Trump’s Infrastructure Plan is a Rare, and Potentially Bipartisan, Feel Good Moment

This article first appeared at The Orange County Register

President Trump’s proposed trillion dollar plus infrastructure program represents a rare, and potentially united feel good moment. Yet before we jump into a massive re-do of our transportation, water and electrical systems, it’s critical to make sure we get some decent bang for the federal buck. Read more

The Screwed Millennial Generation Gets Smart

This article first appeared at The Daily Beast.

It turns out that kids today want the same thing their parents did—a home of their own that they can afford to raise a family in.

It’s been seven years since I wrote about “the screwed generation.” The story told has since become familiar: Millennials, then largely in their twenties, faced a future of limited economic opportunity, lower incomes, and too few permanent, high-paying jobs; of soaring college debt and structural insecurity (PDF). The Census Bureau estimates that, even when working full-time, they earn $2000 less than the same age group made in 1980 (PDF). More than 20 percent of people 18 to 34 live in poverty, up from 14 percent in 1980 (PDF).

Incredibly, many pundits applauded these conditions and credited millennials, forced by economic circumstances into difficult choices, for fulfilling the old boomer dreams that the boomers themselves had long since abandoned of a less materialistic, greener future in dense and heavily planned urban environments.

The environmental magazine Grist envisioned “a hero generation” that will escape the material trap of suburban living and work that engulfed their parents. “We know the financial odds are stacked against us, and instead of trying to beat them, we’d rather give the finger to the whole rigged system,” the millennial author concludes. An editor at the same magazine declared herself a part of the GINK generation (as in “green inclinations, no kids”) that she said meant not only a relatively care-free and low-cost adult life, but also “a lot of green good that comes from bringing fewer beings onto a polluted and crowded planet.”

It has been often asserted that millennials (defined as the generation born between 1982 and 2002) do not want to buy homes or live in suburbia; Fast Company, saw this as “an evolution of consciousness.” The Guardian declares that millennials are refusing to accept “the economic status quo” while Wall Street looked forward to profiting from the idea that millennials will be satisfied to live within a “rentership society” (PDF).

But millennials, as noted in a new paper from Anne Snyder and Alicia Kurimska, aren’t embracing downward mobility but rather are increasingly creating their own aspirational strategies (PDF). Some are doing this consciously by ignoring the wise planners and establishing homes for themselves in suburban and Sun Belt locales once considered insufficiently hip.

Despite the hype from the press and urban planners, millennials are following in the footsteps of previous generations by locating on the periphery major metropolitan areas and Sun Belt cities, most of which are simply agglomerations of suburbs.

This pattern seems certain to accelerate as millennials enter their thirties, the age when contemporary populations tend to marry, settle down, and have children. To be sure, notes Pew, more 18- to 34-year-olds now live with their parents than with spouses or significant others for the first time since the question was first asked in the 1880s. But when they do leave the nest, albeit later than in previous generations, they are becoming adults whose collective decisions are not so different from those of their parents.

Their searches for homeownership and procreation reflect this trend. It turns out that millennials did not reject homeownership because of their enhanced social consciousness, but because of high prices and low incomes. In survey after survey, the clear majority of millennials—roughly 80 percent, including the vast majority of renters—express interest in acquiring a home of their own. A Fannie Mae survey of people under 40 found that the vast majority thought owning made more financial sense, a sentiment shared by an even larger share of owners (PDF). They cited such things as asset appreciation, control over the living environment, and a hedge against rent increases.

“Homes and families will change many millennials, much as they changed previous generations.”

As generational researchers Morley Winograd and Mike Hais have long pointed out, millennial attitudes about family and their preferred future remained fundamentally mammalian and surprisingly conventional, albeit with a greater emphasis on gender equality. The vast majority of millennials, according to Gallup and others, want to get married and have children. Their top priority, according to Pew, is to be “good parents.”

The average millennial is now in their late twenties, and will be well into their thirties by the end of the decade. Already, 16 million millennials have had children, up from barely 6 million a decade ago, a number that is likely to soar in coming years, particularly if this group continues the recent trend of more women, and especially better educated ones, having children in their forties.

Despite endless talk about millennials as the group triggering a “back to the city” movement, census data shows that their populations in many core cities are stagnating or declining. In April 2016, the real estate website Trulia found that millennials were rushing out of expensive cities, with the group making up roughly a quarter of the population in New York and Washington, D.C., but accounting for half of all departures from them.

Its report concludes: “To summarize, those who earn very little income, those who work in unstable, less urban-based, and low-paying industries, and younger generation households that have not yet established a stable career have moved away from these pricey cities at much greater rates than the rest of the population.”

Between 2013 and 2014, only 2,662 people between the ages of 25 and 34 migrated to D.C., according to census data, roughly a quarter of the 10,430 people in that age bracket who arrived between 2010 and 2011.

Since 2010, the 20 to 29 populations have declined in the core areas of much celebrated youth magnets including Chicago (-0.6 percent) and Portland (-2.5 percent). Other areas, like Los Angeles and Boston, have lost millennials since 2015.

“In New York, incomes for young adults have dropped since 2000, even as rents have shot up by 75%.”

