Protecting students in an anti-regulatory environment

December 22, 2016

It’s not easy to predict exactly what federal higher education policy will look like under the Trump administration.

The idea that student loans should revert to the private sector would likely face an uphill battle, given the costs involved. Reducing the amount of time before unpaid balances are forgiven under income-driven repayment from 20 or 25 years to 15 years, as the president-elect proposed in a campaign speech, seems unlikely in light of the recent Government Accountability Office report indicating that forgiveness under the current, less generous provisions will be much more expensive than anticipated.

But the oversight of the for-profit sector of higher education into which the Obama administration put so much energy appears likely to be undone. The statements of the president-elect and his spokespeople, as well as his cabinet appointments, point to a world in which business interests prevail over consumer protection.

It is hard to argue that the gainful employment regulations or the debt relief for students who borrowed to attend colleges that went out of business are perfect. But the evidence about the number of students whose lives have been damaged by unscrupulous for-profit colleges and about the impact of the for-profit sector on excessive student borrowing and student loan defaults is compelling. If the administration does away with these efforts at consumer protection, it is imperative that they be replaced with effective alternative policies.

The for-profit sector of higher education does not represent the free market. The vast majority of revenues in the sector come from federal student aid programs. Middle-income families are not sending their 18-year-olds off to for-profit institutions. The sector is populated by low-income adults, disproportionately African American, who have limited information and limited options. More than one-third of the defaulters on federal student loans in fiscal year 2013 were from the for-profit sector, which enrolled about 10 percent of students.

There are high-quality and low-quality institutions in every sector of higher education. But the for-profit sector has much more than its share of the latter. This is not surprising, since unregulated markets do not operate well when consumers cannot reliably evaluate the quality of what they are buying. The difficulty students face in making judgments based on the effectiveness of education they have not yet experienced invites institutions to appeal to them through marketing ploys rather than through the quality of what they offer.

Consumers rely on the government to ensure that the meat they buy is not tainted, that their cars are safe, and that the drugs they take will not harm them. They also depend on the government to protect them from “colleges” that collect tuition revenues without delivering educational services that meet students’ needs.

Picking a college is not easy. No matter how sophisticated the websites with information about the graduation rates, student debt, and earnings associated with individual institutions, too many students—particularly those without a support system of family and friends who have graduated from college—will end up enrolling in institutions that focus on advertising and false promises. They will waste their valuable time and energy, have their dreams shattered, and accrue unmanageable debt unless the federal government—which is providing the funds they need to enroll—does a good job of protecting them from fraud and guiding them into productive pathways.

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Trump’s child care plan: Poorly directed with lots of unanswered questions

November 30, 2016

Child care costs can present significant barriers to employment, particularly for low- and moderate-income families. In response, President-Elect Donald Trump offered a multi-pronged approach to subsidizing child care, which would tilt benefits to high-income families—those least likely to need help.

While the plan is clear on its intent to subsidize families who care for children but do not incur out-of-pocket costs, how large those subsidies will be and whether low-income families could benefit remain unclear. The plan also relies on the tax code, a system ill-suited for providing subsidies at the time child care bills are due.

Under current law, working parents can use two tax benefits to offset these costs: the child and dependent care tax credit and the exclusion for employer-provided child care. The Treasury estimates that these provisions saved 6.9 million families almost $5.3 billion on their 2015 taxes (a relatively small amount by tax standards). More current law benefits accrue to high-income families than to lower-income families.

Trump would add three more benefits: a child care savings account, a new deduction, and a separate credit for some low-income families. Besides making an already confusing system even more complicated, the new benefits would tilt even more toward high-income families.

For example, the child care savings account would allow parents to deposit up to $2,000 annually on behalf of children. The government would match half of the first $1,000 deposited each year by lower-income parents (though the plan doesn’t define “low income”). Parents could contribute pretax dollars to the accounts, which would be allowed to grow tax-free as well.

