D’Alessandro for Democrats; a chance for a new voice
September 6, 2010
Article Courtesy of: The Boston Globe
IN THE Massachusetts congressional delegation, Stephen Lynch stands out for his lone-wolf stances. He voted against bailing out the financial system, in favor of the Iraq war, and, from vote to vote, was on both sides of the health care debate. In a delegation that prides itself on unity, he often goes his own way. In Boston, where he is one of two representatives to Congress, he has chilly relations with City Hall. In Washington, where most other Massachusetts House members either occupy leadership positions or exert strong pull with the speaker, he operates outside of his party’s leadership. He is a member of Barney Frank’s Financial Services Committee and also serves on the Oversight and Government Reform Committee, from which he chairs the subcommittee overseeing the District of Columbia. For his Ninth District constituents, it’s a far cry from the power and influence wielded by his predecessor, Joe Moakley.
In his re-election campaign, Lynch touts his independence, saying it means that leaders like Nancy Pelosi “don’t take me for granted.’’ Lynch’s challenger, Mac D’Alessandro, a public-interest attorney and union activist, has focused on Lynch’s votes — especially on health care. But an equally important question is whether Lynch’s approach to his duties is paying off for his district. Sometimes, lone-wolf stances can be admirable. But after nine years in Congress, there’s little evidence that Lynch’s independent path has led to much more than a string of frayed relationships. There have been times when constituents cheered Lynch’s willingness to buck the tide; but on other occasions, those same constituents were left scratching their heads.
To his credit, Lynch has been a strong advocate for causes that are important to voters in his district, such as veterans’ benefits and the concerns of organized labor, except on health care. He’s also taken his position on Iraq seriously, visiting the country many times and schooling himself on national security. But there is no doubt that this district was better served in the past by a congressman who sought to gain national clout and deliver for his constituents, and there’s no reason why it can’t again.
D’Alessandro has a ground-level perspective on the district. A graduate of Boston College Law School, he dedicated himself to community activism, first though Greater Boston Legal Services, where he rose to legislative director and lobbied Beacon Hill for job-training programs, and more recently as political director of the Massachusetts Service Employees’ International Union. Clearly, SEIU’s anger at Lynch over health care motivated D’Alessandro’s challenge. But his quarrel with Lynch is also about style and energy: He argues that the district needs a more resourceful advocate, a representative who defines his priorities clearly and sets out to produce measurable returns.
On health care, D’Alessandro faults Lynch as much for failure of leadership as for his unyielding refusal to support the final reform package, despite urgent entreaties from Pelosi, Vicki Kennedy, and his Massachusetts congressional colleagues. From the start of the health care debate, while other representatives were striving to put together a bill that met the complexities of the challenge, Lynch held himself out as a critic. He was the only Massachusetts House member who refused to commit to a public option. But then he voted for a bill that had a public option, and whose near-universal coverage was funded by a surcharge on the wealthiest Americans. When that bill had to be changed to accommodate the Senate, he flipped again, opposing it on the grounds both that it lacked the cost-saving mechanism of a public option and that it was funded by a tax on expensive health plans.
That last vote especially rankled his fellow Democrats, who saw it as a once-in-decades chance to achieve near-universal coverage. The bill also included $11 billion for neighborhood health clinics, of which there are 14 in or near his district.
While Lynch’s votes are individually defensible, collectively they provide a mirror into his politics. When others saw opportunity for historic reforms, he offered skepticism. When others stepped forward to shape legislation, he held back. D’Alessandro would be quite different: More cautious about military interventions, including Afghanistan; more willing to do the necessary work of reforming the economy, even when it involves unpopular fixes like bailing out the banking and housing industries; more eager to be a leader both in extending health coverage and in bringing research dollars to Massachusetts.
Coming into Congress as a freshman, D’Alessandro would be at square one, but ironically would have more favor with his party’s leaders than Lynch. For nine years, Lynch has honorably followed his own path. D’Alessandro is an articulate advocate for working people who deserves a chance to show what he, too, can do. 
A Privileged World Begins to Give Up Its Secrets
About 10 years ago, when I was working in Frankfurt, Germany’s banking capital, I was invited to the top floor of the glittering skyscraper headquarters of one of the country’s most venerable banks. There, I was treated to something that, it was made clear to me, few eyes usually had the privilege of seeing — a tour of its private art collection, an impressive spattering of modern and ancient European and American masters.
