Apple's much anticipated iPad tablet computer was announced today, albeit to some mixed reviews. While the iPad itself may or may not succeed, the overall technology trend line is clear: increasingly rich mobile access to the Internet and email. Oddly, this Business Week columnist thinks the iPad may lead to more telecommuting, when what it really favors is tipping the balance for commuters from driving to transit, where the usually "dead" commuting time can become really productive. Most people are already spending more than two hours a day on email and the Internet - why not put those hours at the beginning and end of the day while commuting so you can spend less time in the office and more time with your family?
A decade ago, the workplace was much more call and voice-mail driven, which matched up just fine with long driving commutes and cell phones. But the shift has moved strongly towards email and other data-driven communications (texting, Twitter, Facebook, collaboration applications, etc.). Most messages have multiple recipients and can expect to have a string of replies - something voice mail simply can't handle. People are trying to do this data-driven communication while driving, with very bad effects that are leading rapidly to a comprehensive legal ban.
As more people realize the productivity advantage of a transit commute, I think there could be a substantial shift. But it might not be quite what you'd expect. Mobile productivity favors one long ride in a comfortable seat - no transfers, no standing 'strap-hanging' (like on a subway or full light rail or local bus), and minimal walking (which is not only incompatible with mobile productivity, but also has weather risk and is especially hard on women in heels). That argues for express buses over trains. I recently met with a friend that lives in Manhattan but works in Connecticut. Does he take the subway and then ride the train? Nope - a luxury shuttle bus with wi-fi picks him (and the other Manhattan employees) up right near his apartment and drops him at the front door of work. Point-to-point express buses are the future of commuting. All you need are a couple dozen people that need to get from the same neighborhood to the same job cluster on roughly a similar schedule to justify a daily round trip - and they can all be productive the whole way, whether through individual 3G data connections on their devices or wi-fi on the bus (by far the cheapest option).
While the climate-concerned may cheer increased transit use, an ironic side effect may actually be increased sprawl. When commuting is truly unproductive time, as driving is, people really hesitate for it to be more than an hour a day, which puts a pretty hard limit on how far home can be from work. But if you can be productive on a bus doing work you'd have to do anyway, you might consider two or more hours a day commuting (as my Manhattan friend does) and look at exurban communities you wouldn't have even considered before, especially if they have more affordable or newer houses with better amenities and public schools.
This is the commute of the future, and cities that offer it conveniently, affordably, and comprehensively (all neighborhoods to all job centers) through some combination of public transit, private buses, and HOT lanes will continue to grow and thrive in the coming decades, while those that don't, won't.
Almost three years ago, shortly after graduating from college, Jeffrey Rogers found himself with a degree and no job. The economy had just taken a dramatic turn for the worse and he was struggling to get by.
“He was literally living off peanut butter and jelly sandwiches,” said Kathryn Rogers, his younger sister and a first-year graduate student at Chapman University in Southern California.
Jeffrey went to their father for help in a last-ditch effort to meet his monthly living expenses, but his Dad refused. “He definitely is into tough love," said Kathryn. “He said, ‘He’ll make ends meet in one way or another...' [his] attitude is, ‘Once you graduate, you’re cut off’.”
Jeffrey ended up borrowing money from friends to pay rent for the next six months. But Kathryn is grateful for her father’s “tough love”. She believes it has strongly contributed to her own sense of financial responsibility. While her parents paid her rent and tuition, with the help of an academic scholarship during her four years of undergraduate studies, she was in charge of everything else. “I paid for food, I paid for gas, I paid for activities, I paid for my sorority,” she said.
Kathryn has always had a job since the age of 16. Being aware of how much things actually cost has helped her keep her budget balanced now that she is on her own. But not having that awareness is a huge problem for many college students. “If you’ve always had everything given to you, you wouldn’t think about [cost of things] because it wouldn’t be an issue,” she said.
A majority of Kathryn’s student acquaintances don’t know the basics of personal finances. “You talk to people our age, they’re 18 and they have $12,000 in credit card debt or they don’t know how to pay bills or how to do their taxes,” she said.
