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September 25, 2008
Is Congress bailing out suburbia?
There’s a lot going on this week in Washington DC and the economy. It’s challenging to follow all the strands and interpret the econo-speak and political-speak in terms of what it actually means in the big picture.
I may be off base here, but could one not interpret the current plans as bailing out the suburban American way of life — propping it up?
First, the automotive industry is also receiving their corporate welfare cheque. Atlantic Monthlyeconomic writer Megan McArdle picked up on this. Sneaking through under the shadow of the banking bail out is a gift to the big three auto makers of a $25 Billion low interest loan. Her analysis:
Yes, I favor intervention when it looks like there’s a risk of a really severe recession. But there is no such rationale here, not even arguably. It’s pure pork, with a soupcon of economic nationalism thrown in. If the Big Three can’t make autos people want to buy, then they should liquidate and open up the market to those who can.
The big three auto makers have built lobbying for roads and freeways (and the resulting way of life) part of their business plan. While other global companies make cars to fit more compact cities and higher fuel prices, the big three lobbied for cities to be built around the car. Here we go again.
Second, the banking bail out may also involve propping up suburban living — that’s where the houses in default are. If the tax payers become stake holders in a bailout, they may collectively become owners of thousands of distant suburban homes that only have value if automobile travel and highways remain subsidized by the US.
Have I had too little sleep lately, or is anyone else seeing an implication for cities of these plans?
Topics: sprawl, transportation |
September 27th, 2008 at 10:50 am
I believe you are referring to what D. Hayden called “The Growth Machine,” in her Field Guide to Sprawl. So yes, you’re right, because the health of the economy has become almost synonymous with the health of the “housing market.”
Unfortunately, it may be sensible at this time to prop it up because a sudden crash might be worse…although some people I know suggest not.
September 27th, 2008 at 7:40 pm
I don’t disagree that the bail out may be necessary. But given the players, I sure am skeptical that $700 billion is needed.
September 27th, 2008 at 9:59 pm
Well, the value of credit default swaps (a financial instrument that allowed an insurance payment to be recorded as profit now on the assumption that the third party in question was never really going to default) on the Wall Street books went from less than $1T annually at the turn of this century to $45T last year… so I am more of the understanding that $700B is a sneeze against a cyclone.
Fannie Mae and Freddie Mac were constituted by the government for the express policy purpose of directing mortgage financing to households that the market would otherwise not have viewed as economical to lend mortgage financing, but unless you view mass homeownership as part of the point of suburbia and one which goes away in the relatively inflexible physical environment of urban vested interests, I wouldn’t call it a suburban program.
I think “Field Guide to Sprawl” is actually a recent book. I think that when I met Harvey Molotch he had been talking about ‘the growth machine’ in a more useful way since (looking it up) the 1970s.
September 29th, 2008 at 1:26 pm
This is an interesting question.
I would say that whether or not federal mortgage help intrinsically leans toward suburban or urban development, it certainly has been the case that a huge portion of the mortgages are, in fact, in suburban/exurban areas. Most of those “bad mortgages” we hear about that the taxpayers may be acquiring are in far-flung exurban areas, am I wrong? I wonder if this bailout will just encourage that development practice (or at least take away some of the sting of the discouragement).
October 16th, 2008 at 1:51 pm
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March 27th, 2010 at 4:37 pm
Scenario 1: The US enters long-term economic stagnation. It can’t afford to service infrastructure on sprawled suburbs. People leave outer suburbs, living density increases further in, outer suburban blight occurs.
Scenario 2: The US shrugs off the current economic woes, and demand recovers. Oil prices hit $160 per barrel again. Sprawled suburbs no longer make sense under such an expensive oil regime. People leave outer suburbs, living density increases further in, outer suburban blight occurs.
Sprawled suburbs are only made possible by high economic growth (which allows their expensive infrastructure to be maintained) combined with cheap oil (which makes commuting economically viable). Remove either of these and many suburbs will become unsustainable; not ‘be nice to the whales’ unsustainable, but unsustainable in the sense that many people who live there now simply won’t be able to afford the energy prices/infrastructure maintenance costs.
We’ve had an inexorable shift from the city to the suburbs for 50 years. That trend is now about to reverse; the next 50 years will be one of increasing living density in Western nations.