The point was, those pictures reflected the bank’s wealth. And the fact the secretive treasures were kept forever behind closed doors for the enjoyment of the privileged few reflected its power.
If that seems like a different era, it is. Banks around the world are reeling, as we know; the European banks’ losses are among the most ruinous. And their prestige and putative secrecy and independence received a further blow last week, when the government of Switzerland agreed to release to the United States the names of 4,450 American citizens suspected of using secret Swiss accounts at UBS, the country’s biggest bank, for tax evasion.
The victory for the United States was made possible by evidence from an American-born whistleblower — code name Tarantula — a disgruntled former UBS employee from the Boston area who was working in Switzerland. Until he left the bank, he was part of a UBS team that made frequent trips across the Atlantic to aggressively market investment strategies to rich Americans to elude the scrutiny of the Internal Revenue Service.
But it would be wrong to see the settlement as a one-off strike against just one bank by a single government. It is in fact the result of a broader political moment created in the wake of the global financial crisis when disenchantment with financial globalization is causing governments to repatriate wealth back to within national borders, especially at a time when countries badly need to balance their books.
Just a few years ago, in the pre-crisis era, the shadowy workings of cross-border banking — and what may or may not have been happening there — were generally overlooked.
And, while some of the alleged tax evaders may be the war criminals, gunrunners or despots usually linked with secret foreign bank accounts, the target of the latest efforts are much more likely to include rich businessmen and high-net-worth individuals. “There is a political movement because of the financial debacle,” said one veteran European banker who insisted on speaking anonymously because he has retired. “They are turning toward the so-called rich and want to hurt them.”
Of course, the United States looks at it a bit differently. Prosecutors have contended that in the UBS case alone, wealthy Americans hid billions of dollars, thereby evading taxes of hundreds of millions of dollars a year.
While Switzerland is arguably the largest off-shore center, it is not the only one. Supporters of its banking secrecy code point out that the code is wrapped up in the country’s claims to neutrality and being above the global political fray. But secrecy has also turned out to be immensely lucrative; according to some estimates one-quarter of the world’s offshore money now resides in Switzerland.
Other countries or territories have copied the model — Liechtenstein, Bermuda, the Cayman Islands, Macao and Hong Kong among them. And while Switzerland is probably seen as the most conservative, blue chip, upstanding offshore haven, the others are measured by a sliding scale of probity and association with dubious business practices, if not crime. The European banker said that in the early 1990s, following the fall of the Soviet Union, he worked in Switzerland where he said agents of Russian expats would show up with “boxes of cash” from Cyprus, a popular haven for capital fleeing the Russian authorities and the country’s post-collapse chaos.
The backlash against this illicit world has not been confined to the United States; it is apparent across Europe, too.
France will become of one of the first European countries to put in place a new tax treaty with Switzerland to improve transparency and access to banking information. Germany is in discussions with Liechtenstein over issues related to tax evasion by German companies and individuals. Liechtenstein has also struck a disclosure agreement with Britain, encouraging British clients of Liechtenstein banks to volunteer information to British tax authorities in return for reduced penalties. In Italy, tax officials have started an investigation into whether the estate of the late Gianni Agnelli, the former chairman of Fiat, has money hidden away in Switzerland. In Britain, the government has become particularly exercised by tax competition — the offering of low tax rates and other advantages like tax secrecy to lure capital away.
In the Swiss settlement last week, the American authorities got the information they needed after they saw an opportunity in the weakness of UBS, a bank that once enjoyed a sterling global reputation but has suffered billions of dollars in losses linked to United States subprime securities and had to be saved by a big government bailout last October. For the Swiss government, the deal lifts the immediate threat of heftier legal action and frees the bank — one of the mainstays of the Swiss economy — to concentrate on recovery.
But will anything really change? Although the United States is supposed to learn the identities of a few thousand tax evaders, those names will go first to an intermediate tax administration in Switzerland for review. The actual process of recovering the names may become lost in bureaucracy and foot-dragging.
Moreover, as The Times reported last week, smaller Swiss banks say they are confident that they can continue to profit by finding new, more elaborate ways to protect the privacy of their clients. Those banks continue to help clients hide billions of dollars through complex structures in offshore havens.