Kathryn believes a financial management class in high school should be mandatory. “If your parents don’t teach you, where are you supposed to learn?” she asks.
Catie Robbins, a senior screenwriting major at Chapman, agrees. “Your parents figure you’re going to learn along the way. But then you always feel so much guilt and disappointment when you’re not being responsible with your money. It’d be nice if there was more guidance available.”
Robbins has taken out student loans and receives financial aid, which helps her parents pay for her tuition. But they also take care of her rent, food, and other necessities.
“Basically I don’t have to pay for anything. But it’s scary because they only send me enough money for my food and lodging, so I can’t buy anything else,” she said. “If you want to do fun, random stuff or if you go overboard on your food expenditures, you can be very poor. It’s fine – it’s just kind of sad to be dependent on my parents.”
Robbins looks forward to graduating and getting a job. But right now her financial aid package limits the amount of money she can make from employment to $2,000 a year, which she said she can easily earn during the summer. “As soon as I make that much, I have to quit,” she said. She points out that, counter-intuitive as it is, students are given financial aid because they don’t have enough money, but then are stopped from earning more because of the aid they receive.
There is also a certain irony in being given dreams and goals during college, and then being unable to fulfill them because of the financial burden of college.
“Originally, I had all these ideas for traveling,” said Robbins, who has studied abroad. “But you definitely can’t just take off after school and be youthful and pursue all these silly things. You have to be responsible. I am kind of excited to finally be free and living on my own, and not having to ask my parents for money,” she added.
While financial aid is limiting for some students, and asking your parents for money is never easy, it is definitely a preferable alternative to being entirely dependent on student loans. That’s the situation in which junior Dave Casey finds himself.
Without the minimum required 2.0 GPA, Casey was not eligible for federal student aid this semester. Taking out loans was his only option for staying in college. Currently, he owes about $60,000 with two more years of school to go. He is paying a monthly $187 in interest alone.
“I could have gone to the University of Rhode Island for $6,000 a year,” said Casey, a native of Warwick, R.I. “But I didn’t want to. I was willing to pay because I wanted to go off, I wanted to experience something else, I wanted to be surrounded by a different environment, different people. And I think that’s how you really learn.”
Casey’s father helps him out with rent, and he works over 20 hours a week at a local restaurant. “What stresses me out is that my mother is on food stamps, and I have no money to give her,” said Casey, whose parents are divorced. “I can’t [help], because I’m in a hole myself. Do I send hundreds of dollars a month back to my mom, or do I pay off these loans and then turn to help her? Either way there’s not enough money to go around.” Like Kathryn Rogers and Robbins, Casey’s only hope is to get a steady job after he’s graduated and start paying off his mountainous debt.
“The only reason why I’m not freaking out hardcore about this is because I can’t comprehend it. Set $60,000 in front of me; I’d like to see it. It’s so abstract to me,” he said. “These loan agencies definitely benefit from our naiveté.”
Donald Booth, a professor of economics at Chapman and board member of Consumer Credit Counseling Service, thinks that technology is a major contributor to the lack of financial knowledge.
“The traditional way was the bill came to your house, you wrote a check, licked a stamp and mailed it back. Now you have automatic pay, it withdraws it from your account,” he said. “[People] don’t even know what they have in their checking account.”
The transition to so much financial activity online has been difficult for generations both young and old. “Don’t think it’s just students who don’t know how to manage money – it’s almost everybody,” he said.
Older people are naturally resistant to new technology because they like doing things the way they’re used to, according to Booth. On the other hand, there was no one to teach students to use the Internet as a financial tool.
So we’re basically in the banks’ pockets now, because people aren’t keeping track of the money they’re spending, how much they have, how much they owe. "And everything seems free. You almost never get turned down anytime you want to buy something. Until it catches up with you.”
Rachel Yeung is a senior at Chapman University in Orange County, California.
