Sunday, December 23, 2018

Welcome to Flyover Country

I think this article explains more about the region of America often defined as "flyover country."  And in reality there are amazing cities that over time have decayed due to larger economic forces that led to the inevitable decline and collapse in some cases of large swaths of America.

There is no Magic 8 Ball that can enable anyone to predict the way policies and in turn market forces can enable and disable large parts of what defines a regions economic contributions to the GDP but we have seen over the last 30 years a part of what is due to the push to global economy, the trade agreements and of course some personal switch in tastes and of course costs associated with a switch in consumer focus.   When I think of this I think of Green Build which is how this blog began and my enthusiasm for energy savings and building green that led me to start my business Vida Verde and in turn close it when demand was less than expected and of course the 2008 housing collapse that contributed to my switching gears and going back into education.

I am watching the current economic climate and the parallels are there with the rise in interest rates and in turn the stock market erratic declines are once again showing that we have a dark cloud on the horizon.  Add the tariff's, trade wars and odd global issues that include chaos and irrationality seemingly further isolating America are all issues of concern and not just socially but economically.

The President is weird, irrational and utterly incompetent. Any rational, intelligent and competent people have long left or finding the exit doors in case of emergency.  And some of this I see here in Nashville and that is alarming.  If I read one more happy bullshit about Nashville in the New York Times I will fly to New York to sit with these reporters and ask them to come here and see first hand what it is like to live here.   Even Birmingham laughed off the negative comparisons.   What is the difference between corporate welfare and individual welfare?  Millions.  And the last sentence in that article says what I have thought all along:

Sometimes around here, you get the feeling that a lot of the folks in charge of the city were so eager to make Nashville the Next Big Thing that once it happened they didn't really know what to do next. Instead of celebrating more affirmation from The New York Times, we maybe ought to spend some more time on that

  I have said that when an educated elite work force arrive from New York to work in the Alliance Bernstein offices and Ernst and Young they will not stay.   There is nothing here nor any reason for them to other than having no income tax or you don't care.  Frankly earning 150K you will spend all of it to live in safe areas of town (we have 500 unsolved homicides here and the shootings continue to break records and it is not year end). and commuting in to your work.   And add to that we have the most regressive tax system in America and it shows.

What has happened in Nashville was a rebirth post flood and in turn a push to build an economy that enabled further growth and that was medical and tourism. Since that time a push to diversify the economy led to more incentives to draw financial services and tech which I do say is smart but the workforce here are neither qualified nor trained to do most of the skilled jobs that these businesses need.  As for most of the schools here they were gearing up to add more hospitality programs to fit that need when they were thrown a curve ball to add Amazon's play list to the curriculum.  What that is and which to do will take at least two years and in turn another two to at least have graduates ready for said jobs, which skill set and qualifications have not yet been established until Amazon starts posting those next year.  And then it is about another year or so before any significant presence will be established in which to hire said workforce.  Again Amazon is promising these 5K jobs over 5 years with supposedly 150K salary.  Sure. Don't tell real estate agents as they are already marketing properties as get in before Amazon.  This will undoubtedly further drive up the housing market and lead to even more houses be built and in turn supply and demand may level off.  Right now I see a ton of supply and less demand but shhh don't tell anyone as my building is going condo its just not listed on the MLS which may hamper demand.  But with the rising rates of interest coming that too will undoubtedly affect demand just not only residential build.

Today we have an industry devoted to property flipping and not just houses but commercial and in turn many out of state investors dropping massive cash on properties that were worth less only two years ago.  So in turn they promise improvements which means more costs and in turn the rents on the space will rise.  So if you have a commercial space you have rented for years and the new landlord spends 150K for what was 75K a year ago and rents were based on the latter the new owner has to make his costs so rents will rise appropriately.  Did those tenants make a rise in income too?  True they may get more customers and in turn make a few bucks more annually but that amount which could be used to improve the business and raise the wages of workers is immediately absorbed by the rent increase.  Crash crash bang bang.   I tried to have this discussion which again was a waste of time as my Lyft driver who moved here from New Jersey to take advantage of the boon was sure that the profit was more important and that is all that matters.  And he then used the analogy that the same type of housing structure he had in his properties in New Jersey are only worth 150K and here they are 350K. And he wished he could move the houses here.  I see... then I changed the subject as right there I again am having a conversation with an idiot who thinks himself as an entrepreneur and driving Lyft in his car.  I did not tip since he clearly did not need the money.

What Nashville did bring was the people that are much like those in the article below, lowly skilled and educated and they are filling jobs that pay minimum wage and require little more than showing up.   I work in the schools where you are required to have degrees and education and even that makes me question their skill set as much of their education comes from third rate and largely non-secular schools.  The few that do come from established institutions don't stay long due to the lack of pay and the lack of respect.  Education is not valued in this part of the world and it was not necessary to find work and with that changing I am not sure who will change first, the transplant or the city?  It will take a generation for this region to actually have critical thinking, to begin to ask questions and demand answers.  This is not how they do things here and they resent anyone who thinks otherwise.  Good luck with that.  

