Category Archives: Economics

Apartments a Big Part of Winston-Salem’s Downtown Revitalization

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I wrote the following for the blog at the day job and am re-posting it here because I thought it would be of interest to some people from my neck of the woods:

At its annual meeting on February 24 the Downtown Winston-Salem Partnership outlined how Winston-Salem’s downtown has been revitalized over the last 15+ years:

The nonprofit group listed 88 downtown investment projects since 2000 that have either been completed, are under way or for which a firm commitment has been made.

The combined capital investment value is $1.23 billion, topped by the $106 million spent on Wake Forest BioTech Place and the $100 million commitment by Wake Forest Baptist Medical Center toward a major medical education facility. Both buildings are in Wake Forest Innovation Quarter.

The investment is divided into eight categories: health and technology (eight projects, total $445.4 million); infrastructure (10 projects, total $188.4 million); institutional and public development (15 projects, total $181.6 million); residential (15 projects, total $140 million); multiple use (eight projects, total $95.1 million); office (five projects, total $88.4 million); arts and entertainment (five projects, total $50.3 million); and commercial (22 projects, total $42.2 million).

The Nissen Building, a PTAA member, was the largest residential project at $32 million, although far from the only project downtown – Winston Factory Lofts, Plant 64, Hilltop House, The Gallery Lofts, and Link Apartments Brookstown to name just a few. The transformation of the former Reynolds HQ building into a Kimpton Hotel and apartments has recently captured the city’s imagination as well as the soon-to-open Mast General Store project that will add another marquee destination for the downtown. In other words the revitalization shows no signs of slowing down.

Meanwhile over in Greensboro the entity charged with leading its downtown revitalization, Downtown Greensboro Inc, is going through a transitional phase and is looking for a new leader. That’s important because there are several projects in the works that will alter downtown Greensboro significantly over the next few years and it’s essential that there be someone at the wheel who can bring together the various constituencies – city government, elected leaders, industry, educational institutions, etc. – and provide a strategic direction for downtown redevelopment. If Greensboro can manage to bring some strategic direction to the downtown then we’re sure to see even more apartments developed in the downtown area in addition to those like Greenway at Fisher Park, CityView and the Southeastern Building.

As for High Point, well they have a new mayor, lots of new city council members and a new city manager and one of their primary tasks is figuring out how, and where, to revitalize their city. With the furniture market they do have a unique challenge so it will be interesting to see how things evolve there.

These are indeed interesting and (finally) dynamic times in the Piedmont Triad.

A Tale of Two States

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The weekend edition of The Wall Street Journal had an article about the burgeoning film industry in Georgia that is likely to make the folks in the film industry here in North Carolina cringe:

ATLANTA—The film industry here has hit the big time, thanks to generous tax credits that have made Georgia one of the top states for movie and television production behind California and New York.

But the growth of what many call “Y’allywood” is being threatened by a shortage of makeup artists and costume and set designers—the rank and file of film and television crews…

In fiscal year 2013, film and television production budgets in Georgia totaled $933.9 million, according to the Georgia Department of Economic Development.

While some states have turned away from incentives, arguing that they hurt budgets, Georgia’s Republican-dominated legislature strongly supports them. Georgia offers film and TV projects transferable tax credits for 20% of production costs, plus an additional 10% if the project agrees to display the state’s promotional logo in its credits. The incentives apply for all workers on a set, whether they are Georgia residents or not.

North Carolina is one of the states that has turned away from incentives, with the state legislature failing to pass the legislation that would have renewed them in 2014. The Hollywood Reporter has a detailed story describing the issue and the probable effect:

One big reason the North Carolina incentive legislation failed is because the Koch Brothers-backed nonprofit Americans for Prosperity bought radio commercials as the debate that slammed film incentives was going on. The ads were part of a larger campaign to eliminate a range of state-funded development programs.

“The money coming in from the outside has hurt the North Carolina programs for business development,” said Rep. Susi Hamilton, a Democrat who fought to retain incentives. “The Americans for Prosperity spent a lot of money to try and end the program and unfortunately they have the ear or our leadership and appear to be successful.”

Hamilton, however, doesn’t believe this means other Southern states will follow suit. In fact, she sees the opposite happening as North Carolina stands to lose more than 4,000 good jobs.

“The implications for other states,” says Hamilton, “particularly in the Southeast, are that they are going to pick up the work that otherwise would have come to North Carolina. That’s good news for the other states.”

Griffin says the irony is that there has been an influx of work into North Carolina in the past three or four years, and 2014 could be a record year.

Hamilton estimates that, in 2013, $360 million was directly spent by productions, while the state paid out $62 million in incentives. And that doesn’t count millions more spent on services and by workers who have moved to the state for jobs that pay an average of more than $65,000 per year.