For tax folks, that’s like getting the benefits of a traditional IRA and Roth IRA tied up in one package—an unprecedented tax benefit. The money could be spent on child care, tuition, and after-school programs. It’s not clear what would happen if the funds weren’t used for these purposes (would there be a penalty?), or even how much low-income parents could use them. In contrast, many wealthy parents would already save this money and would already be paying for some or all of these items.

The main benefit of the savings accounts is reducing taxable income and thus paying less (marginal) income tax. Because tax savings would be proportional to income tax rates, the highest earners would benefit the most. For example, a family in the 39.6 percent top tax bracket would save $396 in tax for every $1,000 they deposit (plus the additional benefit of not paying tax on interest earned in the account).

In contrast, a family in the 10 percent bottom tax bracket would save just $100 on the same $1,000 deposit.

But of course, many low-income families don’t earn enough to owe federal income tax, so they wouldn’t benefit from these accounts. Some low-income families might benefit from the government match, but the plan does not describe how  the match would work. Would parents have to keep the money in the account for a certain amount of time?  Would the match be available for each child, or would there be just one match per family?

The new deduction would allow parents earning less than $250,000 per year ($500,000 if married) to deduct the cost of child care up to their state average. The plan spells out that even stay-at-home parents would receive a benefit, so unlike the current child care tax subsidies, parents could collect the tax savings without spending anything.

As with the plan’s savings accounts, families who pay the highest tax rates would benefit most and low-income families would benefit little or not at all. The plan doesn’t specify how large the deduction would be for stay-at-home parents, whether the deduction would vary by the age of the child, or and how the state average would be calculated.

Finally, Trump’s plan would aim to help low-income parents by offering a “child care spending rebate” though the existing earned income tax credit. Trump’s  campaign website says that “this boost would be half of the payroll taxes paid by the lower earning parent, and would be subject to an income limitation of $31,200.” That’s significant—low-income married couples would benefit only if both spouses work. In contrast, high-income couples with one worker would benefit from other provisions.

Finally, as with all tax benefits, families wouldn’t get financial assistance until they file their tax return in the spring, many months after child care bills were due. For low-income families struggling to pay for child care, benefits from Trump’s plan would not only be too little—they’d also come too late.

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Six Bipartisan Opportunities for President-Elect Trump

November 22, 2016

This post originally appeared on TaxVox. 

I have never believed that candidates should lay out detailed policy agendas in their campaigns. While broad outlines are helpful, the specifics are too complex for the stump and often unappealing to voters. So to move beyond campaign promises that seldom add up for any candidate, here is how President-elect Trump could move forward in six policy areas even while facing extraordinary budget constraints. Each issue has a framing that gives it a better chance of garnering bipartisan support.

Workers. Many workers made it clear in this election that they feel forgotten by government. While the left and right disagree over how well our government promotes opportunity for workers, they generally agree it could do better. Trump tapped into workers’ frustrations but hasn’t yet identified how to significantly help them. How about this as a start? Simply ask agencies to assess the extent to which their programs could better promote work, even when that is not their primary mission. This applies to a wide range of programs, from wage, housing, health, and food supports to how well the military helps veterans get a job.

Budget Reform. Even if some adviser tells the President-elect that there is magic money to be had through extraordinary economic growth, tackling budget shortfalls will soon become unavoidable. Never before have so many promises been made for the future, both for unsustainable rates of spending growth and lower taxes. Indeed, all future revenue growth and then some have already been committed for health, retirement, and the interest costs alone. Engaging in more giveaways only exacerbates this problem. One way to cut the Gordian knot and convince the public to buy into longer-run budget goals is to show how interest savings generated by long-run fiscal prudence eventually allows both more program spending and lower taxes than do big deficits.

International Tax Reform. If the US is going to collect tax revenue from US-based multinationals, it will need to get a handle on this issue. It makes no sense administratively to tax these firms based on the geographical location of headquarters, researchers, patents, borrowing, or salespeople. The solution involves taxing corporations less but individual shareholders more, while still engaging corporations to withhold those taxes. Any reform must limit the firms’ ability to shift income and deductions to the most tax-advantageous locations. 

