A False Notion of Prosperity

This post was originally posted on the Rochester Beacon website on February 17, 2020 under the title Albany's False Notion of Prosperity.

The factors that made Rochester a bustling, growing center of economic activity in the 19^th and 20^th Centuries are no longer relevant.  Founded around a river that emptied into the busy shipping lanes of the Great Lakes and connected to the Port of New York by the Erie Canal and railways, Rochester was a shining light on the western frontier in the early 19^th Century.  Its fortunes rose during the second industrial revolution as George Eastman founded Kodak, an enterprise that not only was a center of innovation but also attracted human capital.  

Our city has always occupied a middle space between urban centers like New York, Chicago and Los Angeles and rural company towns that rely on one major employer for their economic well-being.  In the last quarter century, Rochester has been treading water while manufacturers in company towns migrated their workforce to low-wage countries leaving them to the ravages of economic irrelevancy.  Some have taken matters in hand, embraced 21^st Century industry and created conditions that promote prosperity.

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At the end of every supply chain is a consumer.  We buy goods and services depending upon our whims and capacity of our wallets.  Companies competing for our dollars have moved us from cable TV to streaming video, from landline phones to mobile and from postage stamps to email.  The home cities of firms driving those changes benefit from the downstream effects of their success.  Those cities – Boston, Seattle, Palo Alto -- attract the attention of investors and the momentum of investments creates boomtowns.

It’s possible for smaller cities to become magnets for investment too. Chattanooga, TN (population 179,000) famously transformed itself from fading rustbelt casualty to tech center boomtown by investing $330 million to bring no-latency internet to citizens and businesses.  The non-profit Kauffman Center outlined three intertwined layers leading to the success of the initiative. The drive for 21^st Century relevance began with the mayor’s vision of his low-cost-of-living hometown as a magnet for technology startups.  Abandoning the usual dogma of the left and right, business and government worked together cooperatively to obtain a federal grant to fund one-third of the project.  Not satisfied with “If you build it, they will come” city government sweetened the pie with financial incentives for I.T. professionals to move to their city.  Small though it may still be, Chattanooga’s metro area population has grown 11% in the last decade. 

Charlotte, NC – once the same size as Rochester and now two and a half times its size – attracted new businesses and jobs the old-fashioned way.  Lower taxes and proactive city and state governments worked for decades to make the city what it is today.  Rochester could duplicate that success.  We have a highly qualified workforce, entrepreneurial energy and an enviable array of colleges and universities. 

So, how do we New Yorkers (and Rochesterians) ensure we get a larger slice of the pie?  

A group of local business organizations has created ROC2025.  Describing itself as a “powerful new alliance of economic development organizations,” they have declared themselves in favor of Mom and apple pie.  It’s difficult not to support any of their initiatives:  workforce development, support for existing businesses, enhancing new business attraction and so on. But, in the end, we’re just whistling past the graveyard.  The overhead of high taxes, a heavy regulatory burden and a city school system that doesn’t graduate students prepared for the real world of work is simply too much for our local economy to bear.  

A prominent feature of Governor Cuomo’s administration has been economic development programs targeted at upstate New York.  And, for good reason.  The state only shows good economic results by virtue of the overwhelming success of Wall Street.  The governor took office as the nation (and Wall Street) was climbing out of the deep hole dug by the Great Recession.  So, while he loves to tout his record of having “created” over a million jobs during his reign, it is noteworthy that the rate of job growth is below the national average.  Also noteworthy is that over 70% of those new jobs were created in the New York metropolitan area.  

The non-partisan Citizens’ Budget Commission estimates the state spent roughly $10 billion on economic development in 2018.  Nevertheless, New York leads the nation in population loss.  Business interests and the conservative Empire Center claim the high tax and abysmal regulatory environment is the culprit (a claim with which I agree).  The governor claims it’s our lousy winter weather. Whatever the reason, it’s fair to say that so-called investments by government haven’t created a booming upstate New York economy.  