Costs appear to be key here. According to Zillow, for workers between the ages of 22 and 34, rent costs claim upwards of 45 percent of income in Los Angeles, San Francisco, New York, and Miami, compared to closer to 30 percent of income in metropolitan areas like Dallas-Fort Worth and Houston. The costs of purchasing a house are even more lopsided. In Los Angeles and the Bay Area, a monthly mortgage takes, on average, close to 40 percent of income, compared to 15 percent nationally. In many cities millennials seem destined to live as renters, without gaining any equity in property. In San Francisco, 18- to 24-year-olds now make up one of the fastest-growing homeless populations.

A recent survey by the UCLA Luskin School suggests that 18- to 29-year-olds were the age group least satisfied with life in Los Angeles (PDF), perhaps something reflected in the overbuilt and increasingly vacant downtown market. Similarly a recent USC study found that high prices made attracting talent increasingly difficult. In the Bay Area, according to ULI, 74 percent of millennials are considering an exit, largely due to high housing prices.

In New York, incomes for people aged 18 to 29 have dropped in real terms since 2000, despite considerably higher education levels among millennials (PDF). At the same time, rents have shot up by 75 percent.

Meanwhile, the much mocked suburbs have continued to dominate population trends, including among millennials. As people age, they tend, economist Jed Kolko notes, to move out of core cities to suburban locations. Although younger millennials have tended toward core cities more than previous generations had, the website FiveThirtyEight notes that as they age they actually move to suburban locations at a still higher clip than those their age have in the past. We have already passed, in the words of USC demographer Dowell Myers, “peak millennial,” and are seeing the birth of a new suburban wave (PDF).

To some extent, the meme about millennials and cities never quite fit reality outside of that observed by journalists in media centers like New York, D.C., and San Francisco. More than 80 percent of 25- to 34-year-olds in major metropolitan areas already live in suburbs and exurbs, according to the latest data—a share that is little changed from 2010 or 2000.

Suburban tastes remain predominant with 4 in 5 people under 45 preferring the single-family detached houses most often in suburban locales (PDF). Surveys such as those from the Conference Board and Neilson consistently find that most millennials see suburbs as the ideal place to live in the long run (PDF). According to a recent National Homebuilders Association report, more than 2 in 3 millennials, including most of those living in cities, would prefer a house in the suburbs.

“As millennials grow up, they are moving to the ’burbs at an even faster pace than previous generations did at the same age.”

In the process, note authors Snyder and Kurimska, their generation is also changing suburbia. “These transplants value high social cohesion and want neighborhoods with walking trails and other community features like fitness centers, local shops and manmade lakes,” they observe. They may also initially at least choose smaller homes, according to Zillow, and often in places closer to work and with more things close by to do. The good news for them: The majority of new jobs continue to be created in suburbs, along with most theaters, ethnic restaurants, and music venues.

At the same time, millennials are shifting to different regions. Much of this has to do with housing costs. The income required to buy a home in Silicon Valley ($216,000), San Francisco ($171,000), Los Angeles ($115,000), or New York City ($100,000) dwarfs what is required in places like Orlando ($54,000), San Antonio ($54,000), or Nashville ($47,000).

Not coincidentally, those more affordable places are growing their millennial populations far more quickly. The Millennial homeownership rates is 37 percent in Nashville, 29 percent in San Antonio and 27 percent in Orlando, compared to under 20 percent in New York, Los Angeles and San Francisco.

To be sure, some millennials are moving into downtowns in these places, at least for a few years, but many more remain in what Grist called “sprawling car dependent cities.” Among the 10 major metropolitan areas whose 25- to 34-year-old populations grew most rapidly between 2010 and 2016, seven have more than 95 percent of their population in suburban or exurban settings.

In fact, most of the places with the biggest growth among millennials are highly suburban, sprawling cities. The top 10 regions with the fastest growth in their 25- to 34-year-old populations since 2000 include nontraditional urban areas such as Austin, Orlando, San Antonio, San Bernardino-Riverside, Las Vegas, Houston, Oklahoma City, and Jacksonville. In contrast, Boston ranks 40th out of 53 metro regions, New York 44th, San Jose 47th, Los Angeles 48th, and Chicago 51st.

So perhaps there is hope, after all, of millennials as a “hero generation.” As more of them follow their parents’ path to homes of their own in the suburbs and the Sun Belt’s sprawling metros, they will surely be changed by their environment and they will surely change it. Parenting, as well as homeownership, tends to make people more conservative.

While the strongest population growth now takes place in what Jed Kolko calls “the suburbiest” suburbs, those on the outer fringes, even there millennials are drawn to locations with town centers—whether restored or created—and prefer things such as bike trails and parks over golf and malls. The millennial suburb, as MIT’s Alan Berger has noted, will be different—more walkable, more environmentally sustainable, and likely more connected eventually by autonomous technologies.

While millennials may push back against the efforts of progressives, evident in California particularly, to limit suburban development that thus closes off their housing options, they will also oppose the culturally conservative agendas that long dominated many suburbs. This will be particularly true in areas attracting young minorities, such as northern Virginia, Ft. Bend County, outside of Houston, and Orange County, California.

In this sense, the millennials may be our best hope for a more reasoned future. They are unlikely—particularly as they raise families—to embrace planners’ fantasies of a high-density future. What they can accomplish is to shift the debate about how we live toward a more reasoned, collaborative, tolerant but also family-friendly direction.

