Urban Edginess

Where the City Meets its Future.

Month: July, 2012

Is a new world being created in America?

First some startling facts about life in America today:

1. Only 55.3 percent of all Americans between the ages of 16 and 29 have jobs.
2. There are 240 million working age people. Only about 140 million of them are working.
3. According to CareerBuilder, only 23 percent of American companies plan to hire more employees in 2012.
4. Since the year 2000, the United States has lost 10% of its middle class jobs. In the year 2000 there were about 72 million middle class jobs in the United States but today there are only about 65 million middle class jobs.
5. According to the New York Times, approximately 100 million Americans are either living in poverty or in “the fretful zone just above it.”
6. According to that same article in the New York Times, 34 percent of all elderly Americans are living in poverty or “near poverty,” and 39 percent of all children in America are living in poverty or “near poverty.”
7. In 1984, the median net worth of households led by someone 65 or older was 10 times larger than the median net worth of households led by someone 35 or younger. Today, the median net worth of households led by someone 65 or older is 47 times larger than the median net worth of households led by someone 35 or younger.
8. Since the year 2000, incomes for U.S. households led by someone between the ages of 25 and 34 have fallen by about 12 percent after you adjust for inflation.
9. The total value of household real estate in the U.S. has declined from $22.7 trillion in 2006 to $16.2 trillion today. Most of that wealth has been lost by the middle class.
10. Many formerly great manufacturing cities are turning into ghost towns. Since 1950, the population of Pittsburgh, Pennsylvania has declined by more than 50 percent. In Dayton, Ohio 18.9 percent of all houses now stand empty.

(See: http://theeconomiccollapseblog.com/archives/30-statistics-that-show-that-the-middle-class-is-dying-right-in-front-of-our-eyes-as-we-enter-2012#ixzz1pfpGZedV)

The most significant take away from the above dolorous statistics and the most predictive of the future of American society is the sudden and calamitous reversal of traditional American expectations that each generation is destined to enjoy greater economic and material success than the prior generation.

To step away from examining the political and economic causes of that reversal, hopefully without ignoring or diminishing them, it may be worthwhile speculating on whether or not there are other contributing or exacerbating causes.

One possible and I guess one can call a positive influence on this seeming slide is the emergence in our economy and society of the pervasive and ubiquitous impact of mobile communication and social networking. To look at it in one way, those most proficient in using the devices, have the potential to provide for pennies almost all ones needs except food and shelter. If that is even remotely so, what remains of the incentive to work hard and achieve material success, if such success is directed in part to acquiring those things necessary to travel to and impress others or to entertain oneself? And in terms of personal satisfaction, proficiency in manipulating the device may be adequate for many and if truth be known more personally rewarding than what was available for most people only a generation ago.

So, if I am right that access to basic food, basic shelter and inexpensive mobile communication devices and applications may satisfy an increasing number of the emerging generation, who grows the food, who delivers it, who builds the shelters and the devices? Robots? Perhaps that is why Amazon purchased Kiva Robots. What happens to the economy if a sizable portion of the population chooses to travel less, buy less clothing or cosmetics and the like?

And what sort of world is being created? Do those without food and shelter take it by force from those who have, like they did thousands of years ago? Who fights to preserve this rudimentary lifestyle? Does the industrial economy continue to contract and along with it the metaphors for work –  credit and money, find less and less upon which to, well, work so that gambling appears as valid a use for it as any? And what is the purpose of education? Are these new people, lazy parasites for opting out as they may do? If so, what do you make them do instead, work on the farms?

The costs of infrastructure development.

Borrowing Under a Securitization Structure

Borrowing Under a Securitization Structure (Photo credit: Wikipedia)

Suburbia:

A report a few years ago from “Strong Towns,” a development think tank, maintains that the first generation of Suburbia was built on and maintained by savings and investment, but the second was built and maintained by borrowing tons of money. We are now entering the third generation. We are out of savings and investment and easy money, now what do we do?

They also point out that in every case they have studied the useful life of an infrastructure investment paid for by borrowing from the private market was less than the time it took to pay back the loans. What this means is that almost every community that invested in infrastructure by borrowing will likely face bankruptcy should growth slow or stop.