The Wall Street Journal recently carried an article entitled “E-Yikes: Electric Bikes Terrorize the Streets of China.” The article describes difficulties arising from the fact that nearly 120 million electric (battery) bicycles (E-Bikes) are now in operation in China, as people have abandoned mechanical bicycles and highly-polluting petrol motorbikes.
However, to the millions of owners, China’s E-Bikes are a boon, not a bane. E-Bikes are best understood in terms of human aspiration (just like cars in America or Western Europe). People generally seek to improve their lifestyles. Research at the University of Paris, the University of California, the University of North Carolina and elsewhere has clearly demonstrated a strong relationship between higher incomes and higher rates of economic growth where people have greater personal mobility. This is what the E-Bike provides.
In the large urban areas of the 21st century, even the dense Chinese urban areas, travel is highly dispersed. The efficient operation of the urban area requires an ability to travel from any point in the urban area to any other point in a short amount of time. As effective as public transport can be for trips within the dense (but generally small) urban core or to the urban core from suburban areas, a large share of trips simply cannot be feasibly made any other way than by personal mobility. This includes walking, for very short trips and bicycles for somewhat longer trips. But, it also includes substantial and increasing travel by faster modes of transport, particularly cars and two-wheeled vehicles. E-Bikes have greatly improved mobility. At the same time, the E-Bike has enormously reduced both the air pollution and carbon footprint of two-wheeled personal mobility.
This is not to discount the traffic and other difficulties. However, the Chinese, like their western counterparts, will continue to seek better lives and that means greater personal mobility. It means that E-Bike usage will continue to grow and that car usage will also continue to grow, as incomes rise. While that will make traffic congestion even worse, the spectacular automobile fuel efficiency improvements ahead will allow massive expansion of personal mobility, while moving in the right direction with respect to the carbon footprint. In the final analysis, the Chinese (and the Indians, Indonesians, etc.) would like to live as well as we do in the United States and Western Europe. And why not?
Photograph: E-Bike display at a Suzhou (Jiangsu) hypermarket.
While California's much publicized budget battles have made the dire financial straights faced in Sacramento a topic of regular media conversation, other states are also experiencing major fiscal woes. According to experts interviewed by Crain's Chicago Business, Illinois currently finds itself in a state of de facto bankruptcy, with the state's ledgers appearing "to meet classic definitions of insolvency: Its liabilities far exceed its assets, and it's not generating enough cash to pay its bills."
According to Crain's, "While California has an even bigger budget hole to fill, Illinois ranks dead last among the states in terms of negative net worth compared with total expenditures." The state had a record $5.1 Billion in bills past due at year's end, has failed to pay some vendors for months, and has seen the average time to pay a bill double to nearly 92 days. The state also faces rapidly mounting pension obligations, and has seen it's ability to borrow restricted by its worsening credit rating. Facing piles of liabilities, and recession reduced receipts, the state is currently "living hand to mouth, paying bills as revenues come in each day, building up cash when special payments are coming due. Cash on hand varies from day to day, sometimes dipping below $1 million".
I was pleased to have the opportunity to have an op-ed produced on transportation in the Atlanta Journal-Constitution on January 17. The op-ed, entitled “Arterial system needed” argued that the most important thing the Atlanta metropolitan area could do to reduce traffic congestion would be to develop a decent arterial street system, something that, unbelievably, does not exist today. Regrettably, the permitted length of the op-ed did not permit much elaboration of the point, or mention of other important issues.
In metropolitan areas with effective arterial street systems (such as Los Angeles), there is usually a surface alternative to a grid-locked freeway. A skilled driver can use these alternate routes and avoid much of the frustration of congestion. This may or may not improve travel times, but it is certainly better for the psyche. In Atlanta, there are few alternatives to the freeways and even the freeway system itself is very sparse.
