Monthly Archives: March 2010

The Hidden Cost of Housing: Getting from A to B

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How much does a home cost? There’s the cost of the place itself, and then there’s the cost of getting around. Knowing in your gut that a “cheaper” place way, way, way out in the burbs will mean a lot more driving is one thing. Putting a price tag on that cost is another.

Luckily, the Center for Neighborhood Technology has done it for you. With the latest version of their Housing and Transportation Affordability Web site, if you live near just about any major metropolitan area, they’ve got your number(s).

Normally when we talk about housing affordability, we don’t take into account the cost of transportation. When you factor it in,CNT says, the story is pretty sobering:

only two in five American communities—or 39 percent—are affordable for typical households when their transportation costs are considered along with housing costs

But as their new report, Penny Wise, Pound Fuelish, points out, it doesn’t have to be this way. There’s a striking difference in how much most folks spend on transportation in sprawling versus smart growth communities:

Household savings from residing in a representative compact neighborhood rather than a dispersed community can range from $1,580 per year in Little Rock and $1,830 in Minneapolis to $3,110 in Chicago, $3,610 in Phoenix and as high as $3,850 in Boston—numbers that resonate with families seeking to tighten their belts during difficult economic times.

Regional savings have also been calculated for 12 metro areas using the same representative communities to highlight the aggregate impact if 50% of projected population growth through 2030 could live in more location efficient places. Such cost savings can total $239.8 million in a small region like
Charlotte which is expected to almost double its population while San Francisco could register savings
of $1.1 billion and Phoenix, $2.1 billion, by changing the way they grow.

One more example of how going Green can save us $$$.

More Signs of Hope

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(photo by qbubbles)

This weekend, I went down to DC’s National Mall to pick up my folks, who were in town visiting and enjoying our wonderful free museums. On the way back, we got stuck in my favorite kind of DC traffic jam: a seemingly endless stream of folks, decked out in American flags, union T-shirts, banners, and baby strollers, marching to overhaul our insane, hypocritical immigration policy. It was fabulous — and hopefully a sign of things to come now that we’ve had our first real victory on healthcare!

Even with Housing Crash, Homeownership Still Unaffordable

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It’s been a long, long time since our country try to make homeownership more affordable for most folks. The last real effort was back in the 30s and 40s, when the FHA & VA mortgages and other subsidies many possible for millions of white middle-class Americans to buy a home. In the last decade, prices in most big cities and suburbs have been going up and up. All the government did about it was to let Wall Street turn housing into a high-stakes casino with insanity such as interest-only mortgages. Now that the housing bubble has popped, even though it’s brought terrible pain to thousands of families forced to default on their mortgage, at least it’s made homeownership more affordable again, right? Not so, says a new study, Paycheck to Paycheck: Wages and the Cost of Housing in America.

According to their press release,

Overall, the income needed to purchase a median-priced home dropped in 93 percent of the homeownership markets studied between 2008 and 2009, yet many workers still do not earn enough to own a home. In addition, the typical rent for a two-bedroom home rose in 89 percent of the markets studied…

police officers cannot afford to purchase the median-priced home in 86, elementary school teachers in 83, and licensed practical nurses in 146 of the 208 homeownership markets studied. Janitors cannot afford to purchase a home in 202, and retail salespeople in 207 of the markets studied.

And renting hasn’t gotten much easier either:

in the vast majority of metropolitan markets, fair market rents have held steady or increased – occasionally surpassing monthly mortgage payments for a median-priced home. Specifically, retail salespeople continue to be priced out of renting a two-bedroom apartment in every market studied. Janitors fare almost the same, being able to afford a two-bedroom apartment in only one of the 210 rental markets studied. Licensed practical nurses are unable to rent a two-bedroom apartment in 55, police officers in 12, and elementary school teachers in 11 of the markets studied.

In short, we are in a lose-lose situation — housing prices have dropped enough to cause widespread pain for folks who own a home, but not far enough to help most folks who don’t. And getting out of this mess is going to be really hard.

Why the Game Metaphor Doesn't Work — and What Its Replacement Should Include

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I’m talking with someone at Demos about some questions I have about Topos’ framework, so I’m going to hold off any more posts in the series and go back to wrestling with my own framework. The latest: after reading Promoting Broad Prosperity, having a really helpful conversation with a friend, and banging my head against the wall, I’ve reluctantly come to the conclusion that the Game/Rules/Players metaphor just isn’t going to work.

