Categories
Politics

Trump is wrong about economic growth and equality

Like so many politicians before, and likely after, him, President Trump’s claim that a rising tide lifts all boats equally does not hold water.

From NPR: Trump Says Strong Economy Will Bring Racial Justice

President Trump, touting May’s lower-than-expected unemployment rate Friday, said a strong economy was the “greatest thing that could happen for race relations.”

And he seemed to proclaim that George Floyd, whose killing by police in Minneapolis has sparked more than a week of protests, would be happy with the economic news.

“Hopefully George is looking down right now and saying this is a great thing that is happening for our country. This is a great day for him. It’s a great day for everybody.” Trump added. “This is a great, great day in terms of equality.”

Per usual, I’ll focus on Austin and Nashville here, but pick any economic development success story you like in terms of the fastest-growing local economies around the country and the results will not change much.

Austin

The real (inflation-adjusted) value of the local economy in Travis County more than doubled (106%) in 2002-2018. During that time real average monthly earnings for White workers grew by 15%; earnings for Black workers grew by 10%. As a result, the earnings gap increased by three percentage points. In 2002, Black workers earned, on average, 67% of earnings for White workers; in 2018, it was 64%.

Nashville

The real value of the local economy in Davidson County grew by nearly 50% in 2002-2018. During that time real average monthly earnings for White workers grew by 18%; earnings for Black workers grew by just 5%. As a result, the earnings gap increased by seven percentage points. In 2018, Black workers earned, on average, 59% of earnings for White workers.

As of 2018, average earnings for Black workers in Davidson County could support affordable housing costs of $1,027 per month. In Travis County it was $1,156 per month. Average rent for an apartment in Nashville today is $1,430, according to one frequently cited source. In Austin, it’s $1,547.

The tide may be rising, but we need to build better boats.

Categories
Data Releases

Two-thirds of U.S. metropolitan areas lost at least one out of every ten jobs in April

April employment reports are out for metropolitan areas and I’m not sure where to start.

Maybe with New York. The New York-Newark-Jersey City metro area lost nearly two million jobs in April on a year-over-year basis, about one out of every five total jobs in the region. That’s an astounding number, even by our recently expanded capacity to be astounded. New York lost more jobs than the next three largest metropolitan economies–Los Angeles, Chicago, and Dallas–combined.

Other “highlights” from the employer survey:

Nonfarm payroll employment decreased by 10% or more in 269 of the 389 metropolitan areas in April. On a percentage basis, some of the steepest declines were concentrated in tourism economies–Atlantic City (-33%), Kahului (-25%), Myrtle Beach (-23%), Las Vegas (-21%)–and in regions with significant shares of employment in manufacturing. Michigan, in particular, was hammered. Regional economies in Detroit, Grand Rapids, and Flint lost about one out of every four total jobs.

Forty-one metropolitan areas lost 100,000 or more jobs in April compared to a year earlier, including all but ten of the largest regional economies with employment of 500,000 or more. Of those large regional economies, the best performers in April were Dallas (-7.6%), Phoenix (-7.6%), Salt Lake City (-7.8%), and Birmingham (-7.9%). Rounding out the top ten were Houston (-8.5%), San Antonio (-8.7%), OKC (-8.7%) Jacksonville (-8.9%), Washington (-9.0%), and Austin (-9.1%).

From the household survey:

In April, unemployment was 10% or higher in 337 of the 389 metropolitan areas in the country; 20% or higher in 35 metropolitan areas.

One out of every three people in the labor force were out of work in April in Kahului, Kokomo, Las Vegas, and Atlantic City.

BLS summary and tables are available here.

Categories
Politics

An Open Letter to Nashville About Property Taxes

If you follow local politics in Nashville–or just live here and pay attention to where your tax dollars go–you are no doubt familiar with the argument we have been engaged in the last few years about property taxes. Are they too low? Should they be raised? If so, by how much? Or would doing so undermine economic development that’s been fueling the city’s growing tax revenues? What about equity–would a tax increase disproportionately impact lower-income households and accelerate displacement?

Most growing cities like Nashville, especially those in states with low tax burdens, are having some form of this debate. COVID-19 has changed the conversation a bit, but the fundamental issues underlying the debate are still there. For the uninitiated, here’s a primer at WPLN with links at the bottom to related articles for background on the situation here, or check out this recent story in the Tennessean if it’s not behind the paywall. Or, head over to CM Mendes’s website and search for posts on the budget or property taxes and you’ll find more details available there.