The principal elaboration for which I wish additional space had been available had to do with the role of transit. Many Atlanta officials are of the view that transit is the solution to traffic congestion. Many of them join pilgrimages to Portland (Oregon), where planners are only too happy to reinforce this view, with their doctrine to the effect that transit has transformed their urban area. The reality is that, after nearly 25 years of major transit improvements, transit’s market share in the Portland area is about the same as it was before.
There are proposals to expand the MARTA transit system and tax from the core counties of Fulton and DeKalb to suburban counties. It is hard to imagine a more counterproductive policy approach. This would shower the overly-costly MARTA system with a stream of revenue with which its out of control costs per mile could escalate. The additional cost to taxpayers and riders would be far in excess of any potential benefits. MARTA’s principal problem is not lack of funding; it is rather insufficient cost control.
The reality is that to reduce traffic congestion, transit would need to attract a large share of urban trips. In fact, however, whether in Paris, Portland or Atlanta, the transit system that could compete for most metropolitan trips has not yet been conceived of, much less developed or even proposed. Because of the necessity to travel from every point in an urban area to every other point, this is simply impossible. The vast majority of travel demand in all major urban areas of the United States and Western Europe is for personal mobility – automobiles – simply because there is no choice in their modern, affluent economies.
Taking on the Portland mystique is not easy – and likely I'll find out again with my most recent piece: Picture-perfect Portland?
But I'd also like to take a Midwest perspective that shows some surprising things. Let's compare Portland to a similarly sized and less acclaimed Midwest city, Indianapolis. You can think of Portland as being in “first place” from a policy perspective by popular acclaim. It has an urban growth boundary, extensive transit, excellent urban density, a strong biking culture, a strong culture of civic engagement, the most microbreweries per capita, and on down the line. It is a place people want to live in so badly that they will move there with no job in hand and would be one of the cities that comes to mind among similar sized metros as a talent hub.
If Portland is first, then you’d have to characterize Indianapolis as “worst”. Indianapolis is surrounded by expanding suburbia with very pro-sprawl policies on all four sides. It is one of the least dense cities in America. It has no rail transit and only the 99th largest bus system, along with one of the lowest transit market shares in the country. It is currently in the middle of a multi-billion program to widen about 60 miles of freeway. It just recently put in its very first bike lanes and scores near the bottom in green measures of sustainability. Its brand image also is hardly the best. You don’t hear too many people around the country going, “Man, I’ve gotta get me to Indianapolis.”
But let’s look at how these cities compare on various quantitative measures of urban performance.
Population Growth (2000-2008)
Domestic In-Migration (2000-2008)
International In-Migration (2000-2008)
Job Growth 2001-2009 (QCEW)
Job Growth 2001-2009 (CES)
Unemployment Rate (Nov 2009)
Per Capita GMP (2008)
Per Capital GMP Growth (2001-2008)
Median Household Income (ACS 2008)
Median Monthly Housing Cost (ACS 2008)
College Degree Attainment (ACS 2008)
Travel Time Index (Texas A&M)
Now in most of these Portland does beat Indy, but not by a lot. In job growth and unemployment – two big factors in today's economy – Indy actually does better. Portland's higher incomes are offset by higher housing costs. There are only two stats – international migration and GMP per capita growth – where Portland has a big lead.
Given the wide difference in their policies, it is striking to see these cities so close. By rights, it should be total world domination by Portland – but it isn’t.
Now obviously these aren’t the only statistics to measure a city by. Portland residents would no doubt tout their many livability advantages. Yet at some point isn’t livability supposed to translate into superior demographic and economic performance? Isn’t it supposed to make a city attractive to the talent pool needed to thrive in the 21st century? And isn’t that talent supposed to power the economy? I was particularly struck by how close the cities were on college degree attainment. While I called Portland a talent hub, perhaps I spoke too soon. Contrast with Boston, which has 41.9% of its over 25 population with a bachelors degree or better.
It may be that policy changes act with a lag. But Portland has been at this a long time. The UGB dates to 1973 and the light rail system started construction in the early 80s, for example. Perhaps other factors play a bigger role than many imagine. Land use and transportation policies might provide benefits to cities, but they do not, by themselves, create an economic dynamo.