The article also points out that the legislature did pass a grant program for the film industry, but because of the way it was structured it is “nearly useless.”

As tempting as it is to see everything as black and white, to assume that all Republicans or all Democrats see things the same way, it’s situations like this that reveal how varied the views within a political party can be. Republicans are in charge in both Georgia and North Carolina, but they obviously take very different stances on economic incentives. The folks in the North Carolina film industry are likely to lose out because of it.

Squeezing the Middle

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The Wall Street Journal, that bastion of the liberal press <sarcasm>, has the story behind the squeeze on America’s middle class. In a nutshell the economy has rebounded nicely and consumer spending is up, but when you dig into the numbers you find that the spending is happening at the high and low end. Some interesting excerpts from the article:

Since 2009, average per household spending among the top 5% of U.S. income earners—adjusting for inflation—climbed 12% through 2012, the most recent data available. Over the same period, spending by all others fell 1% per household, according to Mr. Cynamon, a visiting scholar at the bank’s Center for Household Financial Stability, and Steven Fazzari of Washington University in St. Louis, who published their research findings last year.

The spending rebound following the recession “appears to be largely driven by the consumption at the top,” Mr. Cynamon said. He and Mr. Fazzari found the wealthiest 5% of U.S. households accounted for around 30% of consumer spending in 2012, up from 23% in 1992…

Revenue for such luxury hotel chains as St. Regis and Ritz-Carlton rose 35% last year compared with 2008, according to market research firm STR Inc. Revenues at midscale chains such as Best Western and Ramada were down 1%…

For the first time, U.S. builders last year sold slightly more homes priced above $400,000 than those below $200,000. As a result, the median price of new homes exceeded $280,000, a record in nominal terms and 2% shy of the 2006 inflation-adjusted peak.

Total sales last year, however, were up just 1% compared with 2013, and more than 50% below their average from 2000 to 2002, before the housing bubble…

There are some real issues with this kind of market, not the least of which is that it doesn’t do enough to create the kind of economic ripple that benefits everyone. For instance the fact that builders are focusing on fewer, but larger and more expensive houses definitely has a down side:

Homes are generally the biggest purchase Americans make. Housing dollars ripple through the economy by triggering spending on appliances, furniture and landscaping.

Fewer homes means fewer new buyers and that means fewer appliances, furniture and other household goods and services sold. In the end that means fewer jobs. Fewer new homes being built also means that demand for existing homes will rise, which leads to higher prices and thus even more would-be buyers are priced out of the market. That puts more demand on rentals which leads to higher rent; higher rent means less money to save each month which helps put a down payment ever further out of reach. In other words a very nasty cycle.

Of course markets are inherently cyclical and at some point in the future this will all turn around, but what’s become very apparent is that the Great Recession continues to have a negative effect on our country long after it officially ended. The middle class has been bearing the brunt of it, and it looks like people are starting to figure it out. It will be interesting to see if anyone in the political field figures out how to use that to their advantage; someone like, say, Elizabeth Warren.

Getting Squeezed in the Middle

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The Wall Street Journal has a report that should surprise no one if they’ve been paying attention:

The American middle class has absorbed a steep increase in the cost of health care and other necessities as incomes have stagnated over the past half decade, a squeeze that has forced families to cut back spending on everything from clothing to restaurants.

Health-care spending by middle-income Americans rose 24% between 2007 and 2013, driven by an even larger rise in the cost of buying health insurance, according to a Wall Street Journal analysis of detailed consumer-spending data from the Bureau of Labor Statistics.

That hit has been accompanied by increases in spending on other necessities, including food eaten at home, rent and education, as well as the soaring cost of staying connected digitally via cellphones and home Internet service…

Consumer spending continues to make up just over two-thirds of the U.S. economy. But where households spend that money has shifted significantly.

To see how it has moved, the Journal analyzed Labor Department data on 2013 out-of-pocket spending for the middle 60% of the population by income—households earning between about $18,000 and $95,000 a year, before taxes.

The data show they are losing ground. Overall spending for the group rose by about 2.3% over the six-year period from 2007, even as inflation totaled about 12%. At the same time, income for the group stagnated, rising less than half a percent…

“Part of the story is that your income growth is slowing,” said Steven Fazzari, an economist and chairman of the sociology department at Washington University in St. Louis. “They’re spending more on necessities, cutting back on other types.”

It’s tempting to blame the Affordable Care Act for the increase in health care costs, but as the article points out, health care costs were soaring before ACA was enacted. While health care costs is probably one of the bigger issues faced by middle class Americans, probably the biggest is wage stagnation combined with fewer benefits.