Read this article and it may provide insight into the thinking process here that I call a conundrum wrapped in a contradiction.  But again that times may be a changing.




Where Government Is a Dirty Word, but Its Checks Pay the Bills

The residents of Harlan County, Ky., depend heavily on federal assistance. That hasn’t deterred, and may explain, their swing to Republican voting.


By Eduardo Porter
The New York Times
Dec. 21, 2018

HARLAN, Ky. — Gov. Matt Bevin skillfully worked the room at the old courthouse building here in Harlan, one more town-hall meeting in the long campaign toward next year’s election. He deplored the parlous state of a half-mile stretch of U.S. 421 and said $802,000 would be spent to rebuild it. He commiserated with the man who wanted to know how he should deal with the bears tearing through his trash bins, now that it’s forbidden to shoot them.

The line that got the governor a standing ovation, however, was about Medicaid. More precisely, about his plan — so far frustrated by the courts — to require thousands of able-bodied Medicaid recipients between 19 and 64 to work, get training or perform community service for 20 hours a week to keep their health insurance.

“Yeahs” rippled across the room as the governor extolled the value and dignity of work, which propelled him from a hardscrabble youth in rural New Hampshire to the governor’s mansion in Frankfort. “People tell me it’s too much to ask,” he noted, incredulously, about his plan to demand that people on Medicaid get a job. “Baloney.”

And the line from Ronald Reagan got chuckles all around: “The worst thing you can hear,” the governor told Harlan’s gathered residents, is “I’m from the government and I’m here to help.”

Mr. Bevin’s distaste for government is not news. His insurgent campaign to take the Kentucky governorship in 2015 was heavy on attacks on government spending. What’s more notable is the people’s applause. Harlan County residents rely on government programs more than pretty much anybody else.

Harlan County is the nation’s fifth most dependent on federal programs, according to the government’s Bureau of Economic Analysis. In 2016 some 54 percent of the income of the county’s roughly 26,000 residents came from programs like Social Security and Medicaid, food stamps — formally known as SNAP, the Supplemental Nutrition Assistance Program — and the earned-income tax credit. That is up from 28 percent in 1990.

Federal assistance has grown all over the U.S., but particularly in Appalachia and the South, where many people now get more than a third of their income from the government.

Surrounding counties are similarly dependent. Part of a coal-mining region in long, inexorable decline, this pocket of the nation exemplifies a political paradox: Why are so many American voters hostile to the government hand that feeds them?

“The SNAP card works every month; the kids eat two meals a day, but people don’t think about where the food comes from and go vote for Republicans,” said Larry King, a Kentucky farmer who is chairman of the Democratic Party in McCreary County, whose residents get 55 percent of their income from federal transfers.

It’s not just about Kentucky. Research by Dean Lacy at Dartmouth College on the presidential elections in 2004, 2008 and 2012 found that states receiving more federal spending for every tax dollar they contributed were more likely to go Republican.

The phenomenon produced a 2004 best seller, Thomas Frank’s “What’s the Matter With Kansas?” It argued that Republicans drew working-class voters to their platform against taxes and spending not with economic arguments, but by appealing to their conservative cultural preferences — against gay rights, abortion rights, affirmative action and gun control.

The contradiction has only become more pronounced over time. As Americans have grown more reliant on federal programs over the last 50 years, they have increasingly embraced the Republican Party, a trend put in stark relief by President Trump’s 2016 victory. Of the 10 states in which government transfers account for the largest share of income, seven voted for Mr. Trump. Speaking to the economic and social anxieties of blue-collar white voters over immigration, trade and demographic change, Mr. Trump has championed tax cuts for the well-to-do paired with benefit cuts for the struggling voters in his base.

Nowhere has the strategy worked better than Kentucky. In a new book, “The Government-Citizen Disconnect,” Suzanne Mettler, a political scientist at Cornell University, observes that Mitch McConnell was known as a pro-civil rights, union-friendly moderate as a county executive in Louisville in the late 1970s. As federal transfers grew from around 10 percent of the income of the average Kentuckian in 1970 to 24 percent in 2016, seven percentage points more than the national average, the ideology of Mr. McConnell, the Senate majority leader — and the rest of Kentucky’s congressional delegation — moved sharply to the right.

And local Democrats — who once thrived in heavily unionized mining towns — gradually lost ground. In 2015 Mr. Bevin became only the second Republican since the 1970s to take the governorship. And in 2016, Republicans captured the State Assembly and for the first time gained full control of Kentucky’s executive and legislative branches.

Transfers from the federal government account for more than half of residents’ personal income in 11 counties across the country. Ten are in eastern Kentucky; another is in West Virginia. Nine of those sit in Kentucky’s Fifth Congressional District, which was the first in the nation to declare a winner on election night, Nov. 6: Harold Rogers, a Republican who has held the seat since 1981. He won 79 percent of the vote.

Even excluding health insurance — which some experts argue should not count — people in this patch of Appalachia draw between a fifth and a third of their income from the public purse.