Individual Tax Reform. Trump could accomplish some individual tax reform by focusing less on reducing the existing $1 trillion-plus level of tax subsidies and more on limiting their automatically-increasing growth rates. He could use the revenue to either reform the tax code or better target the subsidies. For example, he could redesign housing-related tax preferences so they truly promote homeownership.

Health Reform. Conservative and progressive health experts agree that the Affordable Care Act suffers from at least two problems: It did not sufficiently tackle the issue of rising medical costs, and many people remain uninsured. Trump could generate more bipartisan support if he aims to reform the system to cover more people while generating enough cost saving to make that goal attainable in a fiscally sustainable way.

Retirement and Social Security. President-elect Trump promised to not cut Social Security benefits while Secretary Clinton said she would raise them. But raised or cut relative to what? An average-income millennial couple is scheduled to receive about $2 million in Social Security and Medicare benefits versus $1 million for a typical couple retiring today. Younger people, who often expect no Social Security benefits, seem willing to accept changes that would slow the program’s rate of growth. That’s an opening for Trump to sell the reform as a long-term effort that opens up the budget to some of their needs, such as reducing student debt, while still protecting the current elderly. For many elderly, benefits can even be enhanced through private pension reform to increase individual retirement savings and enhancing Social Security benefits for low-income retirees.

Paraphrasing Herb Stein, who was President Nixon’s chief economic adviser, “what can’t continue won’t.”  And that’s true with the nation’s unsustainable fiscal path. Eventually, we will need to take the types of steps that I’ve outlined. With some creative thinking about how to newly frame important issues, President Trump could advance some real possibilities of reform despite a season of ugly campaigning.

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What President-Elect Trump’s immigration promises might mean

November 18, 2016

In his “Contract with the American Voter,” President-Elect Donald Trump lists the steps he wants his administration to take and the legislative measures he will work with Congress to introduce during his first 100 days in office. Four of these steps and two legislative measures are related to immigrants, refugees, and immigration.

What has Trump promised, and what is likely to happen?

 

Immigration promise 1: “Cancel every unconstitutional executive action, memorandum and order issued by President Obama.”

Trump has pledged to end Deferred Action for Childhood Arrivals (DACA), a 2012 executive action that has provided work authorization and temporary protection from deportation to approximately 750,000 youth who arrived to the United States as children and have lived in the country since 2007. This group has every reason to fear that they will lose their opportunities for work, driver’s licenses (in many states), and protection from deportation, leaving them vulnerable to removal. However, Trump has not said that he will prioritize DACA youth for deportation, focusing instead on “criminals.”

In his first television interview since winning the election, Trump’s message on deportations and the future legalization of undocumented immigrants was mixed. When asked about his pledge to deport millions of undocumented immigrants, he said, “After the border is secured and after everything gets normalized, we’re going to make a determination on the people that you’re talking about who are terrific people.” This could refer to—in part or in whole—the group of youth who have DACA. But what metrics would be used to determine that the border is secure and when would people opposed to legalizing undocumented immigrants be convinced that the border is secure enough?

 

Immigration promise 2: “Cancel all federal funding to sanctuary cities.”

Though sanctuary city has no formal definition, it normally refers to places that limit their cooperation with federal immigration enforcement agents. Nearly 300 jurisdictions in the country could be considered sanctuaries, including New York City, Los Angeles, Chicago, and Miami-Dade County. It is unclear how Trump would define “sanctuary cities” or which funds would be withheld, but a 2015 bill sponsored by Senator Pat Toomey would have blocked sanctuary jurisdictions from receiving Community Development Block Grants and Economic Development Administration Grants. Mayors of New York, Los Angeles, Austin, Washington, DC, and other cities have pledged to continue being sanctuaries.

 

Immigration promise 3: “Begin removing the more than 2 million criminal illegal immigrants from the country and cancel visas to foreign countries that won't take them back.”

Fact checkers have refuted the claim that there are two million undocumented immigrants who are convicted criminals. Some estimates say that there are only 820,000 undocumented immigrants with criminal records in the country, including 690,000 with a felony or serious misdemeanor conviction. Moreover, felony under immigration law can mean something different than under criminal law. Some of these estimated 690,000 have likely committed relatively minor crimes. For example, theft and simple battery are felonies under immigration law.

