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Jon Talton

Analysis and commentary on economic news, trends and issues, with an emphasis on Seattle and the Northwest.

Category: Sustainability
March 18, 2010 at 9:40 AM

By the time you get to Phoenix: Spring training and economic lessons (plus, the best Mexican food)

Mariners fans from Seattle are no doubt enjoying the sun in Phoenix. They also have a front-row seat on how not to run a metropolitan economy. Phoenix is not merely in recession but outright depression, being ground zero for both the residential housing collapse and now the meltdown in commercial real estate.

Phoenix, my hometown, was once a sweet if flawed paradise. It was a farm town grown large by 1960, but visionary leaders had brought in industries such as semiconductors and aerospace. But eventually population increases and sprawl building overwhelmed any other economic development efforts. The money seemed easy, at least to those running the growth machine. Why do more? Now Phoenix is the nation’s fifth most populous city and 13th most populous metro, but it ranks far lower on other scales. Seattle residents would look in vain for the diverse economy back home.

Incomes are far below peer metros; Arizona has some of the worst-funded schools in the nation, and not surprisingly, Phoenix has one of the least literate cities; yesterday’s suburbs are today’s linear slums, as the people with means kept moving farther out to new sprawl; the old stewards died off and the city lacks the kinds of giving and community cohesion enjoyed by Seattle. Infrastructure is lacking — it never kept up with growth, a public cost being pushed ahead into the future. Bitter fights between the city and suburbs further hold back progress. Civic participation and giving are low: For most people, this isn’t “home.” They either want to be left alone in the sun — or are working two jobs just to stay afloat.

Beyond the remnants of the chip industry and a few other nodes, its economy is based on real estate and tourism — and ever rising population. Now population growth has slowed, perhaps stopped growing entirely, and the old sprawl machine is in ruins. Political extremism and anti-immigrant sentiment stand in the way of quality economic diversification, and the area has a huge underclass cut off from opportunity. Low taxes and light regulation have not built a great economy — state finances are in ruins, with even rest areas being closed and the state parks system in doubt. There is another economy: Phoenix is the nation’s hub for people smuggling, gun running to the Mexican cartels and illegal drug distribution.

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February 25, 2010 at 9:20 AM

Burgess bill an essential start to taking downtown crime seriously

Top of the News: It would be too extreme to say that downtown Seattle is sitting on a tipping point. Seattle still enjoys one of America’s best central cities, while the damage from the Great Recession has been heavily felt in suburbs and exurbia. One thing that is true: There’s no truly successful metropolitan area without a vibrant, real downtown. That’s why Seattle’s leaders need show a bias for action for addressing the stresses emerging downtown and in other urban neighborhoods. Anything can happen in the Great Reset.

On Monday, a man was sitting on Second Avenue when he was robbed of his iPhone — at gunpoint. It was 2:50 p.m. Later, while he was at a phone store, he saw the two thugs headed toward Westlake Center. Police were called and the perps were nabbed. Such street crime is on the rise, especially by the roaming hoods on Third Avenue looking for trouble and victims. The mayhem in the Transit Tunnel was a high-profile incident. If the gunman Monday would have decided to shoot, that affair wouldn’t have been a mere “petty crime.”

All manner of criminal havoc happens in the suburbs (e.g., this beating at a Renton shoppng center). But to many Americans, crime downtown carries a special danger. That’s why its important that Seattle leaders move quickly on Councilman Tim Burgess’ measure to address aggressive panhandling and crime. It can’t fix an economy that has put record numbers of young people out of work. But it’s just a start to support businesses downtown and in other shopping districts.

This issue cuts into many areas, including the economic. For the city of Seattle to have a competitive future, it must ensure high quality of life in its urban areas. A high-cost energy future, among other things, works in center citys’ favor. Downtowns are more sustainable. But Seattle can’t count on its past successes. I feel much safer walking downtown Seattle than I do driving around suburbia. But most Americans aren’t like me, and many Seattle residents don’t show the natural urban ease of those in Portland. It’s time to take perception and reality seriously.

