What the Suburbs Might Learn From Their Urban Neighbors

A nice report by the Brookings Institution on recent demographic trends in metropolitan America entitled "Getting Current" (warning: large pdf). It highlights some of the convergence of suburban trends with what were previously seen as more urban characteristics:

* More racial and ethnic minorities moving from cities to suburbs, or in the case of some immigrants, straight to the suburbs, means suburbs are dealing with unprecedented diversity of tongues and skin colors.

* More and more poverty, particularly in older communities, means suburbs are dealing with fiscal and mechanical challenges in providing social services and affordable housing.

* Suburbs have more of certain populations - yuppies, the elderly, the working poor - whose housing and transportation needs may be mismatched with current inventory and infrastructure.

* The long global transformation to a more knowledge-based economy puts institutions of higher learning at the forefront, but suburbs often lack the density to attract such entities, impairing residents' ability to tap into ongoing educational and training needs.

Of course, some of these trends are just urban issues creeping outward to inner ring suburbs. But there's some pullback from the outer bound as well, as heightened energy considerations and tapped out transportation infrastructure funding sources make far-flung suburban areas less attractive.

In other words, cities and suburbs may not be so different tomorrow as they were yesterday, with implications for residents, employers, and government. Perhaps we ought to learn a little from each other, and help each other out, more so than we're currently doing, rather than trying to distance ourselves from each other.


Why I Want This Tax

Let me pick up on a post from earlier this week, which I admittedly didn't provide much commentary on: "Price Matters." The reason why price matters, and why a carbon tax is superior to a cap-and-trade system, is that it acknowledges that some carbon emission is socially optimal.

Socially optimal? Whoa! Didn't the EPA just label carbon dioxide a pollutant? Yes, but remember that as with all pollutants, the socially optimal amount is likely not zero.

Think about it this way: at least in the medium term (which even the rosiest forecasts assume means something like a generation or two), and perhaps forever, some of our energy is going to be in the form that leads to carbon emissions. So one way to reduce carbon emissions is for industry to come to a grinding halt.

That can't be a socially optimal solution. Rather, obviously, there's some amount of economic activity that is justifiable, even if it leads to carbon emissions, because the positive consequences of that economic activity are worth more to us as a society, even factoring in the environmental element, than doing nothing.

The problem today is not that we have pollution at all, but rather than we have more pollution than is socially optimal, since the cost of polluting is artificially low. The solution, therefore, is not to eliminate pollution altogether, but to drive it down to a level at which point the economic benefit to all of us is at its greatest, considering that the trade-off of more economic activity is more pollution.

Cap and trade, particularly that which gives away the pollution credits, presumes to know what that socially optimal level of pollution is. But it is highly unlikely that whatever level is determined by the US government will be better than whatever level is determined instead by individual decision-makers making choices about how much activity to undertake and how much pollution that will produce.

In contrast, by instituting a carbon tax, people and businesses will make rational decisions for themselves. Some individuals may become more conserving in their behavior, motivated by saving money; while others will decide that they are willing to pay the extra dough to continue to do what is best for them. Same goes for businesses.

And these billions of decisions by millions of actors will lead to an equilibrium level of economic activity and pollution production: any more or less, and we're worse off. But I have to think that the US government guessing at an appropriate carbon tax amount at which we reach that equilibrium level is a more comforting leap of faith than hoping that they can guess what the equilibrium level is directly.

In other words, I'm highly skeptical that cap and trade can do better than setting a carbon tax and letting individual actors make their own decisions, now properly motivated to conserve if makes sense to. Of course, a carbon tax is currently the least politically palatable and publicly acceptable course of action. (Take a look over the American Enterprise Institute for a nice piece on carbon tax vs. cap and trade, link courtesy of Greg Mankiw's blog.)

So instead, we get the government deciding what is the socially optimal amount of economic activity, mandating to the carmakers what sort of fuel efficiency should be in the cars you and I will buy, and subsidizing all manner of energy efficient products and services that otherwise rational people and businesses would have the freedom and motivation to choose for themselves if only we priced energy correctly. That's a lot of finagling just to hope that people and businesses will make the right decisions, when setting a more correct price on carbon would do the trick much more effectively and directly.

Sorry for all the econo-speak. Just wanted to clarify why I was so excited about Thomas Friedman's column from last week, and why advocating for a carbon tax is completely consistent with being a pro-business, free-market-loving, cold-blooded capitalist Republican.

Affordable Homes in Pennsylvania

As noted in a previous post, I had the honor of participating in Housing Matters Day, organized by the Housing Alliance of Pennsylvania to shed light on the importance and necessity of affordable homes. Here are my written comments from the press conference portion of the festivities.

In addition to the direct benefits enjoyed by new residents, it is important to note that investing in improving the efficiency of our housing stock is an effective form of economic stimulus, which is obviously an important consideration these days.