That alone would make them smarter than their parents.

Homepage photo credit: Financial Resource Center.

The Cities Where African Americans are Doing the Best Economically 2018

This article originally appeared at Forbes.

The 2007 housing crisis was particularly tough on African-Americans, as well as Hispanics, extinguishing much of their already miniscule wealth. Industrial layoffs, particularly in the Midwest, made things worse.

However the rising economic tide of the past few years has started to lift more boats. The African-American unemployment rate fell to 6.8% in December, the lowest level since the government started keeping tabs in 1972. Although that’s 3.1 percentage points worse than whites, the gap is the slimmest on record. A tightening labor market since 2015 has also driven up wages of black workers, many of whom are employed in manufacturing and other historically middle and lower-wage service industries.

There’s still much room for economic improvement for the nation’s black community — the income gap with whites remains considerably higher than it was in 2000, with the median black household earning 35.5% less — but as we pay homage to Martin Luther King this week, the record low unemployment rate is a cause for celebration.

President Trump has predictably taken credit for the good news, but kudos more likely should go to those states and metropolitan areas that have created the conditions for black progress.

The gains have not been evenly spread. To determine where African-Americans are faring the best economically, we evaluated America’s 53 largest metropolitan statistical areas based on three critical factors that we believe are indicators of middle-class success: the home ownership rate as of 2016; entrepreneurship, as measured by the self-employment rate in 2017; and 2016 median household income. In addition, we added a fourth category, demographic trends, measuring the change in the African-American population from 2010 to 2016 in these metro areas, to judge how the community is “voting with its feet.” Each factor was given equal weight.

The South Also Rises

One of the great ironies of our time is that the best opportunities for African-Americans now lie in the South, from which so many fled throughout much of the 20th century. In the past few decades, many good jobs have moved South and blacks, like many whites and Hispanics, have followed.

The South dominated the previous version of this ranking, developed through the Center for Opportunity Urbanism, three years ago, and still does. All of the top 10 metro areas are in the South, led in a tie for the No. 1 spot by Washington, DC-VA-MD-WV and Atlanta, which was our previous leader.

Washington, with its ample supply of well-paid federal jobs, is the metro area where blacks have the highest median household income in the nation: $69,246. Amid rising home prices, the black home ownership rate has dipped to 48.3% from 49.2%, but that’s still fourth highest among the largest metro areas.

Atlanta, with its historically black universities and strong middle class, has long been described as the black capital of America, and its thriving entertainment scene has given rise to claims that it’s become a cultural capital as well. Entrepreneurship is strong, with some 20% of the metro area’s black working population self-employed, the highest proportion in the nation, and though median black household income is quite a bit lower than in the D.C. area at $48,161, costs are lower too. In-migration has slowed since the financial crisis, but the black population is still up 14.7% since 2010.

Atlanta and Washington are followed in our ranking by Austin, Texas, Baltimore and Raleigh, N.C., with the rest of the top 20 rounded out exclusively by Southern cities, except for Boston in 19th place.

Two key determinants seem to be driving these rankings: homeownership and self-employment, traditional benchmarks of entering the middle class. All of the top 10 boast homeownership rates that match or well exceed the black national average of 41 percent. (It should be noted that the national average is a full third lower than the national average for all ethnicities.)

These patterns hold up as well for income. Black incomes have been rising most rapidly since 2010 in largely fast-growing Sun Belt locales, as analyst and Forbes contributor Pete Saunders has found, such as Nashville, Raleigh and Austin. It appears as if the fastest income gains are generally being made in the places where other ethnic groups are advancing as well. After Washington, the metro areas where blacks have the highest annual household incomes are San Jose ($65,400), the capital of Silicon Valley, and No. 4 Baltimore ($53,200), which like Washington has a huge federal employment base.

The New Great Migration

Perhaps the most persuasive indicator of African-American trends lies in population growth. During the period of the Great Migration out of the south in the early 20th century, an estimated 6 million blacks headed north and west to cities such as New York, Los Angeles, Chicago and St. Louis. But now the tide is reversing, with the African-American population dropping in the latter three over the past six years, as well as in San Francisco and cities with fading industrial cores like Pittsburgh, Cleveland, Detroit and Milwaukee.

In contrast the metro areas whose African-American populations have expanded the most since 2010 are the South and Sun Belt: Las Vegas, Dallas-Fort Worth, Austin, Phoenix.

In some cases it’s clear that blacks are leaving for better economic opportunities. In others, high housing prices may play a role: In Los Angeles and San Francisco the black homeownership rate is about 9 percentage points lower than the major metro average.

In San Francisco the black community seems headed toward irrelevance and extinction as tech workers have driven up home prices to unprecedented levels; the metropolitan area’s African-American population has dropped 6.3% from 2010.

The situation is particularly dire in California where strict land-use and housing regulations have been associated with increases in home prices relative to income of 3.5 times the rest of the nation since 1995. In coastal California, African-Americans face prices from more than two to nine times their annual incomes than non-Hispanic whites. African-American homeownership rates in California are down 17% in the Golden State compared to a decline of 11% for Hispanics and 6% for non-Hispanic whites. Asian homeownership rates have stayed the same.