Oregon’s voters will soon give their judgment on Measures 66 and 67, measures that will raise income and corporate taxes in the recession-ravaged state – with unemployment at 11.1 percent, the eighth highest in the nation. Besides leaving the state with the highest marginal rate in the country, tied with Hawaii, more insidiously measure 67 will impose a minimum tax based on sales, not profits, implying an infinite marginal tax rate for low-profit companies.
This is not good news for businesses and citizens of Oregon. In a report titled Tax Policy and the Oregon Economy: The Effects of Measures 66 and 67, Two Cascade Policy Institute economists, Eric Fruits and Randall Pozdena, thoroughly review the literature on the impacts of tax increases on jobs and domestic migration, and they rigorously analyze the measures’ impact on Oregon jobs and migration.
They estimate the new measures through 2018, will cost Oregon employment losses of “approximately 47,000.”
Finally, Fruits and Pozdena examine the impacts of measures 66 and 67 on migration. They find that adoption of measures 66 and 67 will result in the loss of approximately 80,000 Oregon tax filers with a loss of $5.6 billion in adjusted gross income.
These results have to be taken as the minimum impacts. Fruits and Pozdena are careful researchers. They do nothing that is not completely defensible. Consequently, because of statistical issues, some of the potential impacts, particularly those of measure 67’s minimum tax based on sales are almost surely under measured.
Clearly Oregon , where many residents look down on the increasingly bedraggled Golden State seems anxious to follow California’s decline trajectory. We all know how that story ends: high unemployment, domestic out-migration, declining jobs, declining opportunity, and a vanishing middleclass.
I am not alone in seeing the warning signs.
The PEW Center on the States issued a report in November 2009 titled Beyond California: States in Fiscal Peril. PEW created an index using foreclosure rates, job losses, state revenues, budget gaps supermajority requirements, and money-management practices. The index resulted in values ranging from 6, Wyoming, to 30 California. Higher values are bad here, and the closer to California’s 30, the more a state is at risk of California-style fiscal problems. Oregon, with a value of 26 is listed as one of nine states that the PEW researchers consider at high risk.
Then there’s Small Business & Entrepreneurship Council’s recently released Small Business Survival Index. They use a much larger set of variables to create their index of public policy climates for entrepreneurship, a total of 39 indicators covering tax policy, regulation, crime rates, costs, and more. This index results in values ranging from 25.7 for South Dakota to 84 for the District of Columbia. As with the previous index, high numbers are bad. California, with a score of 77.7 is the second worst state, behind only New Jersey. Oregon’s score is 65.2, the 38th among states, and dangerously close to California’s score.
After reading a recent article I wrote about growing unfunded liabilities for public employee pensions and health care, a reader told me that it made him want to “burn his eyes out with red hot pokers.” Yes, the current situation – expanding debt, growing government, excessive pay and special privileges for government workers, thanks to union power – is not fun to read about. It can be downright scary, when one considers the financial mess that already is looming.
If you really want to be scared, you need to listen to the types of people who are now sounding the alarm bells. I’m a libertarian, and it’s not a surprise to hear me warn about the ill effects of government spending.
But listen to what former California Assembly Speaker Willie Brown, one of the state’s best-known liberal politicians, recently wrote in a San Francisco Chronicle op-ed:
"The deal used to be that civil servants were paid less than private sector workers in exchange for an understanding that they had job security for life. But politicians--pushed by our friends in labor--gradually expanded pay and benefits...while keeping the job protections and layering on incredibly generous retirement packages...This is politically unpopular and potentially even career suicide...but at some point, someone is going to have to get honest about the fact."
Democratic state Treasurer Bill Lockyer said at a legislative hearing: “It’s impossible for this Legislature to reform the pension system, and if we don’t it will bankrupt the state,”
The chief actuary for the California Public Employees Pension System called the current pension situation “unsustainable.”