But the I.R.S. commissioner, Doug Schulman, said the agreement with UBS was a “major step forward” in the government’s efforts to pierce bank secrecy, and he warned that “wealthy Americans who have hidden their money offshore will find themselves in a jam.”
In the new political climate, expect to see a few rich Americans shifting uncomfortably.
Apartments, museum lead race for Greenway site
BRA says proposals most consistent with its plans for parcel
A 78-unit apartment building and a museum focused on local history became the front-runners yesterday in a competition to develop a sliver of land that would become the cornerstone of a public market district along the Rose Fitzgerald Kennedy Greenway.
The proposals, both of which call for a food market on the ground floor, were singled out yesterday by the Boston Redevelopment Authority as the most consistent with its plans for the property, located next to the weekend gathering of Haymarket vendors on Blackstone Street.
The news came a day after city and state officials raised financial concerns about the only two proposals submitted for a market in an adjacent building known as the parcel 7 garage. City officials want to use that building and the land discussed yesterday, known as parcel 9, to create an expansive public area for local growers for food sellers.
One of the favored proposals for parcel 9 was submitted by Boston Museum, which wants to construct a glass and terra-cotta building with four floors of interactive exhibits above the market. The other was submitted by Eastat Realty Capital, of Boston, which is proposing to build apartments and a parking garage over the market.
The BRA offered support for the proposals in a letter to the Massachusetts Turnpike Authority, which owns the property and is collaborating with city officials to select a developer. The authority will make the final decision. The district the agencies are trying to create what would house the first public market in Boston since the 1950s and would resemble public food markets operating in most major cities across the United States.
Parcel 9, a triangular plot used for storage by the Haymarket vendors, attracted four proposals after the Turnpike Authority began soliciting bids in February. City officials did not make a clear recommendation in yesterday’s letter, but indicated the museum proposal is consistent with their economic development goals, and that the apartment building complies with planning documents that call for housing on the property.
“We want a viable project that can happen quickly,’’ said Peter Gori, a senior manager at the BRA. “Realistically, we think we could see this come together within the next couple of years.’’
The BRA’s letter did express concern about both Eastat’s apartment plan and the museum proposal. It stated the museum’s executives face a long struggle to raise $120 million to build the facility and must address traffic issues.
Frank Keefe, chief executive of the nonprofit organization seeking to build the museum, said both issues can be resolved. “Our project will animate the Greenway, and it’s the best museum site in the country,’’ he said.
The BRA said Eastat’s apartment plan could be problematic, due to noise from the market on the first floor. Chris Tsouros, a lawyer for the developer, said the company is seeking to address that with the building’s design and by putting the garage between the market and the residences. “We recognized that characteristic from the beginning and built it into our plans for the site,’’ he said.
Two other proposals for parcel 9, submitted by the DeNormandie Cos., of Boston, and Gutierrez Co., of Burlington, were reviewed in the BRA’s letter, but were not mentioned in a summary discussing the authority’s preferences.
DeNormandie, which owns buildings facing the site on Blackstone Street, proposed art galleries or offices above a market and a restaurant. Philip DeNormandie said he had not seen the BRA’s letter last night and was not prepared to comment.
Gutierrez proposed building offices above a market, retail store, and restaurant. A managing director of the company, Bill Caulder, said the company considered residences but concluded the parcel is too small to include amenities such as a gym and a business center, making it difficult to compete with surrounding projects, such as the nearby Avenir apartment complex.
Casey Ross can be reached at cross@globe.com.
With 2 acquisitions, AOL looks to tap local ad market
Boston’s Going Inc. Web firm bought
By Hiawatha Bray, Globe Staff | June 12, 2009
AOL, the troubled Internet company that is being spun off by parent company Time Warner Inc., is buying itself a parting gift. It is acquiring a pair of start-ups, including one in Boston, that run websites featuring neighborhood news.
Going Inc. of Boston, founded in 2006, offers information on local parties and entertainment events. The company runs websites targeting 30 US cities, including Boston, Chicago, Miami, and New York. Patch Media Corp., based in New York, publishes community news online, covering five towns in New Jersey. Patch was launched in 2007 and funded by an investment company owned by AOL chief executive Tim Armstrong. Financial details of the transactions were not released, but the Associated Press reported AOL paid less than $10 million each for the two privately held companies.
