Category Archives: News commentary

The Washington Post reports that Barack Obama will be our first president whose heritage is from the central cities since Grover Cleveland, who left the office in 1897. Prior to becoming president, Cleveland had been a reform mayor of Buffalo, and then governor of New York. I think they missed one: Theodore Roosevelt grew up in New York City and represented part of the city in the legislature. But presidents since then have been from suburbs or small towns.

Obama, however, was born in Honolulu, went to school in Jakarta, Los Angeles, and New York, and got his famous job as a community organizer in Chicago. His only “suburban” time was getting his law degree in Cambridge, MA.

From one perspective, the war on sprawl is really a war between central cities and suburbs. The central cities see the suburbs growing and want some of that growth (and the tax revenues that come with it) for themselves. By demonizing the suburbs, at the very least they have a chance to grab more than their share of federal and state funds for housing and transportation.

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Remember when TreasSec Henry Paulson got down on his knee to beg Nancy Pelosi to support his $700 billion recovery plan? He said he would use the money to buy mortgage securities in order to set a floor on their value and restore faith to the credit markets. Treasury Department wonks talked about reverse Dutch auctions and other fancy ways of making sure that the bailout would succeed and maybe even earn a profit for taxpayers.

Immense pressure was put on Congress to pass the bill authorizing Paulson’s plan. “If there is even the slightest chance it will work,” one congressman said, “we should do it.”

Now, a mere seven weeks after Paulson bent his knee, not only is there not the slightest chance it will work, there is not even the slightest chance that Paulson is going to do it. Paulson now admits that “it was clear to me” as early as October 3, the date the President signed the bailout bill, “that purchasing troubled assets” would not work. But he waits almost six weeks to tell us?

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Remember those transit agencies that are in trouble because of the credit crisis? It turns out this is all the fault of “public-private partnerships.” At least, that’s what U.S. Representatives James Oberstar (who chairs the House Transportation Committee) and Peter DeFazio (who chairs the Highways and Transit Subcommittee) said in a letter to Secretary of Transportation Mary Peters last week.

Recall that transit agencies decided to exploit a loophole in federal tax law (since closed) that allowed them to “leverage” their capital investments to get an extra 3 percent out of those investments. They “sold” their capital investments to some bank, then leased them back. The banks would get to depreciate those investments on their taxes (which the transit agencies, not being taxpayers, couldn’t do), saving about $6 million out of $100 million. They split the savings with the transit agencies.

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Dear President-Elect Obama,

Congratulations on your historic victory, and my condolences for the economic mess left you by your predecessors. Here are a few ideas that may help. They boil down to two words: user fees.

Many people have suggested that one way out of our current economic crisis is for Congress to pass a stimulus package focused on infrastructure. If you let it be known that you support this idea, everybody and his sister will try to make their pet projects look like “infrastructure.” They will come to you with all kinds of multipliers showing how their infrastructure projects will do all sorts of wonders for the economy. It will all be very persuasive and it will all be a lot of hooey.

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About 40 percent of Americans are hard-core Republicans and 40 percent are hard-core Democrats. The way to capture the White House is to appeal to the 20 percent who are often called “independents.”

So the Antiplanner was puzzled after the Democratic convention when Obama’s acceptance speech was so clearly oriented to the left wing, while McCain’s vice-presidential pick was so clearly oriented to the right wing. How, I wondered, will either of them capture the center that way?

The answer today is clear. Obama’s acceptance speech committed him to nothing; he could go out and give more centrist-oriented speeches and sweep up the independents.

In contrast, by choosing Palin, McCain committed himself to the right wing. Sure, Palin “energized the base” of the Republican Party, but that only meant that 40 percent of the public will vote for McCain-Palin. Selecting Palin also meant selecting Palin’s rhetoric, such as claims that Obama “pals around” with terrorists and that he is a socialist.

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Since the financial crisis has been caused by falling housing prices, some people (including John McCain) have argued that the government should take steps to prop up housing prices. Harvard economist Edward Glaeser and Wharton economist Joseph Gyourko think this is a bad idea.

“Housing affordability has long been a stated goal of the Federal government,” observe G&G in the Economists’ Voice, an on-line journal edited by Joseph Stiglitz. “Why should it now try to make it more difficult for people to buy, or rent, a home by supporting prices?”

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Some people blame Alan Greenspan’s policy of low interest rates for causing the housing bubble. Why did Greenspan keep interest rates low? “I did not forecast a significant decline” in housing prices, he told Congress yesterday, “because we had never had a significant decline.”

If you fail to look closely at the data, you will come up with the wrong policies. Nationally, we’ve never had a housing bubble. Locally, we had several. But until now, they have been in so few states that they haven’t impacted the national economy.

The above chart shows the ups and downs of two housing bubbles in California, the first peaking in 1980 and the second in about 1990. Hawaii, Oregon, and Vermont also had bubbles at about the same time. By an extraordinary coincidence, these are the only states that had growth-management planning in the 1970s.
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By 1998, more than a dozen states — including Arizona, Florida, much of New England, and New Jersey — had growth-management laws. So when the housing bubble started growing about that time, it affected nearly half of all American housing. Greenspan continued to insist there was no national housing bubble, and he was right. But as Paul Krugman noted in 2005, local bubbles appeared in places that had strict land-use regulation.

Restrictions on housing created shortages that not only made prices go up, they made them more volatile. As the Antiplanner has previously noted, the fact that prices are falling is not an indication of too much supply, but too little.

Low interest rates did not cause the housing bubble, though higher rates might have suppressed it somewhat. Unless we understand what did cause the bubble — growth-management planning — we will adopt the wrong policies and fail to prevent the next one.