Specifically, our analysis estimates that each ten million dollars invested in a Pennsylvania Housing Trust Fund would generate 16 to 22 million dollars in total expenditures within the Commonwealth, as well as hundreds of jobs and millions of dollars in wages, in a variety of industries.

Rehabilitating homes is particularly potent, in that it produces more houses per million dollars, and also has a greater statewide multiplier effect.

Combined with the leveraging of other public dollars plus private dollars, this all could have an even more potent effect.

Importantly, the savings associated with both reduced housing payments, as well as lower energy costs as a result of more efficient housing are also stimulative, in that the savings go right into peoples' pockets and can therefore be spent locally.

Finally, the economic literature also suggests there's a huge positive spillover effect associated with reducing foreclosures and the destabilizing effect they can have on communities.

In other words, when you invest in improving the efficiency of our housing stock, new residents win, neighborhoods win, and the Commonwealth wins.


Price Matters

Tom Friedman's column on the importance of setting a price a carbon is right on: "Moore’s Law and the Law of More." Here's hoping our elected officials, on both sides of the aisle and at the very top, are courageous enough to get us there. Without it, climate change policies are destined to fail, unsustainable behaviors won't change, and we'll all be left with a far bigger tab down the road.


Philly in the Middle

With many in California and other parts of the country eagerly anticipating the introduction of high-speed rail, I am all the more pleased to be living in the City of Brotherly Love. You see, our firm has, for the past year or so, sought to expand its footprint, and slowly but surely we are moving in that direction, with actual or potential client work in such places as New York City, Baltimore, and Harrisburg. Thankfully for me, given that I have two small children who I like to see in both the morning and the evening, each of these three locations is very doable as a day trip within a normal business day. And all without setting foot in a car.

I used to think that when people said one of Philly's selling points was that it was near so many other big cities, I thought it somewhat of a backhanded insult. But it is a true statement, and a feather in Philly's cap, a huge competitive advantage in a world that seeks to become less auto-reliant even as it needs to become more interconnected.

20,000 Hits and Counting

I've been blogging since February 2003 but only put up the hit counter in February 2005. Four plus years later, we've finally hit the 20,000-hits mark from that point. Thanks to everyone for stopping by, and particularly for those who have mused along with me.


Immigrants and Workforce Development

As noted in a previous post, I had the honor of participating in a state legislative committee hearing on the topic of immigrants and workforce development. Here is my written testimony.

Good morning. My name is Lee Huang, I am a director at Econsult Corporation here in Philadelphia. I received an undergraduate degree from Wharton with a dual concentration in Accounting and Management, and a Master’s in Government Administration from the Fels Institute of Government at the University of Pennsylvania, with dual certificates in Public Finance and Economic Development. Econsult Corporation is an economic consulting firm founded in 1979. Our work includes high-level economic and statistical analyses for government agencies, non-profit organizations, and private companies. We cover topics from economic development to real estate to transportation. Most recently, we conducted an unprecedented study of Philadelphia’s commercial corridors, reviewing city tax data and shopper survey data that had never been available before.

So in exploring the economic impact of integrating immigrant workers into the state economy, we bring a rigorous, statistical approach, and are careful to deal with facts, not guesswork. Let me start by noting that 74 percent of immigrants in the Commonwealth are of working age, versus only 56 percent of native-born Pennsylvanians. So from the standpoint of our workforce, Pennsylvania needs immigrants. The Commonwealth is old and getting older. Although young people flock to our wonderful colleges and universities, most of them leave the Commonwealth four years later. If our economy is going to thrive, we need workers who will stay.

We also need effective ways of making sure those workers are producing at their highest ability. If we’re not firing on all cylinders, that’s wasted capacity. In this case, that means making sure that qualified workers get connected to the jobs that Pennsylvania employers need to fill.

The Welcoming Center is a key part of making that connection. If I may borrow from a turn of phrase by President Obama, who recently wondered aloud that so much work needed to be done and yet so many people were looking for work; today’s hearing is about wondering aloud that so many skilled immigrants are under-utilizing the very skills and experiences that are most needed within the Commonwealth.

But the Welcoming Center is helping bridge that gap with a variety of outreach, training, orientation, and placement services. To help measure the value of these services, Econsult reviewed an entire year’s worth of data from the Center. We calculated the impact of all of the workers placed in jobs, and we found numerous positive results.

• First, individual workers were able to earn more. When a person earns more money, she can spend more – in other words, they now have greater purchasing power. That spending power ripples through the local economy, creating additional employment and earnings opportunities for other Pennsylvanians. Using standard economic multipliers, we calculated this “ripple effect,” and estimated that from one year’s worth of participants in Welcoming Center programming, the Commonwealth gained over 200 jobs and $4 million in earnings, of which 145 jobs and $2.7 million in earnings was enjoyed within the City of Philadelphia.