“By joining with AOL, we have the opportunity to greatly expand the reach of our platform to more cities both in the US and around the world,” said Evan Schumacherm, Going’s chief executive.
“They want the local advertising dollars,” said Carl Howe, Internet analyst at Yankee Group in Boston. Howe said that small and midsize businesses throughout America spend vast sums on ads, mostly with local newspapers and radio and TV stations. Howe said newspapers alone took in $29 billion in local advertising in 2008, and acquiring Going and Patch will help AOL tap this market. “It lets them approach a different set of customers than the national advertisers,” Howe said.
Last month, Time Warner said it intended to spin off AOL, nine years after the two companies merged in a deal valued at $166 billion. At the time, most users connected to the Internet over dial-up telephone lines, and AOL was the dominant US provider of dial-up Internet service. But over time, millions of customers abandoned AOL and switched to high-speed cable and DSL Internet service. In addition, the company’s Internet advertising business has been unable to gain ground on rivals, including industry leader Google Inc.
Hiawatha Bray can be reached at bray@globe.com.
BlackRock’s Fink engineers biggest deal of career
BOSTON (Reuters) – In the rarefied circles of institutional investors and government officials asking for investment aid, Laurence Fink is known as the go-to man.
Now he may become that to average savers around the world.
As chief executive of BlackRock Inc (BLK.N: Quote, Profile, Research, Stock Buzz), already the largest publicly traded U.S. asset manager, Fink this week engineered a blockbuster deal to buy Barclays Plc’s investment unit BGI. Together they will become world’s biggest money manager with roughly $2.8 trillion of assets.
To analysts and investors the move is typical Fink — a carefully considered deal with a hefty price tag designed to add critical mass, access new products and bring in the retail clients BlackRock has long wanted to attract.
And one the California native, known for keeping top talent happy, is expected to execute on time.
“There is potential there for BlackRock to pull this one off,” said Michael Herbst, a mutual fund industry analyst at research firm Morningstar Inc.
Since 1988 when Fink co-founded BlackRock as a one-room fixed income shop, he has proven his hand at orchestrating a string of acquisitions, including a $8.6 billion deal to buy Merrill Lynch Investment Managers in 2006.
Before that he bought Boston-based State Street Research & Management and after that purchased the funds-of-funds business from Quellos Group.
Fink, who has deep roots in the mortgage markets, has worked hard to diversify BlackRock’s capabilities and make it more than a bond manager locked in a deep rivalry with West Coast competitor PIMCO.
And when Washington needs a trusted player on Wall Street to help calm markets during the financial crisis, BlackRock often gets a call, insiders at the company have said.
The company applied to become one of the Treasury Department’s hand-picked managers assigned to buy toxic assets from banks as part of its Public-Private Investment Program.
The lanky executive is not well-recognized by the public and can walk through midtown Manhattan without creating a stir. Unlike other bank chief executives, Fink is no danger of being pelted with expletives, largely because his company rode out the financial crisis with relative ease.
Since January, BlackRock has returned 36.12 percent, ranking among the best performers in the industry.
Two years ago Fink was in the running to take the helm of Merrill Lynch but was not offered the job after he began asking to tear into the company’s financial documents more deeply, people familiar with the search said.
Merrill Lynch was acquired by Bank of America last year and John Thain, who beat Fink to the position, is out of a job.
Fink apologized to shareholders for any unrest the talk of his leaving might have caused and has been fully devoted to BlackRock ever since.
Famous for the long hours he keeps, Fink is also known for navigating turbulent markets, wooing and keeping top talent, and speaking plainly about all types of topics, according to people who work with him and know him.
The 56 year old is also known to be both diplomatic and plain-spoken. He helped persuade embattled former New York Stock Exchange Chairman Dick Grasso to step down and helped find John Thain to take the top job.
Fink, who traditionally wears a tie to work even as he encourages other BlackRock employees to sport more casual wear, is usually at his midtown Manhattan office by 6 a.m.
He sticks to a grueling but predictable schedule that includes lunch at a favorite Italian restaurant near the office and lots of overseas travel.