An estimated 45 percent of undocumented immigrants in the United States have (mostly US-born) children, so these deportations will affect many US-citizen children as well. The harmful consequences of deportations for children have been well documented.

Additionally, current funding for immigration enforcement under the Obama administration supports processing, detaining, and deporting about 400,000 immigrants a year, so additional appropriations would be needed to increase this pace.

Trump’s promise to cancel visas to countries that do not take US deportees is a response to countries, (e.g., India, China, and Haiti) that do not always accept deportees with criminal records from the United States. The United States cannot return immigrants to their home countries without that country’s cooperation. To compel these countries to accept deportees, Trump is proposing denying travel visas to these countries’ residents. No one knows how countries would respond to such a policy. Notably, India and China are two of the country’s largest sources of temporary workers, international students, and permanent immigrants.

 

Immigration promise 4: “Suspend immigration from terror-prone regions where vetting cannot safely occur. All vetting of people coming into our country will be considered extreme vetting.” 

Though the United States already has a highly structured procedure for screening refugees and an ongoing vetting process to assess whether refugees pose a security risk, Trump’s policy shift could have a big impact on the US refugee program. The United States offers protection to people who have a well-founded fear of persecution, often as a result of war or violence. Refugees are escaping many countries and areas that could be considered terror-prone regions, such as Syria, Afghanistan, and Somalia. Could these places be “areas where vetting cannot safely occur?”

During his campaign, Trump promised to bar all Muslims from entering the country, linking refugees and other immigrants of that faith to terrorism. Trump has overstated the number of Syrians who have entered the United States and has called them “a great Trojan horse” that will lead to future terror attacks. Media outlets are reporting that Trump’s advisers are considering a new special register of immigrants from Muslim-majority countries. A registry for men from certain predominantly Muslim countries was implemented shortly after the September 11 attacks, but was effectively ended in 2011 because of allegations of discriminatory profiling and its lack of effectiveness in rooting out terrorists.

 

Immigration promise 5: The End Illegal Immigration Act.

This proposed legislation, which would require Congress to act, “fully funds the construction of a wall on our southern border with the full understanding that the country of Mexico will be reimbursing the United States for the full cost of such wall.” It has other provisions, such as mandatory prison sentences for reentering the United States after deportation and ensuring that “open jobs are offered to American workers first.” Trump has emphasized the border wall (or fence) from early in his campaign and seems unlikely to abandon the effort. Prior attempts to expand border fencing beyond the current 650 miles, such as those following passage of the 2006 Secure Fence Act, have stalled because of lawsuits by environmental groups, because of construction difficulties on mountainous terrain, and because stretches of the border are privately held.

 

Immigration promise 6: The Restoring National Security Act.

This legislation focuses largely on US military capacity and investments and “establishes new screening procedures for immigration to ensure those who are admitted to our country support our people and our values.” While few details are available, Trump offered some clues in his August speech on immigration in Phoenix, when he emphasized that “not everyone who seeks to join our country will be able to successfully assimilate. It is our right as a sovereign nation to choose immigrants that we think are the likeliest to thrive and flourish here.” He also spoke about the US refugee program, saying, “applicants will be asked for their views about honor killings, about respect for women and gays and minorities, attitudes on Radical Islam, and many other topics as part of the vetting procedure.”

These new screening procedures may signal a shift from a system that prioritizes family ties to one that focuses on immigrants with language and professional skills likely to contribute most to the US economy. It may be similar to Canada’s points system, which bases admissions on high human-capital characteristics, including skills, education, work experience, and language ability. There may also be some type of ideological test to ensure that US entrants are willing to endorse certain values, resembling a 10-year-old policy in the Netherlands.

 

What’s next?

Details remain to be filled in for all these promises made in the Contract with the American Voter. Some of them may face an uphill battle in Congress. Meanwhile, the proposals have activated the fears and hopes of immigrants and refugees and of those who provide services to, advocate for, and govern the places they live. However these plans unfold, there will be ramifications for immigrants, their families, and communities across the country.

