Quality Of Life

The unrepresentative Representatives who infest Indiana’s legislature have gone home, leaving  citizens to consider the multiple harms done during the concluded session. One harm that was mostly overlooked was their refusal to invest in Indiana’s state parks.

As the Capital Chronicle has reported,

Indiana Senate Republicans’ disregard for our parks and for the benefits they bring to Hoosiers’ quality of life was on full display recently when they zeroed out Gov. Eric Holcomb’s requested investment of $25 million for the President Benjamin Harrison Land Trust.

The Trust is the mechanism through which the state purchases land for conservation and parks. As the Chronicle editorialized,

Our Indiana parks and natural spaces are a treasure. They bring more than a connection to nature. They bring jobs, economic growth, and a quality of life that attracts and retains talent…. A 2016 study commissioned by the Indiana Chamber of Commerce and the Wellness Council of Indiana stated, “infrastructure related to traditional wellness activities (such as trails, playgrounds, parks, and open green space) matter more than ever in where people and subsequent businesses relocate.” 

Parks are highly prized and extensively utilized–a quality of life asset–and as Michael Hicks recently documented, economic growth is tightly tied to quality of life indicators. It’s one reason some places grow while others shrink.

First, most migration is concentrated among younger people with high human capital. Yes, retirees move, as do folks in mid-life, but most don’t. One result of the age concentration of migrants is that this movement of people also drives natural population change of births minus deaths. So, places with net in-migration tend to thrive over the coming decades, while places that lose folks do not.

Migration of people is driven by three factors; economic opportunity, quality of life and housing elasticity. Housing elasticity is simply whether the supply of housing adjusts to demand. With the exception of a dozen or so large metropolitan areas in the U.S., housing elasticity plays no meaningful role in household migration. In fact, the Midwest currently benefits from bad housing policies in other regions such as the West Coast. Thus, migration in the Midwest really comes down to economic opportunity and quality of life.

For most of American history, people moved for better farmland, better jobs and/or better places to start businesses. As the role of educated workers has grown, however, and the share of college graduates explains nearly 80 percent of the growth and earnings in a city, people began to value more than just economic opportunity in their location choices.

Today, research shows that jobs follow people, not business-friendly tax climates.

In 1980, few places enjoyed both economic opportunity and high quality of life, but as of 2019, they are highly correlated…

Over the past couple of decades, families found that their location choices were vastly expanded. Economic opportunity was tied to the places where people clustered, and people clustered where the quality of life was good.

In the 60s and 70s, the perceived differences between places was driven by nature–climate, mountains, lakes– not government. That has changed.

The empirical evidence is now extraordinarily clear. Places with restrictive social policies in the United States fail to become destinations for economic opportunity. They struggle to attract and retain their share of well-educated people. That trend is sure to continue, if not accelerate.

Another change: in the 2000s, a national focus on school quality emerged.

At the same time, labor markets began valuing education far more heavily. So, for the past couple of decades, it has become obvious that the quality of a K-12 and college education were prime determinants of economic opportunity for individuals.

In the post-COVID environment, the role of quality of life is even stronger. Today a quarter of all young, educated people have full-time remote jobs, and half work at least partially remote. The certain effect of this is that the amenities (and dis-amenities) of a region will weigh more heavily on prospective residents than ever before.

So, what do we know about the characteristics of a high quality of life?  Excellent schools, natural amenities/climate, and local recreational opportunities head the list. 

What is new is the fact that the effect of quality of life on population growth is close to four times larger after COVID than in the decade before. Much of that is due to remote work accelerating the existing trends. We don’t yet know how long that will last, but my guess is for at least a generation. We also know that a welcoming social climate matters.

Meanwhile, Indiana’s legislature continues to pursue an outdated low-tax strategy, shortchanging education and parks, among other quality of life amenities, and doubling down on  misogyny and homophobia.

No wonder we’re not thriving.

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Forgiveness

One of the problems inherent in all public policy discussions is the degree to which various aspects of our communal lives are connected–and the even greater degree to which those connections are unseen and/or under-appreciated.