English: 800 iii Infrastructure comparison

English: 800 iii Infrastructure comparison (Photo credit: Wikipedia)

Finally, the report found that, in almost every case, where a developer paid for or otherwise donated infrastructure improvements as part of its development in return for the community assuming responsibility for operation and maintenance of the improvements eventually the community required a tax increase to pay for their continued maintenance and replacement.

It used to be that in embarking on an infrastructure project, the costs for operation and maintenance were budgeted for. One of the centerpieces of the Reagan Revolution was the abolishing of this practice so that his administration could appear to have cut spending in the budget. Not only did this practice push-off the burden onto to future generations (like ours today) but by masking the true long-term costs it encouraged the orgy of borrowing that marks current governmental policy worldwide. This was neither traditional liberal nor conservative orthodoxy, but a cynical ploy to obtain and hold power by pandering to the economic elite.

If incomes either to pandering to the rich or pandering to the average person, I know which side of the street I would prefer my elected politicians to set up their cribs.

The real reason why local governments often have to raise taxes or revenue or go bankrupt (Hint, it is not from spending on social programs, education or public security):

Aggordong to “Strong Towns” a development think tank that concentrates on the costs of suburban growth and development, we are in the third cycle of suburban development in the United States. The first generation of suburbia was built on savings and investment. The second was built and maintained using tons of borrowed money.


Although prepare by “Strong Towns” to reflect US suburb growth patterns, the above chart applies to to larger areas and their infrastructure development including countries. What we build and pay for with debt [whether public or private] generally has not included accounting for replacement costs or operation and maintenance beyond the infrastructure’s estimated life cycle, which as a rule is less than the payback period on the bonds used to build it in the first place. This would be like borrowing for your weeks food agreeing to pay it back in installments over two weeks, then borrowing the following weeks food on the same terms hoping that somehow the nourishment can be converted into increased earnings. The syndrome compulsive gamblers suffer resembles this.

The real reason why local governments (and larger entities as well) often have to raise taxes or revenue or go bankrupt:

Case study: “Free roads’ are a myth”:

A group of high-value lake properties petition the city to take over their road. They agree to pay the entire cost to build the road — a little more than $25,000 per lot — in exchange for the city agreeing to assume the maintenance. As one city official said, “A free road!”

Question: How much is the repair cost estimated to be after one life cycle and how does that compare to the amount of revenue from these properties over that same period?

Answer: It will cost an estimated $154,000 to fix the road in 25 years, but the city will only collect $79,000 over that period for road repair. To make the numbers balance, an immediate 25% tax increase is necessary along with annual increases of 3% with all of the added revenue going for road maintenance.
(See Strong Towns for more)

Infrastructure Costs and Planning

Suburbia

Suburbia (Photo credit: bluekdesign)

A new report from “Strong Towns” a development think tank states that the first generation of Suburbia was built on and maintained by savings and investment, but the second was built and maintained by borrowing tons of money. We are now in the third generation we are out of savings and investment and easy money, now what do we do?

They also point out that in every case they have studied the useful life of an infrastructure investment paid for by borrowing from the private market was less the time it took to pay back the loans. What this means is that almost every community that invested in infrastructure by borrowing will likely face bankruptcy should growth slow or stop.

Finally the report found that in almost every case where a developer paid for or otherwise donated infrastructure improvements in its development in return for the community to assume responsibility for operation and maintenance of the improvements eventually required a tax increase to pay for the maintenance.

It used to be that in embarking on an infrastructure project the costs for operation and maintenance were budgeted for. One of the centerpieces of the Reagan Revolution was the abolishing of this practice so that his administration could appear to have cut spending in the budget. Not only did this practice push-off the burden on to to future generations (like ours today) but by masking the true long-term costs it encouraged the orgy or borrowing that marks current Conservative governmental policy world-wide. This was neither traditional liberal nor conservative orthodoxy, but a cynical ploy to obtain and hold power by pandering to the economic élite.

If in comes either to pandering to the rich or pandering to the average person, I know which side of the street I would prefer my elected politician to set up his crib.

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