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Two ways in which a business perspective could help the housing market

November 11, 2016

While President-elect Donald Trump has been largely silent on housing and housing finance issues, the perspective of someone with a business background could actually be helpful in confronting two of the biggest issues in housing finance today: the supply shortage and credit availability.

There is an acute shortage of housing, both for owners and for renters: New supply, as measured by new single family completions plus new multifamily completions plus new manufactured homes minus obsolescence, translates into a 430,000 unit per year shortfall for the roughly 1.1 million new households that will be formed. This severe shortage will put continued upward pressure on both rents and home prices. This will increase the already acute affordability issues, particularly for renters. Forty-nine percent of renter households are already cost burdened (paying over 30 percent of their income on rent) and 26 percent of renter households are severely cost burdened (paying over 50 percent of their income on rent)—and the numbers have been climbing.

With his business background, Trump will presumably understand that supply issues need to be addressed. The tools for addressing these at the Federal level are limited, as supply constraints are heavily at the local level, including zoning restrictions and building codes. However, at the Federal level actions can be taken like targeting transportation funding in exchange for higher density near transportation hubs and recognizing the positive impact of density on environmental concerns, including clean water. It may also be time to think about Federal actions that would allow an override of local zoning laws if a clear public benefit can be established.

Mortgage credit availability is an issue we have repeatedly written about. We have shown that the market is taking less than half the credit risk it was taking during 2001, a period of reasonable credit standards. And we have shown that this tight credit has resulted in close to one million missing loans per year since 2009. There are many reasons for this including the fact that lenders often put overlays on top of the FHA and GSE credit boxes, due to fears about put-backs due to reps and warrants, the high and uncertain costs of servicing non-performing loans, and fears about being sued for treble damages under the False Claims Act. The FHFA and the GSEs have gone a long way toward making lenders comfortable that they are only responsible for manufacturing defects, not subsequent performance. By contrast, the FHA (whose flexibility has been limited by the Justice Department) has not taken the necessary steps to give lenders comfort; the False Claims Act is the single largest deterrent for lenders to eliminate overlays.

Trump should understand the need to clarify the rules under which the False Claims Act should be invoked. Fortunately, the perfect tool with which to do that is already in place. The FHA has established a defect taxonomy in which errors are classified into four severity buckets. The only item left to do is to tie this to remediation, for the less severe errors, in which the loan would have been made on the same terms and the cost of remediation low. Fraud, the most severe error, would trigger automatic indemnification. If only the most severe, or two most severe, buckets of errors were subject to the False Claims Act, lenders would have substantially more certainly, allowing them to eliminate some of the credit overlays they have imposed on FHA lending.

In short, if he channels his experience as a businessman, President-elect Trump should understand both the supply and credit availability issues facing the housing market and take steps to address each.

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Both Clinton and Trump would reduce tax incentives for charitable giving

November 4, 2016

This post originally appeared on TaxVox.

Both Hillary Clinton and Donald Trump have proposed income* tax changes that would result in less charitable giving. While the effects are indirect, the Tax Policy Center estimates that Trump’s plan would reduce individual giving by 4.5 percent to 9 percent, or between $13.5 billion and $26.1 billion in 2017, while Clinton’s plan would reduce giving by between 2 percent  and 4 percent, or $6 billion to $11.7 billion.  

The actual reduction in charitable gifts would depend mainly upon how responsive givers would be to smaller tax incentives.  However, higher-income taxpayers would be affected the most. Lower-income households would not likely reduce giving since most do not itemize deductions today and would not under either the Trump or Clinton plans.  

Figure 1 summarizes the increase in the cost (reduction in incentive) of giving under the two plans. The Clinton plan only affects the cost of giving for those in the top 5 percent, while Trump’s plan raises the cost of giving for those at all income levels. 