This is from a recent Economic Policy Journal article: “According to the chairman of New Jersey’s pension fund, the US public pension system faces a higher-than-expected shortfall of more than $2 trillion.”
The only hope to rein in the current problem is for wider agreement that the days of enriching public employees must end. That means making inroads with liberal Democratic politicians, many of whom must realize that the future of other programs they support are imperiled by shaky finances and pension obligations that suck the life out of government budgets.
Steven Greenhut is director of the Pacific Research Institute’s calwatchdog.com journalism center and author of “Plunder! How Public Employee Unions Are Raiding Treasuries, Controlling Our Lives and Bankrupting The Nation.”
In California, already challenged by record state deficits, the city of Los Angeles may have a budget shortfall of $1 billion by 2013, "driven primarily by escalating employee pension costs and stagnant tax revenues". For the current fiscal year the city faces a deficit of $98 million. Under such budget conditions, the city's administrative officer projects substantial cuts to city services will be "unavoidable".
With states already facing their own set of budget challenges, the League of Cities is calling on the federal government to intercede. According to the League, "in the absence of additional federal intervention, a deepening local fiscal crisis could hobble the nation’s incipient recovery with more layoffs, furloughs, cancelled infrastructure projects, and reduced services." However, with an exploding federal debt load and federal budget deficits running at all time highs, municipal cries for increased aid may face a lukewarm reception in Washington, DC. Support for expanded stimulus efforts might prove lacking, with signs beginning to emerge that a mild economic recovery is underway, and many of the already passed stimulus dollars yet to be spent.
For now, cities facing deficits will have to find ways to solve the shortfall on their own. If they are unable to bridge the gap, municipalities may find themselves forced, like the city of Vallejo, California,to file for Chapter 9 bankruptcy protection.
Northrop Grumman Corp started California’s New Year by announcing it is moving its headquarters to the Washington D.C. area. Unfortunately, they are neither the first nor the last major corporation to leave Southern California. It is a trend, one that may not last much longer, though since aren’t that many major corporations still headquartered in greater Los Angeles.
For decades, Southern California was the center of the aerospace world, a basic part of the Southern California’s DNA. Now, once Northrop leaves, there will be no major aerospace companies still headquartered in Southern California.
Aerospace is not the only industry abandoning Southern California. The region was once host to financial giants, like Bank of America, Security Pacific Bank, Countrywide, and First Interstate. Today, there are none. California was once a major automobile manufacturing state, with a dozen plants. Even the entertainment industry is slowly shifting away from its Hollywood roots.
When you lose corporate headquarters, you lose more than jobs. You lose the tax base, the leadership, the philanthropic giving, and the intangibles. Corporate headquarters are usually very good citizens.
Many local political leaders ignore this business’ exodus, or make excuses. The decline of the U.S. defense spending, aerospace spending in particular, is often given as a reason for the decline. But the last decade was not a bad one for defense; the industry thrived, just not in Southern California.
The reasons for this exodus are both simpler and less flattering than those usually given. One big reason is selfishness. California’s decline chose to consume, and not to produce. Wealthy, aging, Baby Boomers control the state. In the cause of “quality of life,” or “the environment,” they have succeeded in limiting opportunity for everyone else.
The other big reason for decline lies with governments, state and local, that now exist to serve themselves and not their citizens. The level of government goods and services, even infrastructure and basics, has declined, but state spending, adjusted for inflation and population, has continued to soar. The difference has been going into public employee’s pockets, through higher salaries, benefits, and generous retirement programs.
Remarkably, no Southern California economic sector is in ascendancy. Unemployment remains well above the national average, particularly in the middle class Inland Empire. The growth in bankruptcies has been about twice that of the United States. The state is becoming less equitable, the divide between those who have and those who do not have constantly growing, the middle class declining.
Southern California is starting to look a lot like a third-world economy, service based, inequitable, serving a wealthy, mostly aging few, with little opportunity for younger workers and a large underclass. Changing the region’s prospects will be very difficult. Nothing short of a major generational change in leadership is likely to change the current sad trajectory.