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Comments | More in Downtown and urban issues, Macro/Big picture, Sustainability

February 2, 2010 at 10:00 AM

Cheney’s ‘Deficits don’t matter’ becomes Obama’s hot potato

Top of the News: Much of the media yesterday kept repeating that President Obama’s budget includes the largest federal deficit in American history. This is not true. One must ask whether they are careless and ignorant — the same bunch that said in 2006 housing prices would always keep rising — or are they partisan?

The key measure is the deficit as a percentage of GDP. Washington’s deficit in 1943 was more than 30 percent; the current number is around 10 percent. We’ve now been embroiled in two wars lasting longer than World War II. The top tax rate then was 94 percent vs. today’s 33 percent, a product of years of tax cutting and loopholes. In addition, the worst economic downturn since the Great Depression has severely cut tax revenue and required a robust response.

One first is true: President Obama inherited the largest deficit in history.

Deficit projections are extremely fluid, dependent on such factors as how quickly the economy — and thus tax revenue — recovers, whether taxes are raised on the wealthy, etc. In the late 1980s and early 1990s, experts argued that eliminating the deficit was impossible. Yet it was done quickly thanks to the modest Clinton tax increases and the economic boom of that decade.

The real question is: When does a deficit matter?

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Comments | More in Deficit, Dollar, Politics and the economy, Sustainability, Tax policy

December 18, 2009 at 10:10 AM

Winners and (mostly) losers from Copenhagen

Top of the News: It looks like the best we will get out of the Copenhagen climate summit will be kicking the can down the road again. This is entirely predictable.

Nations are divided. The developing world says, essentially, hey, America and the West raised themselves to affluence by causing this mess in the first place — why should we not have the same advantages? Meanwhile, in an era where economic arguments now trump any other ethos of societal good, the costs of addressing climate change are “huge” and meaningful action is opposed by very well-funded industries.

Of course the costs of doing little or nothing are even bigger. But they lack the backing of vast lobbying money as well as being difficult to quantify. The “winners” from inaction will eventually be swamped by these costs and resulting destabilization, too. The result: Countries and even states (if the ascendant GOP allows them once it wins in 2010 and 2012) will go it alone. For some countries, it will even be profitable.

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November 9, 2009 at 10:00 AM

Kraft wants to gobble up Cadbury: Sweet for Wall Street, not Main Street

Top of the News: The significance of Kraft’s $16.4 billion hostile bid for Cadbury is that the Smart People (you know, the ones who cooked up credit default swaps) believe it heralds a return of animal spirits to the wounded capital markets. No wonder the Dow touched a 52-week high today.

These kinds of deals rarely deliver what they promise to shareholders, and they result in heavy job losses at the acquired company (how else are they “paid for”?). They reduce competition and choices for consumers. Yet after decades of lax antitrust enforcement they go on, largely because they are so lucrative for CEOs, investment bankers and lawyers who control the show.

Kraft’s move is also motivated by another usual suspect: its sales are suffering in the recession, materials costs are rising and Wall Street must be placated. That’s the point: The real economy is still sick. If Kraft gets a short-term boost by the deal, it won’t change this reality. Meanwhile, most businesses will be wondering why they can’t get the capital to build productive work while Kraft can assemble it for a speculative, anti-competitive play.

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Comments | More in Macro/Big picture, Stock market, Sustainability, Transportation

October 7, 2009 at 10:20 AM

Want to create real jobs? Get busy building high-speed rail in U.S.

Top of the News: Many smart people talked about “a lack of imagination” among American leaders in not foreseeing the 9/11 attacks. The same language was used to describe the sleepwalk into the financial crash. It could be applied now to efforts to restart job creation.

The other Washington is apparently mulling a tax credit for employers who will hire. This seems like a bad idea for at least two reasons. First, the jobs would not be related to real demand and would likely not have a future unless the economy rebounded strongly, an unlikely scenario. Second, every tax credit already increases the deficit.

American policymakers seem mired in the past. A federal effort to actually build high-speed train networks would create real jobs, many of them permanent for workers to operate and maintain the system. It would relieve congestion and enhance productivity, as well as better positioning the nation for a high-cost energy future (and helping with carbon emissions).

While America is only studying high-speed rail (and Amtrak still lacks predictable, adequate funding for regular trains), the world is racing ahead of us. Britain, continental Europe, China, India and Saudi Arabia are building and expanding their systems.