As an example, a recent study from the Brookings Institution detailed the multiple ways in which student loan debt affects Americans, and illustrates the way lack of understanding of those connections distorts discussion of proposals to forgive at least some portion of it.

There is one element of student debt that is widely understood, of course–its size. In the last quarter of 2020, the Federal Reserve calculated the national student debt at $1.7 trillion, spread across 45 million borrowers. That is a monumental amount, and a monumental burden on both the borrowers and the economy.

Research suggests that forgiveness of some or all of that burden would prompt a variety of economically consequential behaviors–everything from eating out more frequently to  making large purchases that the level of debt currently doesn’t permit: houses, cars, appliances and furnishings. Respondents to one survey also cited returning to school, and saving more for emergencies.

In a study cited by Brookings,

Higher amounts of student debt forgiveness were associated with other investment behaviors like starting a business or savings for a down payment on a home, as well as a willingness to spend more on entertainment….

These results [of the study cited] show two things. First, they show how extensively student debt affects debt holders. The responses to this experiment indicate that student debt is strongly influencing decisions that can have large implications for household economic stability (e.g., emergency savings) and mobility (e.g., saving for a down payment on a home, starting a business). In addition, student debt may be altering the structure of families themselves. Roughly 7 percent of respondents reported that they would be more likely to get married (results not shown) or have children if their student debt were forgiven, indicating that this debt burden is affecting even fundamental decisions about debt holders’ life trajectories.

Second, these results show that the level of student debt forgiveness matters. In particular, setting a student debt forgiveness target too low may not lead to broad-based changes in households’ economic behaviors. However, setting a student debt forgiveness amount at a point where the average debt holder would have more than a quarter of their debt forgiven may yield large changes in savings behaviors, human capital investments (e.g., returning to school), and business starts, without leading to large changes in labor supply.

It is undisputed that even a modest amount of debt forgiveness would remove what is currently a large drag on the economy. There are, obviously, other considerations: many people who have dutifully paid off their loans object to what they see as unfairness of giving later-comers relief that was unavailable to them. Others argue that any forgiveness should prioritize low-income borrowers, and avoid “bailing out” higher income folks.

Going forward, my own preference would be to replace the current, complicated student loan environment with a program that pays for at least two years of college in return for a year or two of military or civic service (a la Americorp).

Whatever the policy approach, we need to recognize that debt of 1.7 trillion dollars constitutes an enormous drag on Amreica’s economic growth. It isn’t simply an impediment to business formation–it prevents many individuals from taking lower-paying but gratifying jobs in the nonprofit sector– and it is a significant fiscal and psychic burden to individuals. It has become unsupportable.

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A Doughnut For The Economy?

What makes an economy successful?

Americans are just beginning to realize that widespread inequalities dampen and retard economic vitality, but the more foundational–and to me, at least, more interesting–question is: what does a “successful” economy look like? In the United States, a great proportion of our economic life revolves around “stuff”–the production and consumption of consumer goods. There’s nothing wrong with producing items that people want to buy, but a model that requires constantly increasing consumption has obvious drawbacks, especially when large numbers of workers lack disposable income.

As readers of this blog are aware, one of my sons lives in Amsterdam. He has made me aware of that city’s experiment with a different economic approach. In April of last year–even while the pandemic was raging–Amsterdam became the first city in the world to formally implement what is called “doughnut economics.” Brussels then followed, as did
the Canadian city of Nanaimo.

Scholars advocating for a new approach argue that the current economic system sacrifices both people and environments at a time when everything from shifting weather patterns to rising sea levels is global in scope and unprecedented in nature.

The premise requires us to re-envision what really constitutes economic health–to define it as a system that ensures that “nobody falls short of life’s essentials, from food and water to social equity and political voice, while ensuring humanity does not break down Earth’s life support systems, such as a stable climate and fertile soils.”

The doughnut’s social goals are based upon the Sustainable Development Goals promulgated by the United Nations. These are food security, health, education, income and work (not limited to paid employment), peace and justice, political voice, social equity, gender equality, housing, networks, energy and water.