Charitable giving under Clinton and Trump

Start with Trump, who would reduce the tax benefits of charitable giving in three ways:

First, by reducing marginal tax rates he’d increase the after-tax cost of charitable giving. If you give away $100, you don’t pay tax on that $100 of income, so the after-tax cost of the donation for someone in today’s 39.6 percent top tax bracket is only about $60—the $100 gift minus $39.60 in tax savings. But by reducing the top rate to 33 percent, Trump would raise the after-tax cost of that $100 gift to $67.

Second, by raising the standard deduction to $15,000 ($30,000 for couples), Trump would sharply reduce the number of taxpayers who itemize. People who stop itemizing can no longer deduct their charitable contributions and thus lose the tax break. In 2017, 27 million of the 45 million who now itemize would opt for the standard deduction, a decline of 60 percent.

Finally, Trump would cap itemized deductions at $100,000 for singles and $200,000 for joint filers. IRS data indicate that in 2014 taxpayers with over $1 million in adjusted gross income (AGI) deducted an average of $165,000 for charitable contributions and another $260,000 for state and local taxes. Since the state and local tax deduction alone would exceed Trump’s proposed cap on itemized deduction, many high-income taxpayers would lose their tax incentive to give to charity.

While all these changes might discourage charitable giving, Trump’s generous tax cuts would also leave taxpayers more money to give to charity. This would particularly be true for very high income households: in 2017, tax cuts for people in the top 1 percent would average more than $200,000.

Clinton’s plan would do little to change the giving incentives of taxpayers for the bottom 95 percent of the income distribution. She’d slightly increase incentives for low- and middle-income taxpayers to give to charity by boosting their after-tax incomes.

In contrast to Trump, Clinton would significantly raise taxes on high-income households. She’d impose a 4 percent surcharge on adjusted gross income (AGI) in excess of $5 million, increase capital gains rates based on holding periods, create a minimum tax of 30 percent of AGI phasing in between $1 and $2 million of incomes, and put a 28 percent limit on the value of tax benefits from deductions other than the charitable deduction. On net these not only decrease after-tax incomes, but also lead some current itemizers to take the standard deduction and thereby lose the charitable deduction. The proposal with the largest effective on giving incentives is the 30 percent minimum tax (i.e., the “Buffett Rule”), which would reduce the incentive for affected taxpayers.

Overall both candidates would reduce the tax incentives for giving to charity, probably not what either really intended.

*Update: This analysis only includes changes in the federal income tax. Both Clinton and Trump have also proposed significant changes to the estate tax that would impact incentives to donate to charity and leave charitable bequests. Clinton’s proposal to lower the estate tax threshold and increase estate tax rates would increase giving incentives, while Trump’s proposal to eliminate the estate tax would reduce them.

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The next president's urban opportunity

November 4, 2016

This post originally appeared on CityLab.

If voting patterns follow population trends, Tuesday’s election will be the most “urban” the United States has ever seen. More people live in America’s cities and metropolitan areas today than ever before. And for the first time since World War II, many US cities are growing at the same rate or faster than their suburbs, which for decades absorbed most of the population growth in metropolitan areas.

The Great Recession caused younger families to delay (or avoid) purchasing homes in the suburbs, and demand for urban amenities has grown as both large employers and small startups have returned to central cities. Demographic changes in coming decades are likely to accelerate the growth of cities, as millennials, aging baby boomers, and immigrants increasingly choose to live in urban neighborhoods.

At the same time that our cities are growing, income inequality is on the rise in the United States, and this disparity is greatest in our largest cities. According to a Brookings Institution report from earlier this year, large metropolitan areas in the United States—as well as their central cities—tend to have greater income inequality than the nation as a whole. And the widening gap between rich and poor people within metropolitan areas coincides with a widening gap between rich and poor places. As colleagues at the Urban Institute recently demonstrated, the disparities between America’s most- and least-affluent neighborhoods within metropolitan areas have grown rapidly over the past two decades.

Income inequality has dominated national political discourse this year, taking center stage in the primary debates and party conventions (and to a lesser extent in the contentious general election presidential debates). Many observers, including President Obama, have declared that “combating rising inequality” is the most important challenge facing the next president. This should come as no surprise: after all, income inequality nationwide has surged to levels last seen before the Great Depression, and voters are feeling the squeeze.