Many, many details.

To illustrate, there’s a slide you can count on being in nearly every budget presentation to Metro Council or the public, showing Nashville’s relatively low property tax rate compared to other large cities in Tennessee. Here it is from this year, with the proposed rate for next fiscal year:

Last year:

The year before:

The year before that:

You get the picture. Even before the historically low rate of $3.15 went into effect it was still lower than other large cities in the state.

But does that mean it’s “too low?” Well, that depends on your budgeting philosophy and general outlook on the role of government–something I’m not going to get into here because somebody will inevitably fire back with something along the lines of “government should budget like a household” and I just can’t do it right now. We can have that ridiculous argument when we’re not all wearing protective masks anymore, if you’d like.

What I do want to point out, though, is how limited a view that slide from the budget presentation provides. It’s not inaccurate or misleading; it’s just incomplete, at least in terms of how most people think about taxes. Here’s another way to look at it, with some more context:

At the median, households in Davidson County paid $1,861 in real estate taxes in 2018, third highest in the state behind households in Williamson County and Shelby County. For a household in an owner-occupied unit earning median income of $60,856, that’s 3.1% of income going to real estate taxes, second highest in the state behind Shelby County.

So, just because the tax rate in Nashville is low compared to other places doesn’t mean that the tax burden on residents, and particularly middle to lower income residents, is comparatively low here as well. In fact, they are already facing a combined state and local sales tax rate that ranks among the highest in the country.

And that brings me back to the slide in the budget presentation: Why look at only cities in Tennessee? After all, if we are going to entertain the notion that raising the tax rate could hurt our competitiveness in economic development, we should consider where we rank nationally, with particular attention paid to our competitors for jobs and private investment. We can’t get a complete accounting of Nashville’s competitive standing here without information on taxes paid by households and commercial entities, but this is a start. Maybe the Chamber or another local business association can fill in the gaps during the budget debate at Metro Council.

At the median, real estate taxes paid by households in Nashville are low compared to most other large counties. In 2018, only 20 of the 140 counties with populations of 500,000 or more had lower median real estate taxes paid compared to Nashville. Here’s the list:

Nashville’s relatively low property taxes stand out even more among the nation’s fastest-growing local economies. Forty-four large counties have averaged at least three percent real (inflation adjusted) GDP growth on an annual basis since 2010. Of those counties, Davidson ranks fifth according to the lowest median real estate taxes paid by households, behind Maricopa (Phoenix), Utah (Provo), Oklahoma (OKC), and Tulsa. There were only two other counties with median real estate taxes paid of less than $2,000 in 2018, in suburban areas of Atlanta and Denver.

You would have to ask somebody at the Chamber which regions Nashville competes with most often for projects, but I assume Atlanta and Denver are on that list. Oklahoma City may be as well, but its economic drivers are much different than Nashville’s core industries. You also may have noticed in the table above other regional players in Nashville’s orbit, including the Jeffersons (Birmingham, Louisville), Greenville, and, to a lesser extent, Guilford (Greensboro).

So, if you can fill out this picture with taxes paid by commercial entities and the story doesn’t change much, which I’m guessing is the case, then there’s an argument to be made that raising property taxes may hurt our competitive standing in the region from a cost perspective. However, I don’t believe we are anywhere close to a tax rate that would significantly change Nashville’s most important economic development asset: human capital attraction and retention. Median real estate taxes paid here are considerably lower than places like Charlotte (-21%), Raleigh (-34%), Dallas (-47%), and Austin (-70%).

Yes, that’s correct, 70%. I couldn’t believe it either.

As you watch and hopefully participate in the budget debate over the next few weeks, decide what sort of local government you think we should have in Nashville, even during a crisis. We can do better than clickbait rankings and talking points from special interests. Metro Council is in a tough spot, largely of our own making some would say, but that’s way too convenient and, at times, self-serving for the people pointing fingers. I can’t claim to be completely objective–or above reproach, if you prefer–here given my time at Metro, but I think it’s more than fair to say that our debates about the “right” level of taxation have been lacking in some crucial perspective.

City budgeting is not like a household or a business, and while we’re at it, next time you hear somebody claim that renters don’t pay property taxes please do yourself a favor and just turn around and walk away. Trust me, it’s not worth it.