Over the years, Fink’s fascination with geology has become well-known on Wall Street, where he and his partners stuck to the rock theme in naming their company, as well as products like the Obsidian and Galaxite hedge funds.
Even in his free time, rocks aren’t far from Fink’s mind. People who know him say the avid outdoorsman enjoys hiking and fly-fishing in the mountainous state of Colorado.
(Editing by Steve Orlofsky)
Has economic twilight fallen on nation’s Sun Belt?
ORLANDO, Fla. – We first heard the term decades ago: The “Sun Belt” was just starting a run of phenomenal growth — and no wonder. It conjured a sunny state of mind as well as a balmy place on the map.
Everybody, it seemed, wanted a spot in the sun.
Industries such as aerospace, defense and oil set up shop across America’s southernmost tier, capitalizing on the low involvement of labor unions and the proximity of military bases that paid handsomely, and reliably, for their products and services.
Later, San Jose, Calif., and Austin, Texas, developed into high-tech nerve centers; Houston grew into a hub for the oil industry; Nashville became a mecca for music recording and production; Charlotte, N.C., transformed itself into a center for low-cost banking and finance; and then there were the new Dixie Detroits, places like Canton, Miss., Georgetown, Ky., and Spartanburg, S.C., that began rolling out Titans, Camrys and BMWs.
Meanwhile, other warm-weather havens offered their own variants of the Sun Belt dream — as Fountains of Youth for 60-and-up duffers, as Magic Kingdoms for fun-seekers, as Cape Canaverals for middle-aged northerners looking to launch their second acts.
Air conditioning, bug spray and drainage canals that transformed marshes into golf-course subdivisions — these innovations, plus the availability of flat, low-taxed land attracted migrants from Brooklyn and Cleveland, Havana and Mexico City to locales once dismissed as too hot, too swampy, too dry, too backwater-ish.
“We Give Years to Your Life and Life to Your Years!” That was the sort of slogan you’d hear from developers pitching the promise that a new start in the Sun Belt might even, in the best of circumstances, extend one’s time on Earth.
In this way, for a generation or more, the Sun Belt thrived like no other region in America — a growth so steady it felt as though the boom would never end. But now it has, replaced by a bust that has left some swaths of the region suffering as severely as anywhere in the current recession.
What brought the dark clouds to the Sun Belt, and are they here to stay?
Interviews with economists and demographers across the region, and data from The Associated Press Economic Stress Index, a month-by-month analysis of foreclosure, bankruptcy and unemployment rates in more than 3,000 U.S. counties, suggest that the answers are not all encouraging.
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Some cities — Las Vegas, Phoenix, Fort Myers are good examples — hitched their floats to housing bubbles and got caught up in development that depended largely on, well, development itself, rather than sustainable, scalable, productive industry, economic analysts say.
It’s in these places where the economic meltdown “will likely find its fullest bloom,” Richard Florida, the urbanist and author, wrote recently in an Atlantic Monthly article titled “How the Crash Will Reshape America.”
AP Stress Index figures, which calculate the economic impact of the recession on a scale of 1 to 100, illustrate how the downturn has played out in some of these communities:
_In Maricopa County, home to Phoenix, the Stress Index more than doubled from 5.12 at the beginning of the recession in December 2007 to 12.67 in March 2009, worsened by a foreclosure rate that nearly tripled.
_Mounting foreclosures in Las Vegas’ Clark County drove up its Stress Index score from 10.5 at the start of the recession to 19.3 in March 2009.
_In Lee County, home to Fort Myers, unemployment has doubled and foreclosures have soared 75 percent since the recession began, lifting its Stress Index from 10.5 to 19.98.
The boom in parts of the Sun Belt was, Florida wrote in the Atlantic, a “giant Ponzi scheme” — a growth machine that banked on wishful thinking, on the hope that an unending stream of new arrivals would forever inject their money into construction and real estate.
But as often is the case with such schemes, there comes a day when the engine sputters, gasps, and conks out. A day when the faithful stop turning up.
In the Sun Belt’s newer, shallow-rooted communities, the roadkill is most evident: Where once there were “boomburbs,” there now stand “ghostdivisions.” Where property-flipping was once almost a middle-class sport, joblessness and “For Sale by Owner” signs reign.
The fallout is traceable in other ways, too. Nevada — the only state with a lower proportion of native residents than Florida — has seen net migration plunge 61 percent in two years; Arizona, 55 percent.