But if inequality is greatest within cities and across metropolitan areas, why hasn’t either presidential candidate applied a distinctly “urban” lens to the challenges of this growing problem? And how can the president we elect on Tuesday harness demographic changes and economic shifts in cities to reverse this trend and help reduce inequality in these places?

The answer to the first question may be easier. At a political level, America’s city dwellers are overwhelmingly Democratic voters, so the Clinton campaign may take them for granted, while the Trump campaign may handily dismiss them. This would explain why Clinton’s “Breaking Every Barrier” plan to improve economic opportunity for poor communities and people of color doesn’t specifically earmark funds for cities. It would also explain Trump’s willingness to describe urban neighborhoods with high concentrations of Latinos and African Americans as a living “hell” and declare that "places like Afghanistan are safer than some US inner cities.”

More pragmatically, many of the policy levers that could prove most effective at reducing economic inequalities in cities—such as housing, education, land use, transportation, and economic development—are primarily (although not exclusively) controlled by state or local governments. Under our nation’s federalist political system, and in light of the powerful tradition of local control in many of these policy arenas, an aggressive “urban agenda” by a presidential candidate (or sitting president) could be seen as radical overreach.  

But does this mean that our next president is bound to stand idly by as inequality continues to widen in our nation’s cities? Far from it. After all, many of the patterns of segregation and uneven development we see today were driven by decades of federal policies and (dis)investments, from racial redlining in credit markets to the siting of public housing developments and the funding of interstate highways. Of course, some federal solutions that would help unwind these barriers or affirmatively promote economic equality would require congressional action—a dubious proposition in the current political climate, regardless of who wins. But there is still plenty that the next president could do, early in the new administration, without legislation.

Here are three broad suggestions:

  • Break down silos. The effectiveness of existing federal investments in cities is hampered by entrenched divisions and communication gaps between the federal agencies that administer them. All too often one agency doesn’t know what investments another is making in a particular place. Programmatic priorities may conflict with each other, and grants often include onerous and inconsistent reporting requirements. The Obama administration made significant progress in breaking down these silos by incentivizing government agencies to adopt place-based approaches and by encouraging inter-agency coordination in the targeting of particular areas. But much more could be done. In this regard, the federal government can draw inspiration (and models) from local governments that are leveraging both new technologies and bold leadership to share data and create cross-functional teams that increase coordination and improve accountability across city agencies.
  • Incentivize inclusionary policies. The greatest tool at the federal government’s disposal is its money. Each year, the federal government distributes more than $600 billion, about 17 percent of its budget, to states and localities, providing about a quarter of their general revenues. Agencies could give cities that take certain qualifying steps to overcome economic inequalities a “leg up” for the share of these grants that are awarded competitively. HUD has experimented with this approach by awarding bonus points in discretionary grant applications to jurisdictions that participated in the Sustainable Communities Initiative and contributed to region-wide sustainability plans. Clinton’s Breaking Every Barrier proposal seems to take a similar approach by rewarding jurisdictions that “implement land-use strategies that make it easier to build affordable rental housing near good jobs” with competitive grants from the Department of Transportation. The impact of these incentives could be even greater if bonus points were coordinated and awarded across agencies.
  • Get ahead of the curve. Increasingly, local governments are developing predictive analytics with their own data and private sector “big data” to get ahead of the curve and prevent problems such as traffic collisions, homelessness, and public health hazards. Making public data more visible through open data portals has also unleashed the creativity of other civic-minded actors that have developed technology solutions to some of the most difficult challenges. The federal government has access to a wealth of data on cities. Federal agencies manage 8.4 billion records, and much of this data is or could be geocoded. More recently, the Obama administration launched the Opportunity Project, which made federal and local datasets available through open data agreements to support the development of tools that promote economic opportunity. The next administration could take this work several steps further by investing in the integration of data, from both within and outside the federal government, to make projections about stresses cities face that may drive inequalities, from property abandonment to gentrification pressures, and redeploy both financial and technical resources to help direct growth towards more inclusive outcomes.