The nine ecological boundaries are drawn from proposals developed by a group of Earth-system scientists. These are climate change, ocean acidification, chemical pollution, nitrogen and phosphorus loading (inefficient or excessive use of fertiliser), freshwater withdrawals, land conversion (removal of habitat), biodiversity loss, air pollution, and ozone layer depletion.

Kate Raworth’s 2017 book “Doughnut Economics” explains the doughnut economy as one based on the premise that “Humanity’s 21st century challenge is to meet the needs of all within the means of the planet. In other words, to ensure that no one falls short on life’s essentials (from food and housing to healthcare and political voice), while ensuring that collectively we do not overshoot our pressure on Earth’s life-supporting systems, on which we fundamentally depend – such as a stable climate, fertile soils, and a protective ozone layer.”

Raworth recognizes that “significant GDP growth is very much needed” for low- and middle-income countries to be able to meet the social goals for their citizens.

Using a simple diagram of a doughnut, Raworth suggests that the outer ring represents Earth’s environmental ceiling — a place where the collective use of resources has an adverse impact on the planet. The inner ring represents a series of internationally agreed minimum social standards. The space in between, described as “humanity’s sweet spot,” is the doughnut.

Amsterdam formally adopted the model on April 8, 2020.

The city of Amsterdam has always been a pioneering city. It loves to be a pioneer which is a brilliant attribute because there are many cities that will not lead. They will only follow when they see someone else go,” Raworth said.

“It is not going to work to have three, four, five separate strategies all trying to connect. When they encountered the concept of the doughnut, I know that they said: ‘Aha, this is a concept that sits above and embraces everything that it is that we want to do.’”

Van Doorninck, who’s responsible for spatial development and sustainability in the Dutch capital, said the city’s circular strategy was focused on areas where local government “can really make a difference.”

These areas include food and organic waste streams, consumer goods and the built environment. As a result, the city has targeted a 50% reduction in food waste by 2030, implemented measures to make it easier for residents to consume less (by establishing easily accessible and well-functioning second-hand shops and repair services over the next three years) and pushed for construction companies to build with sustainable materials.

According to the article, a number of cities around the globe are watching, and considering whether to follow suit. It’s a very encouraging effort to marry economic growth with social equity and environmental responsibility.

Fingers crossed…..

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Repeating My Mantra…

People who have read this blog for any length of time are familiar with some of my preoccupations–civic literacy and civics education, climate change, competent governance, and job creation. (Admittedly, I have a lot of “hot buttons”…)

I have been fairly consistent in my approach to most of these issues over the years, but I’ve changed my tune when it comes to growing the economy and creating jobs. I used to be persuaded by the argument that significant raises in the minimum wage would lead to job losses–it seemed logical that forcing a business to pay more to worker A would leave that business with fewer dollars with which to hire worker B. What I didn’t understand was the unspoken caveat: all things being equal. In the real world, it turns out that all things aren’t equal.

What the real world evidence shows is that paying workers a living wage–and thus providing them with a modicum of disposable income–is what creates jobs. As I now understand, demand is what creates jobs, not the beneficence of the factory owner. The guy who owns the widget factory isn’t going to hire more workers to make widgets if no one has the money to buy them.

A recent article in The Week emphasized the point

For many years, rich oligarchs have posed as the engines of the economy — the entrepreneurs whose beneficence and wise decisions create economic prosperity. In a 2019 article for Fox News, Sally Pipes, president of the right-wing Pacific Research Institute, called for Americans to “celebrate America’s job creators” during Labor Day. “Let’s honor the people responsible for that grandeur — namely, the profit-seeking entrepreneurs and business people who make our economy hum,” she wrote.

This is bunk. The real engine of the economy is the dollars in the pocket of the humble average citizen.

The article goes further, however. Most economists now recognize that putting additional money in the hands of workers stimulates demand, but they tend to think of that demand in the context of a fixed economic capacity–as a mechanism for getting to full employment in existing factories and other enterprises.