Blacks, like many other Americans, are likely to continue to move, as Pete Saunders notes, to cities that are both high growth and relatively low cost. In these cities, housing and land use policies generally allow the market to function, resulting in lower home prices and greater housing choice. Business investment and job creation are also strongly backed. Blacks, like others, are moving to these places for opportunity.

In many cases this means a reversal of the Great Migration and a return trip to parts of the country now far more accommodating to black aspirations than those places which once provided the greatest opportunities.

Homepage photo credit: Ryan Quick via Flickr under CC 2.0 License

Can the Trump Economy Trump Trump?

This article first appeared at City Journal.

President Trump’s critics find it hard to give him credit for anything, especially given his extraordinary boastfulness. Yet Trump’s economic policies seem to be working. New job numbers are robust, GDP and wages continue to rise, stocks are soaring, unemployment continues to decline, and overall growth is at its highest in 13 years. And this salutary picture is not exclusive to big business; the index of small business optimism, as measured by the National Federation of Independent Business, has reached its highest level in the 45-year history of the survey.

Some positive trends can be traced to the Obama years, but there’s clearly been a shift in trajectory and direction of the economy. As President Obama once noted, “elections have consequences.” Under Obama, federal policies—the “stimulus,” non-regulation of tech giants, ultra-low interest rates— benefited urban core, blue-state bastions that now constitute the unshakeable base of the Democratic Party. Under Trump, most working- and middle-class workers benefit from higher standard tax deductions and energy deregulation, while the affluent in high-tax states like California, New York, and Illinois are likely not to do as well.

Read the entire piece at City Journal.

Tech’s New Hotbeds: Cities With Fastest Growth in STEM Jobs Are Far From Silicon Valley

This piece originally on Forbes.com.

The conventional wisdom sees tech concentrating in a handful of places, many dense urban cores that offer the best jobs and draw talented young people. These places are seen as so powerful that, as The New York Times recently put it, they have little need to relate to other, less fashionable cities.

To a considerable extent, that was true – until it wasn’t. The most recent data on STEM jobs – in science, technology, engineering or mathematics – suggests that tech jobs, with some exceptions, are shifting to smaller, generally more affordable places.

What we may be witnessing, in fact, is a third turning in the tech world. The initial phase, in the 1950s, was mostly suburban – dominated by the still-powerful Bay Area, Boston and Southern California – and was heavily tied to aerospace and defense. The second phase, now coming to a close, refocused tech growth in two hot spots, the Bay Area and Washington’s Puget Sound, and largely involved social media, search and digital applications for business services.

The third tech turning, now in its infancy, promises greater dispersion to other markets, some with strong tech backgrounds, some with far less. In the last two years, according to numbers for the country’s 53 largest metros compiled by Praxis Strategy Group’s Mark Schill based on federal data and EMSI’s fourth-quarter 2017 data set, the STEM growth leader has been Orlando, at 8%, three times the national average. Next are San Francisco and Charlotte (each at 7%); Grand Rapids, Michigan (6%); and then Salt Lake City, Tampa, Seattle, Raleigh, Miami and Las Vegas (5%).

Why Are New Players Rising?

Silicon Valley, along with its urban annex, San Francisco, seems likely to remain the tech center for the foreseeable future. The area accounted for 44% of the country’s venture capital funding in 2014, according to a Brookings analysis of Pitchbook data, and the San Jose and San Francisco regions’ STEM employment – more than 440,000 jobs – is larger than that of greater New York, which has more than twice the population. The highest location quotient, essentially the percentage of STEM jobs per capita, can be found in the Valley – a remarkable 3.38 in 2017 – while the San Francisco area comes in at roughly half that rate, with an LQ of 1.76, just behind the figures for Seattle and Washington, DC.

But recently there have been signs that the tech sector’s growth in the region is slowing, despite the presence of Google, Facebook and Apple, three of the world’s most highly valued companies. From 2006 to 2016, the Valley saw a remarkable 33% growth rate in STEM jobs – roughly 3% per year. But in the last two years, that rate has fallen to 2% annually. In some recent months in parts of the Bay Area, The San Jose Mercury reports, the tech job count has actually declined.

One limiting factor could be high housing costs. A recent report from the state Legislative Analyst’s Office showed that many CEOs, particularly in Silicon Valley, regard severe housing unaffordability – where you need to earn more than $200,000 annually to buy a median-priced house – as their biggest business challenge.

The effects can be seen in domestic migration, which despite the boom has been declining since 2012. Old-time Silicon Valley residents can celebrate the rapid appreciation of their homes, but for new entrants the prospects are bleak. If millennials continue their current rate of savings, notes one study, it would take them 28 years to qualify for a median-priced house in the San Francisco area – compared with five years in Charlotte, or three years in Atlanta. This may be one reason that, according to a recent ULI report, 74% of Bay Area millennials are considering a move out of the region in the next five years.

Who Are These New Players?

If the Valley is slowing, one might expect the slack to be picked up in places that are heralded – at least by their boosters – as tech havens, places like Chicago, New York and Los Angeles. Instead, the fastest STEM growth is occurring in somewhat less ballyhooed places that have far lower housing costs and typically have less onerous tax and regulatory regimes.

