NewGeography.com blogs

There are many factors and issues that go into winning a political campaign, and the ones swirling about the Texas Republican Primary were numerous. Incumbent governor Rick Perry cruised to an easy victory over sitting U.S. Senator Kay Bailey Hutchison and activist Debra Medina on Tuesday to set up a general election showdown with former Houston mayor Bill White, a Democrat.

It’s worth recalling that last year Perry distinguished himself as the anti-Smart Growth governor, bucking a trend in which political leaders at all levels embrace this command-and-control planning doctrine. In June 2009, Governor Perry vetoed SB 2169 - a bill relating to “the establishment of a smart growth policy work group and the development of a smart growth policy for this state.”

In his veto message, Governor Perry said:

Senate Bill No. 2169 would create a new governmental body that would centralize the decision-making process in Austin for the planning of communities through an interagency work group on “smart growth” policy…. This legislation would promote a one-size-fits-all approach to land use and planning that would not work across a state as large and diverse as Texas.

I’m not sure if this was on many minds as voters headed to the polls, but there does seem to be a strong sentiment among Texans against top-down centralized planning. The recent mayor’s race in Houston grabbed national attention because of the winner’s sexual orientation. But earlier Annise Parker had soundly defeated über-Smart Growth advocate Peter Brown, setting up her run-off with Gene Locke. Brown had made zoning and central planning a centerpiece of his campaign.

Texas has out-performed most other states in terms of economic vitality, housing affordability and other quality of life indicators, and its cities crowd Business Week’s top ten list of metros least touched by the recession.

When it comes to Smart Growth and centralized planning, political leaders at all levels and in all states should embrace the Lone Star attitude: Don’t Mess With Texas!

Thursday a man flew an airplane into the Austin, Texas, IRS Building. The Left claimed he was a “Tea bagger,” their vulgar term for Tea Partiers, apparently because he was anti-government. The Right claimed he was a whacky leftist, apparently because he was critical of Bush. A Muslim group claimed he was a terrorist, apparently because he wasn’t a Muslim.

They all miss the point, and quite frankly, the attempt to make political points out of personal tragedy is pretty disgusting.

Today, there is a report of a Moscow, Ohio, man who bulldozed his home before it was foreclosed. No doubt someone somewhere will try to make political hay out of this man’s misfortune. That will be as misguided as the response to the Texas man’s misfortune.

What these events really do is highlight the human costs of recessions, costs that increase in recession severity and duration. These are the more extreme examples, but the fact is, people’s lives are ruined in recessions. Some working families will suffer a permanent decrease in income. Some of our young people will never recover from a bad start to their working lives. Some families will be destroyed because of financial stress. Some individuals will commit suicide. A few will do things like bulldoze their home or fly into a building.

To ask how big a problem we have is to ask how many are unemployed and how long have they been unemployed. Here are the numbers as of January 2010:

All of these people deserve our sympathy. They also deserve more from our society and our leaders. Most of them are in their current circumstances through no fault of their own. Even worse, our political class appears to be far more interested in election, reelection, rewarding supporters, partisanship, and political purity than they are in providing the environment for job creation. They have also failed to provide a humane safety net, one that provides at least a minimum standard of living, maintains dignity, and provides appropriate incentives.

President Obama has announced a special program of assistance for home owners in the five states that have been hit hardest by the housing crisis. The proposed program is targeted at California, Florida, Arizona, Nevada and Michigan, where house price declines are more than 20% from the peak of the bubble.

The greatest losses occurred in California, Florida, Arizona and Nevada (see note), where peak to trough house price loses exceeded 40% in all 12 metropolitan areas over 1,000,000 population except Jacksonville. These markets accounted for 70% of the gross housing value loss in the nation before the Lehman Brothers collapse. House prices were driven to unprecedented levels of up to four times historic norms by overly prescriptive land use regulations (“growth management” or “smart growth”) that makes land unaffordable.

Average losses were more than $175,000 in the markets of these states, more than 10 times those in traditionally regulated markets such as Atlanta, Dallas-Fort Worth, Houston, Indianapolis, Kansas City and Cincinnati. These intense losses were beyond the ability of the mortgage industry to sustain and it is generally acknowledged that this precipitated the Great Recession.

Smart growth had nothing to do with the Michigan price collapse. There, the strong economic downturn pushed prices down even as the state escaped without a housing bubble.