Here, another failure of imagination, with more costly consequences.

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Comments | More in Jobs/Unemployment, Midweek Economic Briefing, Sustainability, Transportation, Urban issues

October 5, 2009 at 11:35 AM

The hidden banking crisis continues despite the big bailouts

Top of the News: One of the sick contradictions of the crash has been that the giant banks that posed a threat to the global economy through their greed and bad bets were bailed out by the taxpayers. Now they’re even larger, and politically potent enough to fend off regulation of some of the very practices that brought on the late unpleasantness.

Meanwhile, community banks and smaller institutions received some rescue money, but for many of them the troubles continue. It’s a hidden, ongoing banking crisis. Evidence close to home is Frontier Financial, an Everett institution whose deal to be acquired just fell through.

While Frontier Bank remains open and its depositors are protected, 98 banks have failed so far this year, most of them small institutions. For the shareholders of these failed banks, there’s no protection. In many cases, these failures have been disproportionately painful in smaller communities. The capital markets remain far from healthy, despite the rebound among the big dogs in New York, San Francisco and Charlotte.

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Comments | More in Banking, Sustainability

July 30, 2009 at 10:05 AM

Heat wave: Burning questions about what this week bodes for Seattle’s future

Top of the News: As someone who misspent more than half his life in Phoenix, let me tell you the prime fact about the heat we’ve experienced in recent days: It is deadly. That’s double so for cities with little air conditioning. Ask Chicago, where 600 died in a 1995 heat wave.

Thanks initially to an urban heat island created by sprawl, Phoenix’s temperatures have risen 10 degrees in my lifetime. The fifth most populous city in America just suffered through its hottest July on record. Add in the likely consequences of global warming, and it’s hard to believe Phoenix will be habitable as what we would consider a modern American city in 50 years.

Seattle needs to pause from the “you can tell your grandkids about the great heatwave of ’09,” and take stock of potential climate-change effects here, including, for the sake of this blog’s mission, the economic ones. For this may not be a twice-a-century event any longer.

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Comments | More in Macro/Big picture, Sustainability

June 18, 2009 at 10:16 AM

Starting to count the cost of climate change in the Northwest

Top of the News: Back in the reality based community, the U.S. Global Change Research Council, pooling the work of 13 federal agencies, has released the most comprehensive report yet on the consequences of climate change. It’s must reading for anyone who wants to understand the costs — economic, social, national security, health and environmental — of global warming.

Obviously the southern half of the nation will be very hard hit. Good luck with that real estate in Phoenix or NCR’s stab in the back of Dayton, Ohio, to move to the exurbs of ever-hotter and pestilential Atlanta. But the Northwest is far from immune.

The report notes that temperatures have already risen in the region and will likely rise more — especially if the world doesn’t reduce greenhouse emissions. Other concerns include sea-level rise, greater stress on salmon and other fish, more dead zones in the oceans and declining springtime snowpack, adding stress on water supplies. Oh, and spring rain will significantly fall off — that couldn’t happen, could it?

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Comments | More in Jobs/Unemployment, Sustainability

June 11, 2009 at 10:02 AM

How much have you lost in the great recession?

Top of the News: News that American households lost $1.33 trillion in net wealth in the first quarter compared with the same period last year sounds dramatic. Yet it’s only one snapshot of the reality that we are a poorer country as a result of the bad bets and swindles of the financial elite — and the unsustainable economy most of us helped perpetuate.

For example, the numbers mean household net worth is at its lowest since 2004. But the normal march of inflation — we’re not enjoying 2004 prices — means the pain is even greater. Also, most average Americans saw their wages stagnate in the recent boom as income inequality hit levels not seen since the eve of the Great Depression — so the loss of their 401(k)s and, worse, housing values, is a calamity.

Add in the high debt many of the same average Americans face, plus continuing layoffs, and you begin to see how deep the hole is. Unfortunately the great bubble created distortions that must be worked out. For everybody, that is, but the big bankers. Don’t you wish you could have gotten an accounting rule changed that allowed you to value your house and 401(k) at 2006 levels?

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Comments | More in Banking, Consumer spending, Macro/Big picture, Sustainability, Working America

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