Several factors may be in play. In the early part of the decade, notes a 2016 Brookings study, software focused on such things as search, social media and systems design; now, much of the impetus is coming from manufacturing-related industries, such as autos and industrial products, which may help explain the strong growth experienced by places like Grand Rapids.

That metro is also home to 17 universities and colleges, which guarantee a steady flow of tech workers. Low housing costs are certainly a potential allure; Trulia recently ranked the region as the housing market best “poised for growth” in 2018. The area boasts successful firms like Open Systems Technologies, a provider of IT services that employs about 140 people in its headquarters near downtown.

Charlotte, another new high-flier, also takes advantage of lower costs, a revived downtown area and ties to the financial service industries. The real estate firm CBRE named the city its top “momentum market” in 2016 based on its tech-talent growth rate from 2010 to 2015 (74.7%). It was followed by Nashville, with a 67.9% rate; both outpaced the Bay Area, at 61.5%.

Finally, there’s our fastest grower, Orlando, a city better known for Mickey Mouse than high-tech. Like Charlotte, Grand Rapids and Nashville, the city benefits from a combination of lower housing costs and enough amenities to attract millennials. Some companies, like Arrow Sky Media LLC, which specializes in animation and game development operations, and Finexio, a financial technology company, have recently relocated to Orlando, the latter firm from Silicon Valley. These decisions follow recent moves to Orlando by ADP and Deloitte, with 2,850 employees hired between the two companies, a majority of them tech workers.

For many of these emerging markets, the tech boom has accompanied growth in their central cores. But locating in a downtown or adjacent area in a smaller city is not the same as doing so in a megacity like New York, Los Angeles or Chicago: Tech workers can find affordable environments in the relatively dense areas but, as they age, can also settle in affordable, leafy suburbs, many of which are just a short commute away.

These options are not so readily available in our largest metros: Chicago, New York and Los Angeles. Although journalists and local boosters have claimed all three places are “the next Silicon Valley,” their tech growth from 2006 to 2016 was below average, and all now have location quotients below the national average (New York’s, for example, was 0.89 for 2016).

While these regions’ cost of living may pose the biggest threat, millennials, the fuel for tech firms, also may not be as urban-centric as some have predicted. Their numbers have recently dropped or plateaued in the much-celebrated core cities of Boston, Chicago, Los Angeles and New York after rising earlier in the decade. In contrast, many Sun Belt areas – Nashville, Charlotte, Houston, Dallas-Fort Worth, Austin, Orlando – enjoy stronger net population growth in those between 25 and 34 than coastal California and the Northeast.

A recent downturn in the energy industry – a major source of STEM employment – has led to a decrease in jobs in such places as Houston, Oklahoma City and New Orleans.

What Will The Third Turning Tech Environment Look Like?

Of course, none of this is to suggest that anyone will challenge Silicon Valley/San Francisco or even Seattle, clearly following in the Bay Area’s path, at the top of the tech pyramid. But Seattle, once relatively cheap, has become more and more expensive, with the nation’s fifth-highest rents; already, some 45% of local millennials are considering leaving because of the high prices. Even rising Denver is facing a price squeeze, and a mounting exodus.

Cutbacks in H-1B visas could create labor shortages in particularly immigrant-dependent places like the Valley, where most tech workers are foreign born. To appeal more to domestic workers, tech giants will have to accommodate them in lower-cost places. Apple already has more than 6,000 employees in less costly Austin – roughly half the size of the company’s spaceship headquarters in Cupertino – including a hardware engineering division. The tech giant has very few openings in Southern California, but 10 times as many in Texas. Rapidly expanding Amazon is looking for a second headquarters, presumably in a lower-cost area, and has held many of its recent job fairs far from the West Coast. Google has been expanding most robustly in Colorado and Austin, as well as downtown San Jose. Facebook is expanding in lower-cost areas like Ohio.

So contrary to popular belief, growing dispersal, not consolidation, represents the future of STEM employment. Not every smaller city will win, but some may well become serious players in the tech game. As costs intrude and tech itself morphs, competition for STEM jobs will spread, and other regions will begin to impose themselves on the nation’s high-tech map.

What’s Red, Blue, and Broke All Over? America

This piece originally appeared on The Daily Beast.

Beneath the sex scandals, moronic tweets, ridiculous characters, and massive incompetence that dominate Washington in this mean period of our history lie more fundamental geopolitical realities. Increasingly it is economics—how people make money—rather than culture that drives the country into perpetual conflict.

The tax bill brought that conflict to the surface, as Republicans made winners of Wall Street and the corporate elites, as well as most taxpayers and homeowners in lower-cost states, and losers of high-income blue-state taxpayers in high-tax states such as California, New York, and New Jersey.

A U.S. News and World Report headline denounced the bill as a declaration of “War on the Blue States,” comparing it to the infamous Kansas-Nebraska Act that allowed those states to determine whether to adopt slavery in the face of Northern objections. Others in the blue world suggested the bill meant that America no longer wishes to be “at the forefront of the new economy.”

Many progressives see their vision of a post-industrial economy—green, high-tech, and media-centered—as representing the enlightened future. The blue states are all too often hostile to the manufacturing, agriculture, and energy industries critical to the heartland’s, and the nation’s, future prosperity and security.

