Does the Treasury Department need a Rustbelt Intellectual?

The demands of the new quarter require this post to be brief, but I wanted to highlight what I think are some interesting and important dilemmas faced by the Obama administration in the current economic crisis.   

Two main observations:  1)  America appears to be experiencing the first significant wave of economic populism in many decades; 2)  Obama's Treasury Department policymakers and staff of economic advisers appear to be unaware of this or to understand what it means (see Tom's post of February 10).  

A series of Frank Rich columns in the New York Times over the past several weeks brilliantly exposed this political blindness or insensitivity.  And the Times is still hammering home the basic point--a story from yesterday showed the troubling ties that Lawrence Summers (never known for his political acumen) has to hedge funds. 

Watching the political missteps leads me to believe that the Obama administration needs a Rustbelt Intellectual at Treasury or on the staff of economic advisers.  I use that term to refer to the spirit of this blog's many posts and reader comments--as a shorthand to mean only that the administration economic policy needs a voice from someone---anyone--who can truly empathize with the common American, with the working and middle classes.  

Yet the story on Summers indicates the difficulties that Obama faces in balancing politics and policy.  How can we reconcile the interests and concerns of the common American with the arcane world of 21st-century finance?  

Given the highly technical nature of our current financial crisis, does Obama have any other choice than to hand over the keys to the policymaking to folks who presided over and arguably contributed to the crash?  Would providing a seat at the table for a spokesperson for the middle and working classes simply put that person in over their head?  Are the concerns of working families hopelessly naive and likely to worsen the crisis if made a driving force in policy?  In other words, would a Rustbelt Intellectual just mess everything up?  

In the short term, it appears that handing economic policy over to technocrats is politically risky.  In the long term, it may be our only option:  Americans may just have to hold their noses and hope the Wall Street tycoons both in the Obama administration and on Wall Street can save the nation. 

THE LIMITS OF BIPARTISANSHIP

Whatever utility the rhetoric of bipartisanship had for Barack Obama during the campaign, it's now time for the president and the Democratic leadership to let it go. As political historian Allen Lichtman argued at TPM last week, the most effective presidents "don't move to the middle; they move the middle to them."

The GOP unequivocally rejected bipartisanship, when yesterday not a single House Republican voted for the economic stimulus package. And this was a package that the Democrats weakened considerably--by incorporating tax giveaways in capitulation to GOP demands. Republicans have chiseled away at other elements of the stimulus package such as Medicaid funding for family planning. All but the most conservative economists concur that the economic benefits of tax cuts will be minor compared to the jolt of increased spending on public works, unemployment benefits, health care, and public transit. But for Republicans, the efficacy of tax cuts--just like the evil and wastefulness of family planning--are a matter of faith.

Some argue that Obama's bipartisanship gives him the moral high ground: he looks statesmanlike, while the GOP appears truculent and uncompromising. Maybe, but does impression management matter in this moment of grave economic crisis? Why concede to the Republicans on what will arguably be the most important legislation of the Obama years? And why continue to give life to the failed Republican tax policies that have contributed mightily to the current crisis?

Others contend that bipartisanship will help Obama and the Democratic leadership shepherd the stimulus package through the Senate. It is true that to have a filibuster-proof majority, Obama needs to win a few moderate Republicans to his side, but squandering one third of the stimulus to appease the right seems a very high price to pay to win over Olympia Snowe and a few others.

The stimulus package, even in its weakened form, is a step in the right direction. But it may well prove to be too small. If it fails to turn the economic tides, pandering to the GOP in the name of a bipartisanship will be a large part of the reason.

DETROIT SOLD FOR SCRAP

Three years ago, the Onion ran a perversely funny story, "Detroit Sold for Scrap." Now farce has become tragedy.

Last year, I visited the site of Detroit's long-abandoned and much picked over Packard Plant with a film crew from Britain. A half block away was a roving maintenance crew from Detroit Edison, replacing a hundred feet of power lines that had been stolen the night before by scavengers.

It's a sign of the times that scrap metal theft (even through metal prices have fallen in recent months) has become a boom business in inner cities. For a time here in Philadelphia, enterprising recyclers began stealing manhole covers--hundreds of them in a few months. Detroit, once the Motor City, is quickly becoming the Scrap Metal City. Everything is ripe for the plundering in a place with a record number of abandoned houses, skyrocketing unemployment, widespread poverty, and a thriving drug trade.

The metal theft business is not simply an urban problem. Like so many other social problems, it's rapidly suburbanizing. In 2008 alone, there were 145,000 foreclosures in Michigan, many in Detroit's suburbs. Thousands more houses are vacant, unsold in the bleak real estate market. Leftover suburban houses are a treasure chest of steel, copper, and aluminum. Air conditioners, gutters, doors, wiring, and plumbing fixtures are disappearing.