Government is unduly influenced by special interests and even the best and most ethical participants are unlikely to get it right for one big reason: They don’t have their own money invested in the enterprises they endeavor to help.  As for the enterprises, those seeking money from the government would rather spend the taxpayers’ money than their own as they should or would otherwise.  

Economic prosperity is rooted in private capital invested in promising enterprises.  Rochester could create the conditions that enabled Chattanooga’s success with local leadership embracing a vision and seeing it through.  But that vision, whatever form it takes, would be undermined by a state government addicted to the notion prosperity should  and can only be enabled by central government.  

WHO WILL LEAD?

Mitt Romney has his Spartacus moment

Kirk Douglas as Spartacus

I awoke this morning to the headlines that Trump had been acquitted, Romney was the sole Republican voting for his impeachment and Kirk Douglas had died.

In Douglas’ most famous role, he plays the escaped Roman slave Spartacus.  Based on a true story, Spartacus led a slave revolution in ancient Rome.  In the film’s climax (spoiler alert!) – probably not true – the Roman General who defeats Spartacus’ army gives all the slaves the opportunity to be spared if they point out the real Spartacus.  First, one soldier and then another and then all of them stand and declare “I’m Spartacus.” They all heroically choose to die rather than give up their hero.

Yesterday, Senator Mitt Romney (R.-UT) had something of a reverse Spartacus moment.  Choosing principle over political expediency, he stood up in the Senate and voted to convict a president of his own political party.  No Republican stood with him. 

I’m something of a movie nut.  So, I was reminded of a different Kirk Douglas film (my personal favorite).  In it, Kirk plays the role of an old-fashioned cowboy resisting the march of time in the 20^th Century.  The film’s title says it all: Lonely Are the Brave. 

WHO WILL LEAD? 

It’s Official: I’m a Democrat

Everyone I know describes themselves as “fiscally conservative and socially liberal.”  And, yet, neither political party ever gives us a candidate who fits that description.  I asked a veteran of political campaigns why.  She said, “there aren’t enough of you.”  And, she’s right.  Suburban swing voters like me constitute about 20% of the electorate.  

When I moved to Deep Blue New York, I registered as a Republican reasoning that would be closest to the center.  Along the way, I began voting for Libertarian candidates (fiscally conservative; socially liberal). Many people consider a third-party vote to be a wasted vote.  But, in a state where all the electoral votes always go to one party, all votes are wasted votes.  I first expressed my frustration in a guest column last year (Stranger in a Blue Land: The Plight of a Political Moderate).

What knocked me out of this rut was Michael Bloomberg’s announcement that he’s running for President.  A politically moderate party switcher like me, I wonder if he could make a difference in deadlocked Washington.  And, in the primaries, my vote matters. 

Like many Americans, I was shocked at the 2016 election results.  Initially, I believed that establishment Republicans would keep Trump in check.  But those who spoke up were punished at the ballot box.  And, so, those who remain support a morally reprehensible, irresponsible president whose destructive behavior will echo for years or, perhaps, decades after he leaves office.  

I could remain in the Republican Party if it was true to its values.  But the days of fiscally responsible, small government Republicans are over.  The 2017 tax bill is great for the upper and middle classes.  But it also leaves us with trillion-dollar annual deficits. 

Mike Bloomberg

There’s some scary stuff on the other side of the aisle too.  The party of “free stuff” would eliminate capitalist prosperity in the name of social justice.  The Green New Deal would reverse a century of economic progress. And, social democracy is merely the act of taking money from those who have earned it honestly and giving it to those who haven’t. 

Enter Michael Bloomberg.  His views on gun ownership and climate change mirror my own. Will all his ideas be enacted or, if enacted work?  And, where will the money for all these great ideas come from? I can’t say for sure.  While it’s easy for me to point to the flaws in proposals from Sanders and Warren, it’s difficult for me to imagine that a self-made billionaire might not understand business and economics.

And, so, I am leaving the party of no ideas for the party of bad ideas. I confess it’s not very comfortable over here.  But, for now at least, I think it’s the right thing to do. 

WHO WILL LEAD?