The Great Divide

A look at the current Republican majority explains much of our new sectional divide. The states with the largest share of jobs tied to industry (PDF)—Indiana, Wisconsin, Michigan, Iowa, and Alabama—all went for Trump. In contrast, the share of manufacturing jobs in key Clinton states like New York, California, and Massachusetts is no more than half as large.

Differences are even more stark in industries such as energy, mining, and agriculture. The watershed of the Mississippi River, largely controlled by Republicans, is the source of 92 percent of U.S. agricultural exports, and 78 percent of global feed, grain, and soybean exports. The only other major player is California, whose position is threatened by water policies and the prospect of renewed drought.

Perhaps even more politically critical is the energy industry. The top three states for oil and gas jobs—Texas, Oklahoma, and Louisiana—are all deep red. Much of the recent growth has been in the industrial heartland states of Ohio and Pennsylvania, as well as oil-shale-rich North Dakota. All went with Trump.

Blue states have generally abandoned these basic industries. In fact the third largest energy-producing state, California, seems determined to eliminate its once powerful oil and gas sector, while New York, unlike its neighbors, has decided to strangle the emergent shale oil industry in its crib. Manufacturing, on the rise in much of the country, is stagnant or declining in many blue states. Some of the most precipitous drops in the numbers of highly paid blue-collar jobs overall since 1991 have been in California, New York, and Illinois (PDF).

Interior California and upstate New York—the red parts of the big blue states—have declined into a kind of Appalachian dystopia. Nearly half of the 16 counties with the highest percentages of people earning over $190,000 annually are located in California. Yet, the state also has a remarkable 77 of the country’s 297 most “economically challenged” cities based on levels of poverty and employment. Altogether, these troubled cities are home to roughly a third of the state’s population.

California has been portrayed as a “boom state” because of strong growth in finance, technology, media, and tourism rather than tangible production. Workers in these industries tend to be far more liberal than those in manufacturing, mining, energy, or agriculture, and to congregate in the highly urbanized parts of the state.

The professional and business services sector, clustered in New York and Chicago, also amounts for the highest share of all jobs in the blue bastions of Washington, D.C., Northern Virginia, San Jose, and San Francisco.

A similar pattern can be seen in the information sector, which includes software as well as entertainment. Here, Los Angeles leads in total jobs, followed by New York. But the highest share of workers in information can be found in San Francisco, San Jose, and Seattle—all sterling examples of the blue-state economy. These areas claim they are paragons of “opportunity”—and it’s true if you have rich parents, an H1B visa, or a Ph.D.

One blue-state author sees a divide between two economies: “one modern, stable, and healthy, the other backwards, impoverished, and sick.” Slate declared that middle-class jobs in manufacturing and construction are “never coming back.” That was true, until it wasn’t. Over the next decade, there could be a shortage of 2 million manufacturing employees, according to a report this year by Deloitte and the Manufacturing Institute (PDF). More, the “backwards” places in fact employ many skilled people; of the 20 metro areas with the most engineers per capita, only one—Silicon Valley—is located on the East or West Coast.

Crucially, red-state Americans tend to live in more egalitarian regions. In the true-blue economies, employment tends to be highly divided between high-wage workers in finance, media, tech, and business services and low-wage people laboring as cleaners, nannies, retail clerks, and the like. This is one reason why the blue states voting for Clinton, as progressive economist James Galbraith has demonstrated, have far higher levels of inequality than those places, largely in the interior, which supported Trump.

A Tale of Two Presidents

“Elections have consequences, and at the end of the day, I won,” new President Barack Obama famously said in 2009, as his bank bailout and stimulus that gave aid to overstretched governments benefited the places where finance is based and where public spending tends to be the highest.

He also supported the expansion of mass transit, something that mostly benefits a handful of dense and deep-blue “legacy cities” beginning with New York but also including San Francisco, Chicago, Boston, Philadelphia, and Washington, D.C. His spending did much less for areas away from the coasts where transit is insignificant, large financial headquarters are distant, and government is generally smaller.

Perhaps the biggest sectional divide, however, was over energy. Obama’s environmental policies were popular in blue states, most with little in the way of energy industries. It was far less so in places where energy constitutes an important part of the economy. More important still, while his subsidies for green energy thrilled Silicon Valley and some Wall Street investors, the prospect of higher energy prices would put American manufacturers at a disadvantage.

All this at a time when the fracking revolution was giving U.S. firms a potential huge advantage against their European and Asian competitors. Obama did not eliminate the momentum in the Rust Belt, but tried to slow down energy production by imposing environmental and federal leasing policies, a la California, that would reduce the scale and raise the costs of the new energy boom.

These issues may not have registered with many Manhattanites or San Franciscans, but they matter greatly to people in Midwestern and Southern states dependent on fossil-fuel energy. Obama may have been hailed a hero in Europe, but less so in places like Odessa, Texas, or Fort Wayne, Indiana. And when his would-be successor, Hillary Clinton, talked about regulating coal mines “out of business,” it all but guaranteed she would lose many of the Appalachian states her far savvier husband had won as recently as 1996.