The “right” level of taxation can only be determined by the community’s willingness to fund what we believe should be the city’s priorities and that will only happen when we are ready to have an honest, inclusive, and data-driven conversation about the pros and cons of doing things like raising the tax rate–and admitting publicly what we know, what we don’t know, and what we probably can’t know about the consequences.

Otherwise, we’re left with the budget slide, the loudest voices in the echo chamber, and an incomplete picture. Nashville deserves better.

Categories
Migration

Is Cary Still C-A-R-Y? Out-of-State Movers to Wake County, 1993-2018

Growing up in Raleigh, there was a joke about the nearby suburb of Cary standing for Containment Area for Relocated Yankees. As the son of an IBMer relocated from New York in the 1980s, I heard that joke a lot. And it wasn’t limited to Cary, or the North.

Anecdotally, “Northerners” were to blame for most of the changes that occurred in Wake County that people didn’t like, even if the objects of their ire had Florida plates.

I have written about migration in Nashville, Austin, and California, but I have neglected my hometown. And I missed a milestone last year: Wake County surpassed Mecklenburg County as the most populated county in the state, thanks in large part to migration from out of state.

So, here’s what we know about out-of-state transplants to Wake County based on my analysis of migration data from the IRS for 1993-2018:

  • Historically, Wake County has averaged about 28,000 new residents per year from other states, but that number has increased to nearly 35,000 in recent years.
  • For every 100 people who move to Wake County from another county in North Carolina, about 140 people move there from another state, on average.
  • The largest share of new residents in Wake County from out of state come from New York, but it’s only about 12% of the total. Florida is not far behind at ten percent.
  • The county sending the greatest number of people to Wake County is not in New York or Florida. It’s Fairfax County, Virginia.

Now, to be clear, some of those Floridians could be New Yorkers by way of the Sunshine State–retirees with buyer’s remorse, perhaps–as there is no way to track multiple moves for a given household in the IRS data.

But for now, New York is still in the lead as the top-ranking state for out-of-state migration to Wake County.

Source: IRS
Source: IRS

Note: Data is generated from tax records and therefore includes only households filing taxes and is not representative of the entire migrant population. Exemptions are used to estimate number of people.

Categories
Economic Development

In Defense of Economic Development

Never let a crisis go to waste, apparently, when it comes to taking potshots at economic developers:

“One silver lining to our COVID-19 response is a forced re-evaluation of the value of our economic development dollars and the organizations they support.”

Michael Hicks, Time to rethink economic development spending

Count me in support of clear-eyed evaluation and improvement–we could all do with less of this nonsense for example–but a silver lining?

Before we indict an entire profession, let’s maybe back up a bit and start by examining its purpose: What is economic development?

I am approaching twenty years in this field and it’s a question I never get tired of debating. When I was teaching at UT-Austin I would open every semester with it, and it’s the icebreaker I use for most workshops, board retreats, community meetings, and other engagements for clients. Pro tip: Watch the clock when you go all philosophical with an icebreaker. People have strong feelings and like to hear themselves talk engage, especially if you have multiple self-anointed experts consultants in the room.

Economists have been arguing about it for a few centuries now, but it’s one of those rare questions that can anchor a colloquium, a happy hour at an IEDC conference, and a family argument during the holidays in equal measure. Most people, like Dr. Hicks, seem to have strong feelings about what economic development means and what we can, or should, do to influence it. Or whether we have any influence over it at all.

For practitioners, I think the debate is partially fueled by the fact that we lack a canon. That’s not a dig at certification. It’s just the reality that most economic developers I know entered the field by accident, really. Very few major in economic development in college (if you can find it), get an entry-level job at a city or a chamber of commerce, earn their CEcD designation, and away they go. Most of us back into the economic development field from a different career path, such as real estate, politics, local banking, or marketing. Maybe you served on the board of an economic development organization and were asked to step in temporarily during a staff vacancy and then never left. That’s not uncommon.

For me, it was a detour in the form of a cross-country adventure on the way to what I thought would be a career in research or academia. I moved from North Carolina to California after college for a one-year fellowship in a county economic development office, fully–okay, mostly–intending to return to UNC-Chapel Hill for a PhD. But I enjoyed it so much that one year turned into two years, a PhD in economics turned into a master’s in public affairs, and here I am, twenty years later.