Perhaps the politics of welfare is changing — up to a point. Democrats made big gains this year in elections for the House and several statehouses, running largely on the promise that they would protect the most recent addition to the safety net: the Affordable Care Act, including the expansion of Medicaid in many states. But championing the safety net does not necessarily resonate in the places that most need it.

Take Daniel Lewis, who crashed his car into a coal truck 15 years ago, breaking his neck and suffering a blood clot in his brain when he was only 21. He is grateful for the $1,600 a month his family gets from disability insurance; for his Medicaid benefits; for the food stamps he shares with his wife and two children.

“Every need I have has been met,” Mr. Lewis told me. He disagrees with the governor’s proposal to demand that Medicaid recipients get a job. And yet, in 2016, he voted for Mr. Trump. “It was the lesser of two evils,” he said.

About 13 percent of Harlan’s residents are receiving disability benefits. More than 10,000 get food stamps. But in 2015 almost two-thirds voted for Mr. Bevin. In 2016 almost 9 out of 10 chose Mr. Trump.

Conservative values surely run strong in this county of many churches and only one liquor store. But the politics of Harlan, a storied Democratic enclave whose yearlong strike against the Duke Power Company’s coal-mining interests in 1973 is seared into union lore, can’t be explained simply by voters’ cultural leanings.

As Professor Mettler points out, the people who rely most on government transfers are least likely to vote. Only 31 percent of Kentucky’s electorate voted in 2015; only 16 percent voted for Mr. Bevin. Participation was lowest in the counties most dependent on federal aid. The governor’s victory was not propelled by the neediest Kentuckians.

The Most Conservative Counties Are the Ones That Get the Most Government Assistance

A cognitive disconnect is at play: People often don’t link benefits they rely on with the idea of government welfare. Professor Lacy’s research, for instance, suggests that ideology and identity influence how people perceive their benefits, and can outweigh their personal experience of such assistance. He finds that Democrats and African-Americans, but not whites or Republicans, were much more likely as groups to feel they were benefiting from government programs in 2012, when Mr. Obama was president, than during the George W. Bush administration in 2008.

But Harlan’s experience suggests that the steepest barrier keeping voters from embracing the government payments that help them get through the day comes from fundamental mistrust. It’s not necessarily that people here don’t understand they benefit. They fear that Washington — so distant from rural America — does not understand their plight or have their interests in mind.

“People in Harlan County have been on the front lines of the war on poverty for 50-plus years and can see its actual effects,” said Preston Jones, the 31-year-old assistant director at the Pine Mountain Settlement School, over the mountain from Harlan. “It is degrading.”

Mr. Jones, a Republican who not long ago was a Democrat, speaks from a deep well of grievance over the fact that generations of Harlan residents have had to turn to the government for sustenance. That sentiment mixes in with a vague but powerful resentment across the county toward a political system that people here blame for allowing, encouraging even, the decline of coal, its economic backbone.

Harlan is one of the poorest counties in the nation. It has been poor for a long time. The typical household takes in barely $25,000 — less than half the national median. Opiate abuse is rampant. Over the last century or so, the population has shrunk by more than two-thirds.

Coal still provides some of the best jobs in the county, paying about $1,550 a week, on average — more than twice the average county wage. But it employs fewer than 600 people. Fewer than 4,000 work the coal mines in all of eastern Kentucky, down from over 15,000 in the early days of the Obama administration. In Harlan County, little more than a third of working-age residents have a job.

Data from Mark Muro and Jacob Whiton at the Brookings Institution’s Metropolitan Policy Program shows that as the coal industry has withered since 2010 — squeezed out by natural gas as cheaper fuel for power generation — productivity in terms of economic output per Harlan County worker has shrunk by an average of 8.6 percent a year.

There are few open storefronts downtown, mostly occupied by disability lawyers and pawn shops. “The biggest business for a long time was the U-Haul rental business as people moved out of state,” said Jay Nolan, who runs a string of newspapers based in London, some 70 miles northwest. “In Harlan you had to wait for days to get one.”

Many people blame Mr. Obama’s Clean Power Plan for killing coal and credit their vote for Mr. Trump to his promise that he would revitalize the industry. Some are skeptical of a government that saved Detroit’s automakers but not Appalachia’s lifeline. And this feeling is going to be hard to shake.

Harlan has few answers to its economic tribulations: few roads linking it to the world’s markets, few good broadband links, few college graduates, few investors willing to risk their money there. “Most of the kids from here who have a chance to go to university never come back,” said Colby Kirk, executive director at One Harlan County, a nonprofit economic development group serving the area.

Success, when it happens, happens on a small scale. This year, the Harlan County Chamber of Commerce gave its business-of-the-year award to a fledgling coal-mining company that has grown to 220 jobs, almost twice as many as last year.

Therein lies a monumental obstacle to transforming the politics of America’s safety net. As small towns lag behind prosperous urban centers along the coasts, as rural communities shed businesses and jobs, and as their residents turn to welfare as a last line of sustenance, the more they will resent Washington’s inability, or unwillingness, to stem the decline.

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