The biggest problem with the Game metaphor is that it feels too light and frothy. As my friend pointed out, it’s the opposite of how a lot of folks experience the economy. Life isn’t a game. There’s no reset button, and losing can have big consequences. For folks who are struggling to get by and who are seeking stability and security, a game sounds too much like what they don’t like about our economy today.

The only folks who do experience economy is a game are people with a lot of power. Win or lose, hedge fund traders and CEOs get big bonuses, while everybody else wonders if their job, health insurance, or retirement savings will be still there for them tomorrow.

“Players” has similar problems. When many folks think of players, they’re likely to think of powerful people for whom the economy is just a game, with average folks playing the role of helpless pawns.

But if the Game metaphor doesn’t work, there’s a lot I learned from trying it out. Here’s what I want to make sure I include in the next version of my framework:

1) The Economy Isn’t “Natural.” what I like most about the Game/Rules metaphor is that it gets us out of the Robert Kuttner government as “alongside markets problem. Rules aren’t “alongside,” they are inherently, inextricably part of the game.

2) The Economy Isn’t Controllable. Although we can shape parts of the economy, there are real limits to what we can do and how much influence we can have.

3) The Political Economy is Dynamic. Because actors can change the economy’s rules, you can’t simply focus on policy. You also have to focus on the actors. The Wall Street meltdown is Exhibit A. If we don’t change the current balance of power, even if we miraculously manage to put good policies in place, the minute the policies are passed, Wall Street will undermine them; that’s how we got here in the first place. That’s also why Topos’ pipes metaphor and Dean Baker’s rivers metaphor don’t really work for me: they don’t evoke the system’s dynamism.

4) No Black Boxes. Unlike free market fairy tales, you can’t just make one change, like increasing the cost of CO2 emissions, and expect the economy will magically solve a problem like the climate crisis. You’ve got to get your hands dirty and get into the nuts & bolts of how people and organizations actually think and behave, including understanding the micro-worlds in which they live (i.e., behavioral economics, organizational development).

And from wrestling with Topos, I want to add:

5) Start with Values — and Get to the Point Quickly. For example, the Middle-Class Is No Accident.

6) More Grounded Metaphors with Stronger Emotional Resonance. Metaphors that aren’t light, like Game.

On to the next metaphor!

Topos’ Framework: What Works: Testing

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[Part 3 of the Promoting Broad Prosperity review]

The other thing I like about Topos’ Promoting Broad Prosperity framework is that they tested their ideas with opinion research. You’d think by 2009 this wouldn’t be a novel concept. If big corporations spend lots of time testing the best way to convince you to eat Cheetos — and let’s face it, most of us don’t need that much convincing — you’d figure testing language for promoting social justice would be a no-brainer.

Yes, most progressive groups’ budgets are corn chip crumbs compared to Cheetos’ budget. So testing ideas & words wouldn’t be an everyday practice the way it is for Big Business. But even when folks on our side spend millions of dollars on a TV campaign, you can see from their ads that they didn’t do any testing. Or at least you hope they didn’t given how bad the ads are.

(Am I planning on testing RTE framework? With a budget of $0, not anytime soon. But if I ever get to the point where I could afford it? You betcha.)

Up next: where I think Topos’s framework needs work.

Topos' Framework: What Works: The Middle Class Is No Accident

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[Part 2 of the Promoting Broad Prosperity review]

Topos’ Promoting Broad Prosperity framework avoids a major problem with my approach. For the past few months, I’ve been focused on understanding how the nuts and bolts of the economy’s engine works. I think I’ve started to figure it out. But I haven’t yet figured out how this engine is connected to the steering wheel or the breaks, let alone how to connect the system’s aerodynamics — the shaping of a body to help it go faster — to its styling. And ultimately I think choosing an economic framework is like choosing a car. You don’t want it because of its engine or aerodynamics. You want it because it’ll get you to where you want to go and because it makes a statement about what matters to you.

I think Topos’ “the middle-class is no accident” frame is the first step in helping me figure out how to connect the engine to what folks really care about. There’s no preamble. They don’t start with “the economy.” They go straight to what matters to most U.S. folks — the “middle class,” by which most Americans mean building a society where everybody can make it. Then Topos immediately connects it back to how the economy really works. Their framework never goes into the depth or nuance I think we’ll need for a truly powerful way of thinking about the economy. But that’s not what they’re trying to do. They’re trying to hit people where they live — and do it quickly.