As President Obama said, elections have consequences. Trump’s red-state economic base explains his move away from the Paris accords, and his dismantling of many Obama-era decrees on energy policy, public lands, and transportation. The fact that so many of the previous presidents’ most important moves were essentially edicts allowed Trump to easily rescind them.

Barely noted in the press, the economy seems to have responded positively to the president’s policies (or lack of them), as evidenced by rising employment, rising stock prices, and increased foreign investment, particularly in industrial properties.

The big winners under Trump have been the ones that were most threatened by Obama: the industrial, agricultural, and energy states that span the territory from Appalachia to the Rockies. So far this year the country has added 138,000 manufacturing jobs, compared to 34,000 jobs lost during the same period last year. High-school graduates and minorities, who languished during Obama’s blue-state boom, now see their wages growing faster than those for managers and professionals.

The most recent Bureau of Economic Analysis report also shows a shift away from blue states, notably California and New York. In the most recent quarter, BEA reports, Texas grew almost three times as fast as California and at five times the rate of New York. Meanwhile, Utah, Michigan, and Wisconsin also grew faster than California as did most states in the Southeast. Just last year, California’s estimated GDP growth was twice the national average and among the highest in the nation. Since that boomlet, the state’s job growth has plummeted, and its GDP growth now ranks just 35th in the country. Today, the country’s fastest-growing economies are in the South, not the West.

Could this all be Trump? Probably not, though the boost in energy and manufacturing investment may well be tied to the president’s policies. It’s hard to imagine these states would do as well if Hillary Clinton was ruling the roost. As for California, it appears that regulations have contributed to a massive spike in housing costs, one reason the Bay Area appears to be suffering negative job growth and why, notes a recent ULI report, 74 percent of all Bay Area millennials are looking for the exits (PDF).

Given this trajectory the tax bill may be the final coup de grace for blue-state growth. One source of wealth creation in the Northeast, and on the West Coast, has been rapid appreciation in housing—costs have shot up more than 3.5 times as fast in coastal California than the national average, even after adjustment for incomes. It is the primary reason why California now has the highest poverty rate in the county, adjusted for housing costs. It’s also one reason why 5.6 million net domestic migrants have left the highest cost states for less expensive ones since 2000, according to annual Census estimates.

Things could soon get worse as the new cap on deductibility of state taxes and mortgages—non-factors for most red-state taxpayers and state budgets—is terrible news for high-tax and high-property value cities and states.

The Trump administration, like its predecessor, has decided that exploiting economic divides between our regions makes good politics. As the number of “blue dog” moderate Democrats in red states dwindles (down to three in the Senate) the blue states become ever more intolerant of even the most moderate Republicans. At least a modicum of political balance, so critical to our system of government, has been replaced by dramatic sectional polarization.

If the blue states hated Trump, the GOP and the heartland before, one must wonder what revenge they will inflict once they get back in power.

This constitutes something of an American tragedy. Our country’s great advantage has always been the complementary nature of its economy. New York, Los Angeles, and the Bay Area drive out ascendency in finance, media, entertainment, and technology. Texas gave us energy and leads in exports; Michigan provides world-class engineering and the Plains a cornucopia of everything from oil and gas to foodstuffs.

It really does not benefit anyone for red states to seek to inflict pain on New York or Los Angeles, any more than it makes sense for MSNBC host and Daily Beast columnist Joy Reid to call rural voters “the core threat to our democracy.”

These economies and geographies need each other. The heartland needs capital and markets. Overpriced, de-industrializing economies on the coast need outlets for their young people—and after tax reform maybe more of their parents—as they seek out an affordable future in the interior.

America’s diverse regions are critical to its ability to out-compete virtually all advanced economies. Great presidents, and effective political parties, recognize this reality. Franklin Roosevelt did not conduct the New Deal just to help New York; he brought jobs, money, and electricity to vast parts of the heartland, the South, and Appalachia. Ronald Reagan’s policies may have shocked New York glitterati, but won over its voters, and helped spark a financial boom that transformed Gotham into one of the great comeback stories of our era. Bill Clinton may have wowed the coastal crowd, but he never forgot where he was from, and created policies that sustained economic growth across much of the country.

This is the kind of leadership neither Donald Trump nor Barack Obama, each limited by their own prejudices and experiences, have provided us. Instead we oscillate between policies that help one part of the country, often at the cost of others. Only when national leadership recognizes the importance of all regions can our seemingly irreconcilable conflict be settled in a way that benefits our still magnificent, albeit sadly divided, republic.

Joel Kotkin is the Roger Hobbs Distinguished Fellow in Urban Studies at Chapman University and executive director of the Houston-based Center for Opportunity Urbanism. His newest book, The Human City: Urbanism for the rest of us, was published in April by Agate. He is also author of The New Class Conflict, The City: A Global History, and The Next Hundred Million: America in 2050. He is executive director of NewGeography.com and lives in Orange County, CA.

Photo: Rmichaelrugg (Own work) CC BY-SA 4.0, via Wikimedia Commons

Rising Rents are Stressing Out Tenants and Heightening America’s Housing Crisis

This article first appeared at Forbes.

The home-buying struggles of Americans, particularly millennials, have been well documented. Yet a recent study by Hunt.com found that the often-proposed “solution” of renting is not much of a panacea. Rents as a percentage of income, according to Zillow, are now at a historic high of 29.1%, compared with the 25.8% rate that prevailed from 1985 to 2000.

