly excludes all of the Carmens out there -- make sense? The short answer is that it doesn't. It is neither fair nor effective. It lacks boldness, universality and an understanding of the problem.

A far better answer to the problem is one time across-the-board principal reductions to all primary residence mortgages originated in the last ten years. Such a plan avoids the piecemeal approach of subjective formulae and doesn't make personal bankruptcy a precondition to the reduction of principal. It acknowledges that the nation's housing stock was overvalued because of unintelligent home buyers, products that have been discredited, fairly widespread fraud and inexcusable encouragement by naive government officials. Following the principal reduction, each loan can be re-amortized over its remaining life, resulting in the stimulus of a reduced monthly payment for every American homeowner.

I recently recieved this this link to a short essay and some stats titled "Texas on the Brink". I thought I'd share my response with you:

Although I don't really think "we're on the brink" (most of our economic growth stats outpace the nation), I do partially agree with it, with some caveats. Our air pollution is getting better/lower every year, although maybe not as fast as some would like. We have such a vibrant economy, and are a border state, so we attract a lot of uneducated immigrants (both domestic and international) without health insurance looking for work. The opportunities are better for them here, and they're better off here. So we're never going to look great on those sorts of stats compared to most other states. It's like Europe: you can severely limit immigration and reduce opportunities, but make your stats look better as you exclude certain disadvantaged groups from your population, but is the world any better off by keeping those groups away from opportunities? Countries, states and cities seem to play these games of "hot potato" with disadvantaged populations, trying to push/keep them over the border into other jurisdictions to make their own stats look better (and reduce their welfare costs), but it actually makes the world as a whole worse off (for the same reasons protectionism makes everybody worse off vs. free trade). Texas has always pretty much welcomed anybody seeking opportunity and willing to work hard, but in exchange we don't offer much of a welfare state apparatus. That's our deal. The states that are more welfare-oriented tend to have fewer opportunities, play the "hot potato" game by doing things like restricting housing to make it unaffordable, or, like California, simply start to go broke.

And if, as those stats imply, Texas is such a bad place, why are we attracting waves of both domestic and international migrants? Clearly they see value not reflected in those stats. (37th most 'livable' state?! Give me a break.)

All that said, we need to make good investments in both lower and higher education. But I think a lot of what is needed are better systems rather than more money, like increased charter school competition and forcing universities to stress teaching and graduation rates as much as research.

It's hard to find a quality of life ranking that satisfies the preferences and desires of everyone but Bizjournal's recent ranking of mid-sized metros does highlight and affirm the presence of colleges and universities as an increasingly common and important thread in quality of life analyses.

The study compared 124 mid-sized metros in 20 statistical categories, using the latest U.S. Census Bureau data. The highest scores went to well-rounded places with healthy economies, light traffic, moderate costs of living, impressive housing stocks and strong educational systems.

Mid-size places of 100,000 to 1 million residents have experienced strong growth since 2000, exhibiting some of the strongest domestic migration rates among all metropolitan areas regardless of size.

The Hadley Center in the UK has recently reported a “correlation between reduced prosperity and reduced greenhouse gas emissions associated with global warming.”

The report states that since 2000, as greenhouse gasses have risen 2 to 3 percent each year, the world gross domestic product has also risen. The current ½ percent reduction in GDP is therefore correlated with the ½ percent reduction in greenhouse gasses.

Paul Taylor, of the examiner.com, suggests that the “reductions in greenhouse gases will reduce GDP and punish economic prosperity.”

President Obama’s $646 billion spending bill on a new carbon trading system to mitigate greenhouse gases would enact a “cap and trade” system that is “in effect a massive new national tax…[that] would impose substantial additional cost on power producers and manufacturing,” according to Taylor.

The extent to which greenhouse gasses are a direct cause of the world GDP dropping or increasing remains to be seen – a myriad of additional factors should be considered – but these issues will continue to be at the forefront in such volatile times.