The frame also sets you up nicely for slapping down a counterattack. If somebody says to you, “you just want more big government,” you can say,

So you think giving 4.4 million veterans a college grant after World War II was a mistake? Or FHA loans so for the first time millions of Americans could own their own home? Are you saying that didn’t happen? Or are you against the middle-class?

Who wants to be on the receiving end of that?

The frames of the Intentional Middle-Class and Public Structures also keeps the conversation focused on the whole. If Topos just talked about, say, schools, somebody could play the Exception card — I mostly don’t want government, but it’s okay for education. If they just talked about healthcare, some folks might say they think healthcare should be up to individuals. But having a strong middle-class? It covers so many facets of government that it’s the rule, not the exception. And it doesn’t come in individual servings; it’s something we’ve gotta Choose Together.

O Canada Banks!

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Unlike many other countries, Canada is coming out of the global financial meltdown in pretty good shape. One reason why: the rules of their financial game. Business Week explains:

Canadian banks did not fail because they mostly avoided the big mistakes with mortgages. They didn’t lend to people who couldn’t prove a sufficient income. They did give no-money-down mortgages, but not many—and the practice was effectively banned…. They didn’t they do these things largely because they didn’t have to. Domestic banks own 80% of the mortgage business, and most of that is in the hands of the Big Six. Refinancing is expensive and a hassle. Canadian tax law also plays a role. Mortgage interest isn’t tax-deductible, creating a disincentive to borrow…. All of these elements make home loans a low-risk business, so Canadian banks tend to keep their mortgages rather than bundle and sell them. That forces careful lending, which leads to profits, which leads to healthy banks, which leads to more lending—a virtuous circle.

So when housing prices started rising too fast,

the leaders of the major banks recently urged the government to tighten mortgage rules to chill down the market, even though that would cut into profits in the short term. And the government quickly responded, announcing changes on Feb. 16 that enforce stricter requirements for borrowers, among other (tougher) rules.

In contrast, when our housing market got into trouble, Wall Street stomped on attempts to solve the problem. Take what happened when Georgia governor Roy Barnes, who came from a family of bankers, passed an anti-predatory mortgage law in 2002 — six years before the meltdown.

Barnes found himself besieged by lobbyists from major banks and national regulators—as well as Fannie Mae and Freddie Mac, the government-sponsored mortgage issuers whose mandate is to help people obtain affordable homes at fair prices…. The major mortgage issuers hinted they would turn Georgia into a financial pariah if the state made them liable. They let Barnes know in no uncertain terms he was something of a “country bumpkin” when it came to banking, says his legislative aide, Chris Carpenter. As Barnes recalls, “They would say—and Fannie Mae and Freddie Mac were part of it—’This is a complex global market. If you start interfering with the free flow of money, then Georgia will become an island that has no credit’

S&P was even more aggressive. Instead of using its formidable financial power to reign in the insanity before it blew up the entire system, it used its power to blackmail states who tried to stop the insanity.

Standard & Poor chimed in, announcing that it wouldn’t offer ratings for any mortgage securities with Georgia subprime loans in them, citing liability concerns…. Within months of Standard & Poor’s announcement, the Georgia Legislature repealed Fort’s law and replaced it with one that removed the requirement that lenders show a tangible net benefit for refinance loans. The same process unfolded in New Jersey, where the Legislature passed a tough law in 2003. Lobbyists, led by Ameriquest, descended on the state. Standard & Poor repeated its refusal to rate securities with subprimes from New Jersey. And in 2004 the Legislature unanimously replaced the tough law with that deleted the tangible-net-benefit rule.

Canadian bankers didn’t act more responsibly because their CEOs are saints. As one Canadian banking exec explains, Canadian bankers make out quite nicely under their current rules:

“Just stop doing the stupid things, and these are money machines like God has never created before,” Ed Clark, CEO of Toronto-Dominion Bank (TD), said last year.

And Canadian bankers aren’t more responsible because they are more decentralized. Six Canadian banks basically run the show.

The difference between US and Canadian Finance is that in Canada, there’s a very different balance of players, and that’s led to different rules of the economy. These rules shape the interests and actions of the major banks in favor of sane banking. In turn, these players shape the economy’s rules to sustain this more sane system when problems like housing bubbles threaten to disrupt it.