In reality, as Skanda Amarnath and Alex Williams argue at Employ America, spending also affects overall capacity. A factory, for instance, is not some immortal thing — at a minimum, it must be continually maintained because of entropy and ordinary wear and tear on equipment. To remain competitive, it must be regularly upgraded with the latest production technologies. But businesses will logically invest in new capacity only if they see a market for the goods and services that capacity would produce. This is especially true with respect to high-tech manufacturing investment, which is very complex and expensive — taking over half a decade to pay off.

Amarnath and Williams argue that slack demand afflicted America’s economy well before the 2008 recession, and that it is only surging again now because of the huge boom in sales of computer products–a boom generated by two things; the pandemic surge in working from home, and government transfers to individuals, also due to the pandemic.

All of the available evidence confirms that giving poorer people more money generates economic growth. When you give rich people more money–through Republican policies like deregulation, union busting and especially the numerous, generous tax cuts so dear to GOP hearts–they disproportionately save it, rather than spending it and boosting the economy.

As the article says, cash in the pockets of the working poor isn’t just good in in a humanitarian sense (giving people money they need to live.) It’s good because spending those dollars is what will keep businesses humming, investment high, and the economy healthy.

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Those State “Laboratories”

Ah, federalism.

Life in the 21st Century challenges our federalist system in a number of ways; it gets more and more difficult to decide–at least at the margins–what sorts of rules should be applied to the country as a whole, and what left to the individual states.

However those issues get resolved, however, our federalist system pretty much guarantees that state governments will continue to be the “laboratories of democracy” celebrated by Justice Brandeis, who coined the phrase in the case of New State Ice Co. v. Liebmann.  Brandeis explained that a “state may, if its citizens choose, serve as a laboratory; and try novel social and economic experiments without risk to the rest of the country.”

Most recently, state governments have been “laboratories” for the GOP’s belief that low taxes are all that is needed to stimulate economic growth.

As David Leonhardt of the New York Times recently noted,

Until recently, Kansas offered the clearest cautionary tale about deep tax cuts. The state’s then-governor, Sam Brownback, promised that the tax cuts he signed in 2012 and 2013 would lead to an economic boom. They didn’t, and Kansas instead had to cut popular programs like education.

Now Kansas seems to have a rival for the title of the state that’s caused the most self-inflicted damage through tax cuts: Louisiana.

Those who follow economic news have been aware of the painful results of the  Kansas experiment for some time. Evidently, however, the news of its dire results and the subsequent, ignominious retreat by the Kansas legislature failed to reach Louisiana–and that state’s legislators appear unable to deal with the reality of their own failed experiment.

“No two ways about it: Louisiana is a failed state,” Robert Mann, a Louisiana State University professor and New Orleans Times-Picayune columnist, wrote recently.

A special session of the State Legislature, called specifically to deal with a budget crisis caused by a lack of tax revenue, failed to do so, and legislators adjourned on Monday. No one is sure what will happen next. If legislators can’t agree on tax increases, cuts to education and medical care will likely follow.

Leonhardt places the blame for this state of affairs on Bobby Jindal, who came to the Governor’s office having drunk deeply of his party’s ideological Kool-Aid:

Louisiana’s former governor, Bobby Jindal, deserves much of the blame. A Republican wunderkind when elected at age 36 in 2008, he cut income taxes and roughly doubled the size of corporate tax breaks. By the end of his two terms, businesses were able to use those breaks to avoid paying about 80 percent of the taxes they would have owed under the official corporate rate.

At first, Jindal spun a tale about how the tax cuts would lead to an economic boom — but they didn’t, just as they didn’t in Kansas. Instead, Louisiana’s state revenue plunged. The tax cuts helped the rich become richer and left the state’s middle class and poor residents with struggling schools, hospitals and other services.

Unfortunately, these “laboratories” aren’t working the way Justice Brandeis envisioned, because Republican representatives elected by the rest of the country refuse to learn from their failures. Ideology has once again trumped evidence– the tax bill passed by Congress and signed by Trump is patterned after those in Kansas and Louisiana.

The rich will get richer, and the poor and middle-class will pay the price. And those who refused to learn from the experiences of our “laboratories of democracy” will profess astonishment.

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