• Second, the City of Philadelphia and the Commonwealth of Pennsylvania both received higher tax revenues and will continue to receive higher tax revenues, as a result of individual workers’ actualizing their higher earning potential. Having been trained and supported by the Welcoming Center, participants helped contribute to the City of Philadelphia receiving an additional $103,000 in annual wage tax revenues, while the Commonwealth separately gained an additional $123,000 in annual income tax revenues.

• And that is just the initial year of results; those gains in tax revenues generated will continue into the future, and likely as those workers advance in their respective professions. If I may use a financial analogy: having made an investment, through supporting the Welcoming Center in training and guiding immigrants towards their highest and best use in our state economy, the Commonwealth receives both the “capital gains” (in this case, human capital gains) of the talents and efforts of these immigrant participants, as well as an ongoing “dividend” (in this case, a financial dividend) in the form of their annual contribution to state and local income tax revenues.

You can find more results, statistics, and methodologies in the Shared Prosperity report in the packets you received today. We will also make it available on the Econsult and the Welcoming Center websites.

I want to conclude by stressing the importance of integration to native-born Americans. Clearly, immigrant workers gain directly from their participation with the Welcoming Center, and as I just demonstrated, that gain also benefits the local and state economy as well as local and state governments. It is important to stress that these new Americans are joining communities that already exist. Integration is a two-way street. We called our report Shared Prosperity because it’s clear to us that when the integration process is smooth, our whole region benefits. Specifically:

• Businesses have a bigger and more talented pool of workers

• Entrepreneurs are able to start and grow their businesses, allowing them to create new jobs right here in Pennsylvania

• Commercial corridors benefit from increased energy and investment as merchants open up shop in storefronts that used to be vacant

• And the talented young people who come here to attend college are able to stay here and buy homes, raise families, and participate in our civic life

In short, making sure that legal, work-authorized immigrants are integrated into our workforce is wise policy, not just for immigrants, but for everyone. Again, thank you for the invitation to speak today. I would be pleased to answer any questions you have.

100+ Days In

Shockingly, the world didn't miss my lack of contribution to the rush of 100-day evaluations of the Obama administration. A few days late, here are some of my thoughts.

Overall, quite good. First on style, since when it comes to the role, style is often more important than substance. He has managed to carry himself with a nice mix of gravitas, nuance, and competency. Not bad for someone who allegedly lacked the leadership experience for the world's highest office.

On the issues, I'll note a post of mine from right before Election Day, expressing four hesitancies about an Obama presidency: foreign policy, health care, trade, and government spending. Remarkably, on three of the four, he's warmed to, if not flipped over to, my side of the arguments: while being more cheerful and conciliatory in foreign relations, he's flexed American muscle as well; he's open to McCain's way of fixing health care (which was actually one of Obama's own key advisors' way); and he's thankfully backtracked on anti-NAFTA sorts of sentiments.

Of course, the big swing at the plate that Obama has had so far has been on government spending. And a $3.4 trillion budget, with massive deficits as far as the eye can see, puts us in somewhat unchartered territory: witness this Canadian columnist's glee that liberal Canada can now be considered global investors' free-market choice among North American countries.

But one out of four ain't bad, especially if not messing with business and trade gives us a much better chance our economy recovering and growing. So I give a solid B for Number 44. Not that anyone was asking.


What am I Working On

Here's my quarterly update on new things I've been working on at work since the last update on January 17 (you can read past posts for my ground rules on these quarterly updates):

* Quantifying the stimulative effect of investment in the provision of affordable homes via construction and rehabilitation

* Examining the deleterious effect of aggressive panhandling on a city's tourism, commercial, and residential markets

* Estimating the economic and fiscal payoff for developments proposed in a vision plan for a distressed urban neighborhood

* Estimating the revenue potential of a proposed urban amenity in a city that does not currently have this particular amenity

* Providing a developer with a "jobs created" estimate as part of his application for public funds in support of his proposed development

Huang Family Newsletter, April 2009

Kids - A pretty full and fun month for the little ones. Multiple trips to Please Touch Museum and downtown, plus special trips to Sesame Place and the Academy of Natural Sciences. And they got good Easter baskets and a good Easter egg hunt at Granddad and Nina's house. Both continue to improve in the areas they get extra help in: Jada with her words and Aaron with his behavior.

Adults - Both of us got day trips to Manhattan, Amy to see her sister and Lee to catch A's-Yanks. They also enjoyed dinner and dancing (sans kids!) at an evening fundraiser downtown. We finally made progress on some home improvements, although we have a long way to go and are not sure where the time will come from, on account of Amy's feverish studying and Lee's hectic work schedule.