The President’s program means that the nation is now paying twice for smart growth policies. The first payment was, of course larger, which cascaded into the huge household wealth losses in the Great Recession.

Note: While Las Vegas and Phoenix are sometimes perceived as not having prescriptive land use policies, the Brookings Institution ranks both metropolitan areas as toward the more restrictive end of the regulatory spectrum. These overly prescriptive regulatory environments are exacerbated by the fact that in both metropolitan areas much of the developable suburban land is owned by government, and is being auctioned, though at a rate less than demand. These factors combined to drive auction prices per acre up nearly 500% in Phoenix and nearly 400% in Las Vegas during the housing bubble.

The Virginian Pilot reports that the cost of the Hampton Roads (Virginia Beach-Norfolk metropolitan area) “Tide” light rail line has now escalated to nearly $340 million. This is up nearly one-half from the estimates made when the project was approved by the Federal Transit Administration. According to federal documentation, the line will carry 7,100 daily passengers in 2030. This means that the capital cost alone will amount to an annual subsidy of approximately $6,500 per daily passenger (using Office of Management and Budget discount rates), plus an unknown additional operating subsidy. This is enough to lease every daily commuter a new Ford Taurus for the life of the project (assumes a new car every 5 years and includes future car price inflation).

The light rail line cannot be expected to do much for transportation. Even if the line reaches its projected ridership (many do not) by 2030, it will carry only 0.1% of the travel in the metropolitan area (one out of every 1,000 trips).

Warren Buffett, CEO of Berkshire Hathaway (NYSE: BRK), and owner and investor of some very large financial firms including insurance companies, is paying favors backward and forward among the political appointees and politicians that have helped him through the financial crisis. This week, he brought Treasury Secretary Henry “Hank” Paulson to Omaha recently to help tout Paulson’s new book.

He’s also helping out Senator Ben Nelson (D-NE). A year ago, I button-holed Nelson after lunch with the Sarpy County (NE) Chamber of Commerce. He told us in March 2009 that he had discussed the Troubled Asset Relief Program (TARP) with Buffett before voting “yes” on the bailout. Now we are learning that Nelson is discussing other Congressional matters with Buffett – the health insurance bailout.

In October 2009, Bill Moyers investigative reporting gave us a complete outline of just how cozy the insurance industry is with Congress. I said it back then: what they are calling “healthcare reform” is really just “health insurance bailout.” President Barack Obama slipped up in July and called it “health insurance reform” which sent tongues wagging. How soon they forget, really. Seven months later, he’s back to talking about “Health Care Reform” only this time in the context of the possible failure of Congress to pass any legislation.

I doubt it’s necessary to reiterate, but just for the record: Nelson “added a provision (to the legislation) extending federal payment for Nebraska’s new Medicaid enrollees beyond 2017, when the federal share is set to begin to decline” The backlash on the “Kornhusker Kickback” came from a wide array of interests, including. Nebraska Governor Dave Heineman. Heineman appeared on Fox Business setting the record straight: he definitely did not suggest this idea to Nelson and he wanted no special deals for Nebraska.

So, who came galloping to rescue Nelson from the backlash and fallout? None other than Warren Buffett was quoted defending Nelson to the press. And Nelson didn’t let the effort pass unnoticed. Nelson is running television ads in Nebraska quoting Buffett’s comment that “he would have made the same vote” as Nelson on the health insurance bailout. Buffett called Nelson’s vote “courageous”: How much courage did it take for Nelson to vote in favor of legislation that is supported by his largest donor?

Did I mention, again, that Buffett’s BRK holds insurance companies – ten of them according to the 2008 annual report. The holdings include not only property and casualty insurance, but also “reinsurance” (which could include the full spectrum of insurance businesses). Buffett calls this “the core business of Berkshire.” His insurance operations, “an economic powerhouse,” provided $58.5 billion in cash “float” on which they earned $2.8 billion.

Berkshire Hathaway employees and PACS are top contributors to Nelson’s political campaigns. Nelson has a long history with insurance. According the Clean Money Campaign, his pre-politics career was spent as “an insurance executive” and “insurance company lawyer.” His “lifetime campaign contributions from the insurance industry rank him fourth in the Senate,” behind only McCain, Kerry, and Dodd.

Hank Paulson, Warren Buffett, the Financial Crisis Inquiry Commission and now Senator Ben Nelson: part of the problem – not the solution.