Topos' Framework for Talking about the Economy

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A few months ago, I read a smart research brief Topos wrote for Demos called Promoting Broad Prosperity. Topos has done a ton of surveys, focus groups, etc. to figure out how most Americans think about the government’s role in creating a good economy. They’ve come up with a very interesting approach I think will be helpful in rethinking my framework.

The problem, according to Topos, isn’t that most folks are ideologically opposed to “government ‘interference’ in the economy.”

Rather, the more fundamental problem is that they find it difficult to even see that policy shapes the economy. Many default to thinking of the economy as either “natural” (a “free” market that will “turn around”) or shaped by the decisions of multiple individual actors (greedy business executives who offshore jobs, irresponsible consumers who buy more than they should, hard-working small employers who treat employees well, unskilled workers who aren’t prepared for certain jobs, etc.). In neither case is intentional, collective action to shape the economy relevant to the public’s considerations. After all, you can’t legislate away the irresponsibility of consumers who borrow more than they should, or create policies to cause executives to stop making decisions based on personal greed.

To tackle these views, Topos says we should use 2 key ideas that test well. The first idea:

The Intentional Middle Class: A strong middle class, which is the engine driving our economy, doesn’t arise by accident, but is the result of deliberate and proactive choices.

For example, this statement tested well:

A middle class does not happen by accident—it takes long-term planning and particular kinds of policies like an affordable college education, home mortgage deductions to encourage homeownership, and tax and investment policies that allow people to build more savings. In this country we’ve worked hard to grow and strengthen the middle class, with policies like these. Some societies don’t take significant steps to build a middle class and those societies have a large class divide.

Why focus on the middle class?

It helps people focus on broad-based prosperity and collective stakes, as opposed to individual outcomes. Since the vast majority of Americans see themselves as “middle class” or aspiring to be middle class, steps to grow and strengthen the middle class are steps that are in our collective interest. It puts the focus on what government should (try to) achieve, and avoids the question of whether government can achieve economic results…. Americans usually think of the middle class as “most Americans”—it is natural to believe that government efforts should benefit most Americans. …

“Middle class” means “all of us,” so steps to help and strengthen the middle class are steps that build broad-based prosperity and are in our collective interest.

The second idea: “public structures.”

Public Structures as Economic Foundation: The “public structures” created and maintained by government are foundational to prosperity and economic stability, as well as the strength of the middle class.

Topos argues there are 2 useful ways to talk about how public structures help create a good economy. The first: by “paving the way” for new innovations and industries. Continue reading →

Republicans, Democrats, and "Government"

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Two interesting clips from Rachel Maddow’s show last week on talking about government.

From an attack ad by Republican Sue Lowden, who’s trying to unseat Harry Reid:

Harry Reid‘s big government health care plan will raise taxes, put a bureaucrat between you and your doctor, weaken Medicare, kill jobs, push us further into debt. I‘m Sue Lowden and I approved this message, because government-run health care is wrong.

Plenty of politicians contradict themselves. And Republicans have been able to get away with attacking “big government” in one speech while accusing the Democrats of trying to cut Medicare in another speech. But when you get to the point where your rhetoric is contradicting itself in the same ad, you’re headed for trouble — if the Democrats force the issue.

Meanwhile, when Arkansas Lieutenant Governor Bill Halter, who’s challenging corporating-luvin’, union-hatin’, public-option-flip-floppin’ Blanche Lincoln, was asked by Rachel Maddow how he’s different from Blanche Lincoln, he showed how smart Dems talk about government:

I’m running for United States Senate to put Washington back on the side of middle-class Arkansas families.

Instead of getting stuck arguing is he for or against more government, Halter puts it back on his opponents — who do you think government should be for or against?

3 out of 4 Conservatives Love Big Government

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This is pretty mind-blowing.

In 2008, the American National Election Study asked folks if Uncle Sam spent too much, too little, or about right in 12 areas.

The
results:

the respondents who identified themselves as “conservative” or “extremely conservative” had little appetite for specific spending cuts.

Very few conservatives said they favored reducing (or cutting out altogether) spending on any program. The least popular program proved to be childcare — with a grand total of 20 percent of conservatives saying they’d slash it. The most popular is highways; only 6 percent want to cut spending there. Even bugaboos like welfare and foreign aid fare well, attracting the ire of only 15 percent of conservatives. Amazingly, the survey found that, on average, 54 percent of them actually wanted to increase spending.

As John Sides points out, if you polled activists you might get different results. But for the conservative base? Keep your government hands off my Medicare!