Higher health are costs in and of themselves wouldn’t be as big a deal if people were making more money and still had “Cadillac” benefits from their employers. What we’ve been seeing, and what the Journal’s report highlights, is that the middle class is being hit from all sides and they’re truly feeling the squeeze. Employers have been scaling back health coverage for years, often requiring employees to pay higher percentages of their own premiums and paying 100% of the premiums on their dependents, which adds up to hundreds of dollars a month in added expenses. Tack on higher food costs, housing costs, communications costs, transportation costs, etc. and the expense side of the ledger grows very quickly while the income side stays where it is. Taken all together what you get is a middle class that is being squeezed to the point that many will be pushed into a completely different category – the working poor or just plain poor.

That’s not good for any of us.

Recessionary Snips

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From the Atlantic Wire:

A study published in September found that half a million fewer babies were born thanks to the Great Recession, and now new research points to one factor that could have contributed to the decrease—about half a million more men had vasectomies between 2007 and 2009.

Researchers from Cornell Weill Medical College presented their study at the American Society for Reproductive Medicine’s annual meeting. They analyzed data from nearly 9,000 men who responded to the National Survey for Family Growth between 2006 and 2010 and found that before the recession, 3.9 percent of men had had a vasectomy; after the recession it was up to 4.4 percent. That comes out to 150,000 to 180,000 extra vasectomies per year.

Anyone who’s had kids will tell you there’s a simple relationship between kids and money: more kids usually equals less money. Given how hard times got during the recession the rise in snip jobs doesn’t come as too much of a surprise.

Basic Income Guarantee

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Until stumbling across a post referencing it at Fred Wilson’s AVC I’d never heard of “basic income guarantee.” So what is it exactly? From Wikipedia:

An unconditional basic income (also called basic income, basic income guarantee, universal basic income, universal demogrant,[1] or citizen’s income) is a proposed system[2] of social security in which all citizens or residents of a country regularly receive an unconditional sum of money, either from a government or some other public institution, in addition to any income received from elsewhere.

A basic income is typically intended to be only enough for a person to survive on, so as to encourage people to engage in economic activity. A basic income of any amount less than the social minimum is sometimes referred to as a ‘partial basic income’. On the other hand, it should be high enough so as to facilitate any socially useful activity someone could not afford to engage in if dependent on working for money to earn a living.

Interesting concept, but this quote from Wilson’s post echoes my initial reaction:

I don’t have a formed opinion on this idea. I know that welfare didn’t work out too well in the last century. So I’m nervous about any system that encourages or incents people not to work. But if we really are headed into a world where there aren’t any low skilled jobs, then I guess we need to be talking about ideas like this.

One of Wilson’s colleagues has been writing about the concept and has a couple of posts that explore how this all might work. You can read them here, but this excerpt highlights why this might be a concept worth exploring:

A higher minimum wage, as vigorously argued for in an interesting recent piece on Politico, can inject some short term liquidity into the economy and I am sympathetic to that but it is also a very blunt instrument and still doesn’t help with the many unpriced activities. The same goes for government mandated shorter working hours or longer vacations (although I am pretty sure that Google’s founders did not have a government mandate in mind)…

This brings me once again to the idea of a guaranteed basic income. This is a potentially attractive alternative for a number of reasons:

First, it sets human creativity free to work on whatever comes to mind. For many people that could be making music or learning something new or doing research.

Second, it does not suppress the market mechanism. Innovative new products and services can continue to emerge. Much of that can be artisanal products or high touch services (not just new technology). 

Third, it will allow crowdfunding to expand massively in scale and simultaneously permit much smaller federal, state and local government (they still have a role — I am not a libertarian and believe that market failures are real and some regulation and enforcement are needed, eg sewage, police).

Fourth, it will force us to more rapidly automate dangerous and unpleasant jobs. Many of these are currently held by people who would much rather engage in one of the activities from above.

Fifth, in a world of technological deflation, a basic income could be deflationary instead of inflationary. How? Because it could increase the amount of time that is volunteered.

Very interesting.

Bitcoin 101

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Here’s a nice primer on Bitcoin from BoingBoing:

Bitcoin is a peer-to-peer network, a set of protocols (standards for interoperability), client interfaces (called wallets) and a currency that operates on top of all of those technologies. The bitcoin system allows any person to send or receive a fraction of a bitcoin (the currency unit) to another person, anywhere in the world. The bitcoin system operates on the Internet without the need for banks or bank accounts and allows people to send money like they send email.