Chris McCarus, a Lansing-based journalist, recently ran an excellent three-part series on copper theft on his radio program Michigan Now. The epidemic of copper theft is a vivid example of the everyday devastation wrought by the current economic crisis.

ECONOMIC STIMULUS FOR ACADEMICS

The economic crisis is hitting home, even at rich universities like mine. My department is replacing three full-time, tenure line positions in modern American history with one non-tenure line two-year lectureship. Harvard's School of Arts and Sciences has announced, in classic Harvard fashion, a "hiring pause." (The usual and customary phrase "hiring freeze" is, I guess, too cold, given that even after a devastating hit by the market, Harvard still has a $27 billion dollar endowment). Many universities have canceled searches altogether. By the best estimate, in my primary field, history, fifteen percent of faculty searches this year were canceled nationwide. Grim indeed.

In today's Philadelphia Inquirer, education historian and op-ed writer par excellence, Jon Zimmerman makes a persuasive case that the economic stimulus package should include doctorates. He looks to the New Deal's creation of jobs for newly minted Ph.Ds and underemployed professors in the arts, historical preservation and research, archiving, and national parks. The whole piece is worth a read.

When asked why the government should sponsor artists and writers, New Deal official Harry Hopkins responded, "Hell, they've got to eat like other people." Hopkins' quip reminds me of a sign that a job seeker carried at a recent conference of historians: "Will Teach 20th Century U.S. For Food."

But he probably won't - at least not at the university level. That's why we need to design other jobs, to put his skills to good use.

After all, our society has already invested untold sums in educating young scholars. And "investment" is the mantra of the day. As Obama keeps reminding us, his goal is not simply to put people to work. It's to invest in a better future, by making improvements in infrastructure, renewable energy and, yes, education.

For our underemployed academics, of course, the investment has already happened. The only question is whether we will save it, or squander it, and how.

One point to add to Zimmerman's argument. The economic engine of dying rustbelt cities for the last forty years has been "meds and eds"--that is hospitals and higher education. As those sectors contract, the economic effects go well beyond a few underemployed Ph.D.s to the whole metropolitan economy. Stimulate education!

The Geography of Gas Prices

My family and I went car-less this summer.

It was a three month experiment to see how we would do without the family vehicle. It was a terrific success. In all honesty, it wasn't really that difficult. We had the pleasure of feeling virtuous without the pain of working too hard at it.

We spent those three months in the University City section of Philadelphia. There, we had easy access to good public transportation; bike lanes on many streets made it fun for the four of us to zoom around that way; the neighborhood itself is walkable, with a twice-weekly farmers market and a park down the street; and it is home to the best Vietnamese tofu hoagie in the country. On those few occasions where we really needed a car, we used the local car-share program. Philadelphia, as it happens, is better served by car share than any other city in the nation.

And we didn't miss the car much at all - for us, it was more fun (and relaxing) to take the train or the trolley, to walk where we needed to, to pretend we were living a European life-style without having to pay in Euros. Most of all, we read all those news stories about high gas prices as if they were dispatches from some foreign country.

Now that we have returned to Ohio and the experiment is over, it strikes me that the pain of rising gas prices this summer has a specific geography. That geography, in turn, might well predict much of our economic future.

Counterpointing the stories in the papers this summer about gas prices were stories about the increased use of mass transit. Needless to say, however, increased ridership on public transportation only happened in places that have public transportation to begin with: New York, Philadelphia, Chicago, Metro DC.

People in much of the rest of the country don't have any alternative to the car. Like those living in most of the South and the Midwest, for example. Take a map of those places where the car is the only form of transportation and lay it over a map of the most economically distressed parts of the country and I think you'll find a fair degree of over-lap.

Exhibit A - Ohio. The state has been in serious economic trouble for several years. At the same time, there isn't a public transit system worthy of the name in the whole state. (Twenty years ago the local burghermeisters in Columbus conspired to tear down the city's train station, turning Columbus into the largest city in the country without any passenger rail service). Over the last two decades, suburban sprawl has been among the few growth industries in the state, reinforcing the reliance and cars and gasoline. Gas prices thus hurt here a lot more than they do in New York.

Put another way, those places with a wider range of transportation options are positioned to be economically more competetive than those parts of the country without them. This means those places with greater density - shorter commutes, shorter trips to the store etc - and those places where people have options about how to take those trips. The new economics of energy is going to reward places like Chicago and it will punish places like Birmingham.

Fifty-five years after Charles Wilson said it, it has become clear that what's good for General Motors is no longer good for the country. Good urban design, public transit, and increased metropolitan density, once seen as a conspiracy of liberals and do-gooders (see Tom's earlier post "Suburbanites Beware!), is now the key to economic prosperity. Or at least to my economic prosperity now that I have to buy gas for my car again.