No surprise, then, that 58% of the 1,300 renters in the Hunt survey said they felt “stressed” about their rent, or that many respondents said they couldn’t save for future purchases like homes. Rather than the sunny freedom promised by those who promote a “rentership society,” most of those surveyed said that finding a convenient place with the amenities they required – for example, fitness rooms, places for pets and adequate space – was very difficult. Some renters have been forced to euthanize their pets, spend upwards of 50 days looking for a place or move farther from family and friends.

All of this is taking place at a time when the national vacancy rate has fallen to 7.3% (in the second quarter of 2017), from 11.1% in the third quarter of 2009. That trend has continued even with apartment construction in many areas, notably core cities, because the new buildings tend to be too expensive for most renters.

Fuel For A Housing Crisis

There is a strong relationship between high rents and high house prices. Although rents have not risen as much as house prices generally, they tend to attract people who in the past might have become homeowners but instead have been crowded out by the high prices. This essentially brings into the rental market more affluent tenants who directly compete with those with lower incomes.

The result in many places, such as Southern California, is overcrowding. Two-thirds of the places in the United States (municipalities and census-designated places) with more than 5,000 residences and with more than 10% of housing units being overcrowded are in California, according to the American Community Survey.

The rent-related stress also points to a bigger crisis: the decline in the purchase of homes. One of the most prominent reasons for not buying a house directly relates to higher rents: It becomes all but impossible to save enough for a down payment. This also reflects changes in the labor market; service and blue-collar workers, whose incomes have been down in relation to rents, are the most burdened by rising rents. In San Francisco, even a teacher has been driven into the ranks of the homeless.

The situation is worst in the most expensive markets. In New York City, incomes for millennials (ages 18–29) have dropped in real terms compared with the same age cohort in 2000, despite considerably higher education levels, while rents have increased 75%. New York, Los Angeles and San Francisco have three of the nation’s four lowest homeownership rates for young people and among the lowest birthrates.

According to Zillow, for workers ages 22-34, rent costs claim up to 45% of income in the Los Angeles, San Francisco, New York and Miami metropolitan areas, compared with closer to 30% of income in metros like Dallas-Fort Worth and Houston. Home prices provide an even starker contrast. Dallas-Fort Worth, the nation’s fastest-growing housing market, as well as Houston, San Antonio and Charlotte have prices that are more like one-third those of the superstars.

That helps explain why, according to the Hunt survey, the highest percentage of people who cannot save for future purchases (almost 60%) live on the pricey West Coast. The West Coast also had the largest percentage of people stressed about their rent, followed, not surprisingly, by the East Coast.

High rents may also help explain recent shifts in migration to lower-rent areas. A recent survey by Apartmentalist.com found that the best prospects for renters becoming homeowners are in metropolitan areas like Pittsburgh, Provo, Madison, San Antonio, Columbus, Oklahoma City and Houston; the worst are, not surprisingly, in California, New York, Boston and Miami.

Profound Implications

What emerges from the Hunt study, and other research, is a renting population that may never achieve home ownership. This represents a sort of social evolution from the culture of self-assertion and independence that once so clearly characterized America after World War II and was so important to the unprecedented spread of middle-income affluence. Rather than striking out on their own, many millennials are simply failing to launch, with record numbers living with their parents or forced to shell out much of their income rent.

The implications of high rent, and declining home ownership, could be profound over time. In survey after survey, a clear majority of millennials — roughly 80%, including the vast majority of renters — express interest in acquiring a home of their own. A Fannie Mae survey of people under 40 found that nearly 80% of renters thought that owning made more financial sense, a sentiment shared by an even larger number of owners. They cited such things as asset appreciation, control over the living environment and a hedge against rent increases.

But it won’t just be renters impacted by rising rents. Jason Furman, who served as chairman of the Council of Economic Advisors under President Obama, calculated that a single-family home contributed two and a half times as much to the national GDP as an apartment unit.

The decline in investment in residential properties has dropped to levels not seen since World War II. By some estimates, if we had that kind of housing investment again, we would return to 4% growth, as opposed to our all-too-familiar 2% and below.

America’s housing crisis, long tied to ownership, is now extending into rising rents. But the stress that renters are feeling impacts all of us.

Photo credit: Omar Bárcena, via Flickr, using CC License. (Minor brightening of image)

A New Way Forward on Trade and Immigration

This article first appeared in the The Orange County Register

President Donald Trump’s policy agenda may seem somewhat incoherent, but his underlying approach — developed, in large part, by now-departed chief strategist Steve Bannon — can be best summarized in one word: nationalism. Read more

Forget the Urban Stereotypes: What Millennial America Really Looks Like

Perhaps no generation has been more spoken for than millennials. In the mainstream press, they are almost universally portrayed as aspiring urbanistas, waiting to move into the nation’s dense and expensive core cities. Read more

What’s the Future of Beleaguered Fossil Fuels?

This article first appeared in The Orange County Register.

Perhaps no economic issue — even trade — is as divisive as the energy industry. Once a standard driver of economic progress, the conventional energy industry has become increasingly vilified by the national media Read more