To start using bitcoin, you need a bitcoin client, or “wallet” application. The bitcoin client allows you to use the bitcoin network, just like a web browser allows you to use the web. There are many different types and makers of bitcoin wallets, for desktop and mobile operating systems and also available as web applications. To receive bitcoin, you need a bitcoin “address”, which is a bit like an email address or bank account number. If someone knows your bitcoin address, they can send you money, but cannot do anything more, not even identify who you are or where you are. Therefore, you can freely share your bitcoin addresses with anyone without fear or security risk. Once you have a “wallet,” it can create any number of bitcoin addresses for you, even one per transaction. Give those addresses to anyone you want to send you bitcoin. Tip: bitcoin addresses are created by your wallet and do not need to be registered with anyone, or linked to your identity or email address. They can be used immediately to receive money from anyone and become part of the network once they have some bitcoin sent to them. Bitcoin addresses always start with the number “1” and they look like a long string of number. One of my bitcoin addresses is “1andreas3batLhQa2FawWjeyjCqyBzypd”. This is known as a vanity address, because it has my name in the beginning, but it works just the same as if it was a long string of random letters and numbers. I use it to receive tips and donations from people all around the world.

The remainder of the article explains the entire process, including how to pay for things using bitcoins, tips on securing your bitcoin keys, how to find vendors that accept bitcoins, etc.

The Dark Side of the Trust Economy

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While we’re all celebrating the coolness of the “trust economy” – you know, those services like airbnb and Uber – someone asks a pretty good question:

“It all sounds great, at least according to the fawning sycophants who provide all of us out here in the provinces with such worshipful coverage of the amazing achievements of the Techno-Demigods. And it is great as long as you don’t bother to ask (or care) whypeople are suddenly employing themselves as improvised innkeepers and taxi drivers. After all, does anyone really want to let some strangers stay in their home for a few bucks? To drive some trust fund asshole to the airport on Saturday after a 45 hour week? I doubt it. People turn to the “Trust Economy” because they’re somewhere between financially stressed and desperate. They don’t make enough or they’re without any steady source of income at all. They do it for the same reason that people go to work at a temp agency or loiter in a Home Depot parking lot to do day labor: because they have no better options…

It’s remarkable how many of the recent Big Developments from the omniscient men of the Valley have managed to make the lives of the well-off easier without actually creating any jobs that pay a livable salary or have benefits. Oh, and they convince the media to cover these breakthroughs in a way that makes it sound like they’re doing you a favor. You’re free at last, free at last. Say goodbye to the chains of full time employment and hello to the boundless freedom of working piecemeal, making phone calls on Mechanical Turk for a quarter and driving Damon the Junior Content Developer to the airport so he can spend the weekend in Cozumel with his frat bros.”

How’s that for some cold water on yet another new-economy-shiny-thing?

Thanks to Lex for the pointer to what promises to be another time-sucker of a blog to follow.

Mind the Gap

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It will be interesting to see if the Republicans in the states that decided not to expand Medicaid as part of ACA will pay a political price for the outcome. From the Wall Street Journal:

Some GOP-led states are revisiting their decision as complaints pile up over the coverage gap—and its consequences for businesses—in such states as Utah and Florida. The state senate in New Hampshire last week reached a tentative deal to expand Medicaid. In Virginia, newly elected Democratic Gov. Terry McAuliffe hopes to get legislators to reverse his Republican predecessor's stance against expansion.

Lawmakers are also getting a push to boost Medicaid rolls from hospitals that expected a vast new pool of paying customers under the health-care law. Instead, the failure to expand Medicaid coverage by some states not only adds fewer insured patients, it also eliminates the payments hospitals had long received to cover the cost of uninsured people they treat free…

Eugene Steuerle, an Urban Institute economist and former Treasury Department official who served under presidents in both parties, said he couldn't recall a social program that excluded beneficiaries because they earn too little…

Governors in some states that refused to expand Medicaid now say the coverage gap is hard to ignore. "I am not a fan of the Affordable Care Act," Utah Gov. Gary Herbert said in an interview. But, he said, he is working with state legislators on a plan to expand Medicaid after advisers calculated that about 60,000 of his constituents would fall through the gap.

"That is not fair," Mr. Herbert said. "When I say doing nothing is not an option, I'm talking about the 60,000 people in Utah who live below the poverty line and don't have access to health care."

5 Ways We’re Proving Marx Right

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Because calling someone/something Marxist is as damning a critique as we have in America it's important to share the last part of this piece from Rolling Stone first so that we can keep an open mind for the author's main thesis – that in five ways Marx accurately predicted the current state of our capitalist world:

Marx was wrong about many things. Most of his writing focuses on a critique of capitalism rather than a proposal of what to replace it with – which left it open to misinterpretation by madmen like Stalin in the 20th century. But his work still shapes our world in a positive way as well…

Without further ado here are the five ways Marx accurately predicted the effects of capitalism:

  1. The Great Recession (Capitalism's Chaotic Nature)
  2. The iPhone 5S (Imaginary Appetites)
  3. The IMF (The Globalization of Capitalism)
  4. Walmart (Monopoly)
  5. Low Wages, Big Profits (The Reserve Army of Industrial Labor)

Reading the rationale for all five is definitely worth the time.