Were it not for immigrants, many of them from Latin America, and for fertility, the Sunshine State would actually have lost population last year — an “astounding development in the Florida experience,” says Bill Frey, a senior fellow and demographer at the Brookings Institution in Washington, D.C.
He said the end of steady movement of people into the Sun Belt is part of a broader trend of curtailed migration during this downturn. “The merry-go-round has stopped, in terms of people moving from place to place.”
Does this mean we’ve witnessed the Rise and Fall of the Sun Belt? Will those who swept into these Miracle-Gro states get swept out just as quickly, leaving behind a sprawl of hollow houses, cul-de-sac moonscapes and mosquito-infested pools — the stucco ghettos of the 21st century?
Or will the latest downturn merely force the Sun Belt to reinvent itself again?
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The housing bubble in many places revealed an obsolescent model of economic life, in which cheap real estate encouraged low-density sprawl and created a work force “stuck in place, anchored by houses that cannot be profitably sold,” Florida wrote in his March article.
These places, he says, include older, factory towns across the northern Rust Belt but also countless communities in the Sun Belt whose prosperity was built on “fictitious wealth.”
What to do? Scrap policies that encourage homebuying, he suggests, and give incentives to more mobile renters who can go where the jobs are.
In the digital age, he says, industries will likely cluster in “mega-regions” of multiple cities and their surrounding suburban rings (e.g., the Boston-New York-Washington corridor). These areas will surge, lifted by the brainpower of educated professionals and creative thinkers that turn out “products and services faster than talented people in other places can.”
In short: Those that can draw talented, young people with high-quality, higher education will reap the spoils.
There is some evidence to suggest an imbalance in American educational achievement across regions. According to research by two Harvard economists, Edward Glaeser and Christopher Berry, educational attainment is no longer as evenly spread across America as it was in the ’70s.
Places such as San Francisco, Boston and Seattle now turn out two to three times the college graduates of, say, Akron or Buffalo. When examining postgraduate achievement, the researchers found even greater disparities.
If locales that boast premium universities will be able to more quickly pick themselves off the mat, a question arises. In the Sun Belt’s “sand cities,” their expansion now halted, where will the tax money come from to pay for college upgrades?
Parts of Arizona, Nevada and the Los Angeles exurb of Riverside overbuilt and overstretched, said Anthony Sanders, a professor of finance and economics at Arizona State University.
Like Looney Toons characters who, suspended in mid-air, look down to behold they’ve run off a cliff, officials are scrambling to reverse course — either by scrapping government services they’d promised or, at the very least, by hiking taxes to pay for services created in expectation of bigger suburbs, exurbs.
Phoenix is in this fix. Shocked by a 33 percent plunge in home values between October 2007 and October 2008 alone, the city is running a $200 million budget deficit, a shortfall that’s only expected to grow. (It has petitioned the federal government for funds.)
California has an even wider hole in its battered canoe.
That state “went on a spending spree that was incredible,” said Sanders. Now, at a time when many resident retirees are in no mood, or shape, for tax increases, “they’re having to raise taxes or cut back services, both of which are making moving to California a lot less desirable than it has been in previous decades.”
Other Sun Belt states are making similar “mistakes,” Sanders said, adding: “Unless we lower the tax burden, making it simpler for businesses to do more operations, and freeing up the ability to attract workers, the economy here is not going to come back.”
The challenges don’t end there.
Even before the Crash of ’08, the Sun Belt was being buffeted by outmigration of factory jobs abroad. In the Carolinas, for example, industries that linked up the economy, society and culture for more than a century — furniture making, tobacco and textiles — had been gutted by a decade of decline.
And although the overall expansion of the Sun Belt’s economy has been dramatic, the distribution of the region’s prosperity has been uneven; of the 25 metropolitan areas with the lowest per capita income in 1990, 23 were in the Sun Belt.
That has to change, said Warren Brown, a demographer at the University of Georgia, although he noted that the Sun Belt’s unbridled growth in the ’80s and ’90s was “unsustainable, bound to cool off,” and not just because of bursting housing or migration bubbles.
The limits of natural resources were poised to put the brakes on development in the Land of Sunny Dreams anyway, he said. Two biggies: oil and water.