Take a poll at your next economic development conference and you’ll see what I mean. Extra credit: See how many consultants you can get to admit that they still intend to get that PhD, someday. Start with the ones who list “coursework toward a PhD” on their bios–they are easy targets.

I can tell you exactly when my fate was sealed, though I didn’t know it at the time of course. In college, I was enamored with Marxist development theory and the historical figures who had argued about it most forcefully–riding the long wave with your everyday household names like Kondratiev, Trotsky, Mandel. To be clear, I was not the guy in the Che t-shirt annoying you in your econ class. That guy annoyed me too. I was a double-major in economics and history, writing about Faulkner’s struggle with the “duality of the Southern Thing,” as Patterson Hood would put it. I got interested in Russian literature in high school–have I mentioned yet I didn’t date much?–so when it was time to pick a focus for my econ degree, Marxism seemed like an interesting counterpart. Also, the math was easier.

But then I read Development as Freedom by Nobel Prize-winning economist Amartya Sen while I was studying under the wing of Sandy Darity and it shifted my attention from theory to the applied world. Sen’s compelling arguments for seeing economic development through the lens of human capital and outcomes measured in political participation, empowerment, and quality of life appealed to my sensibilities. I also admired his points about the interdisciplinary nature of true, lasting economic development, emphasizing that no single metric could tell a complete story about the state of an economy. No silver bullets, in research or in practice.

Sen wasn’t the first to make the argument, but for whatever reason that book resonated with me more than others, presenting a clear, accessible rationale for economic development with a moral compass. It made the connection to public service for me, which, I know now, is why I was drawn to development economics in the first place. Even after all these years, Development as Freedom is still my favorite academic treatment of modern economic development.

At the risk of speaking on behalf of a very large group of professionals, I also think it’s what binds us together. We don’t have a canon and we come to the field through different gates. But for the local economic developers I know it’s public service that keeps them in it, whether or not they want to admit it or call it that. I’ve heard a cynical jab at economic developers, saying we go into the field because we can’t hack it in the business world. I’m sure that bothers some people, but it shouldn’t. Economic developers I know have the experience and the skills to excel in the for-profit world, but they choose economic development because it offers something most private sector jobs can’t: an opportunity to focus exclusively on a bottom line that is measured in community improvements.

Do we need to continue advocating for smarter decisions about economic development incentives, or at the very least a cost-benefit analysis before a decision is made? You bet.

Are economic developers a bit melodramatic at times? No doubt.

“You’re either growing, or you’re Detroit.”

Source: At least one speaker at every economic development conference

Is there a lot more work to do over the next twenty years to justify public investment in “groups who add nothing to the national economy,” as Dr. Hicks put it? If you agree that economic development, by virtue of being funded by taxpayer money in most cases, is a public intervention into the market and therefore should target a market failure and have clear public benefits, then we have to confront where we are falling short, especially when it comes to achieving outcomes for existing residents.

To illustrate, consider the anemic growth in median household income in many of the fastest growing county economies over the last twenty years. Of the 250 largest counties ranked by population, here are the top twenty ranked by gross domestic product (GDP) growth:

Source: BEA (GDP), Census (MHI)

Austin’s economy–economic development’s sweetheart–has more than doubled in value since 2000 while median household income has increased by only two points, after adjusting for inflation. In more than half of those counties real incomes at the median have actually declined.

Same thing here except we’ll use jobs, the preferred metric for most state and local economic development organizations, instead of GDP:

Source: BEA (Emp), Census (MHI)

While my economic development friends in Texas might be proud of the clean sweep of the top five, it’s largely the same story. Further, very few fast-growing counties have closed earnings gaps, fueling displacement in communities with increasing housing costs. For example, average earnings for Black workers in Travis County (Austin) were 60% of White earnings in 2000. By 2019, the gap had only closed by three points. In Nashville, where I live now, that gap has widened by five points.

Increasingly, economic developers are shifting the conversation from the traditional focus on short-term measures–jobs, capital investment, tax base–to longer-term considerations of sustainability, equity, and human capital. Entrepreneurship, too. But the politicians and board members they report to will have to embrace a new way of thinking as well, or we will continue to provide fodder for critics of the field.

Many economic developers across the country are working tirelessly right now on behalf of local businesses and workers to figure out a way forward when we can safely reopen for business.

It’s wrong to denigrate them, especially now.