“Long before we run out of land, we’ll be running out of water,” he said. “Water is a major issue right now.”
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Doomsaying pundits have played the Sun Belt dirge before.
In 1981, for example, Time magazine declared Florida, a “Paradise Lost.” The state then embarked on an epic boom, in which the Miami-Fort Lauderdale-West Palm Beach corridor ballooned into the seventh-largest metro area in America.
Granted, today’s news from the Sunshine State is hardly cheery: It ranks near the top in foreclosures and near the bottom in high-school graduation rates. There’s a water crisis, an insurance crisis, a budget crisis.
So why do some experts caution that talk of Florida’s demise — and the Sun Belt’s — is exaggerated?
Among other things, Frey, the Brookings demographer, notes that outmigration from metro Miami actually fell last year, and in years to come “we’re going to have large numbers of immigrants in the United States who are going to help us in all kinds of ways,” he says.
Stan Smith, a professor of economics and director of the Bureau of Economic and Business Research at the University of Florida, says tourism, the “momentum” of decades of population growth, and already extensive networks of personal connections will again draw more migrants to Florida.
Frozen credit won’t last, he says. Real estate price declines — as much as 70 percent in some Sun Belt counties — will encourage buyers. And with home heating costs in the “Frost Belt” only expected to rise, Smith says, the attraction of warm weather to retiring Baby Boomers can’t be overestimated.
Florida is one of only nine states without an income tax. Couple that with the fact that its taxes on corporations and financial transactions have many exemptions, he says, and “the effects of the positive factors will continue to outweigh the negative.”
Recovery will take time, though, and few economists see any significant growth in the Sun Belt before 2010. Steve Malanga, a senior fellow at the Manhattan Institute in New York City, agrees that states that have piled up surplus housing “are not going to solve it in this budget cycle or the next budget cycle. It’s going to be with them for five, six, seven years, no doubt about it.”
And yet, to say all areas across the Sun Belt are in for long-term decline is simplistic, he says. Scanning the most recent employment maps put out by the Bureau of Labor Statistics reveals “a ‘belt’ in the middle of the country — Texas is part of it — that is doing quite well.” (The AP Stress Map backs up that finding, revealing a swath of comparatively unscathed counties starting in North Dakota, stretching through South Dakota, Nebraska and Kansas and ending in Oklahoma and Texas.)
Out of the nation’s 100 fastest-growing counties, the majority were in Texas (19), Georgia (14), North Carolina (11) or Utah (nine), according to U.S. Census figures last year. Raleigh-Cary, N.C., and Austin-Round Rock, Texas, were the nation’s fastest-growing metro areas, registering growth rates of 4.3 percent and 3.8 percent, respectively. Both high-tech centers, the two metros are also sites of major college campuses that helped cushion them.
Dallas-Fort Worth and Houston registered the biggest numerical gains, the census figures show. Phoenix and Atlanta ranked third and fourth in growth, respectively, followed by Los Angeles, despite the housing slump.
“Obviously, the best situation is a state that hasn’t had a residential meltdown, still has a low-cost advantage, and has a weather advantage,” Malanga says. High-tax states, such as California, are going to take longer to rebound.
And yet, Sun Belt states will have to offer more than tax incentives to reel in companies in the new, global economy, says Keith Schwer, executive director of the Center for Business and Economic Research at the University of Nevada.
Quality health care, quality recreation, quality education — companies and individuals consider the caliber of amenities before relocating. Cosmetic fixes don’t help, he says. “You can’t hide your warts.”
Does all of this mean the Sun Belt will have to reinvent itself to grow again?
Rethink may be a better term.
As an example, Caron St. John, director of the Spiro Institute for Entrepreneurship at Clemson University in South Carolina, says Sun Belt states now rationing funds ought to consider returning to “First Principles” — that is, channeling what little money they have toward elementary and high schools rather than higher education.
“Elementary and high school children — we can’t scar their lives because of a budget crisis. That has to be the first priority.”
The question is whether the Sun Belt will show the rest of the nation how to retool schools, save water and energy, and better plan its suburbs and exurbs in an era of less.
“By necessity, we’re already being forced to address these issues,” says Schwer, of the University of Nevada. “This crisis is an opportunity, more than anything else, to reset things, to put some balance back into our lives.”