Of course, there are also plenty of proposals out there that evidence suggests would go far in promoting economic opportunity and mobility in cities, but would require legislative action. For example, more funding for housing vouchers or major investments in our nation’s crumbling infrastructure. But these solutions would require significant pressure to break the political gridlock in Washington and a renewed federal commitment to robust and coordinated investments in America’s cities.

To generate such momentum, all cannot depend solely on urban voters, despite their growing numbers. Rather the case should be made that with two-thirds of the nation’s GDP being generated in cities, the economic future of our cities is also the economic future of our country. The United States will not succeed in becoming a more prosperous, equal and opportunity-rich nation if it fails to meet the needs of its cities.

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The problem with talking about “inner cities”

November 3, 2016

Last week, Donald Trump unveiled his “New Deal for Black America: With a Plan for Urban Renewal.” In this plan, he writes, “year after year the condition of black America gets worse. The conditions in our inner cities today are unacceptable,” thereby explicitly associating African Americans with the inner city—which Trump has done time and again in speeches and presidential debates. 

Accordingly, his “new deal” places a particular focus on inner cities; for example, the plan offers strategies such as implementing “tax holidays for inner city investment” and proposes using “a portion of the money saved by enforcing our laws, and suspending refugees, to reinvested [sic] in our inner cities.”

Beyond the lack of clarity and consistency among the plan’s strategies, Trump misses an important reality: not all African Americans live in the “inner city,” which in itself is a vague and loosely defined geography. The evidence also shows that African Americans, like every other community living in the United States, are too diverse for generalizations as broad as Trump’s plan implies.

The term “inner city” gained popularity through the work of urban theorists and sociologists in the 1960s and 1970s to describe central cities and the communities of color who lived there. Even Jane Jacobs, the famous opponent to federal urban renewal, talked about the widespread “inner city stagnation and decay” in The Death and Life of Great American Cities.

But the “inner city” has no formal census-designated definition and is largely a colloquial and rhetorical device. Thus, in my attempts to characterize these areas, I use the central city within a given metropolitan area as an imperfect proxy for an “inner city.”

Atlanta—one of the nation’s fastest-growing metropolitan areas, especially for African Americans—is an instructive case. As the map below shows, African Americans live well beyond the central city of Atlanta, with predominantly black neighborhoods dispersed across the metropolitan landscape. Only 12 percent of the Atlanta metropolitan area’s black residents live inside the city of Atlanta.

Atlanta metro

This is not a story unique to Atlanta, either. In Philadelphia, 53 percent of the metropolitan area’s black residents live in the city proper, and in Baltimore, only 48 percent do.

In the third presidential debate, Trump said that “our inner cities are a disaster… They have no education. They have no jobs.” Atlanta sharply contradicts this contention. Almost 15,000 of the city’s black residents have graduate or professional degrees, and almost a quarter of its households earn more than the area median income of $64,000 for a family of four.

Furthermore, in framing this plan under the banner of urban renewal, Trump is venerating a period in urban history that involved top-down development that often had disproportionately harmful impacts on predominately minority neighborhoods in central cities. He is offering a narrative of African Americans that is false, outdated, and dismissive of structural forces and policy decisions that have contributed to the perpetuation of black poverty.

The majority black and brown neighborhoods characterized by concentrated poverty that Trump’s plan targets are very much products of outright housing discrimination and a set of deliberate strategies to block wealth accumulation. These are among a multitude of racially biased laws, policies, and private-sector actions whose legacies benefit white communities to this day often at the expense of poor communities of color across the nation.

In using this coded language of the “inner city,” Trump is simultaneously invoking and attempting to downplay the troublesome history of urban policy in our nation. By conflating the inner city with African Americans generally, which Trump’s new plan does, he is telling a story of African Americans and establishing a policy agenda that is not based in evidence and is problematically incomplete. 

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How many presidential candidates does it take to screw in a lightbulb?

October 31, 2016

Another presidential campaign season has come and (almost) gone with little attention to climate change and the future of energy production. Though both candidates have made statements on those topics, they have not received much national debate.

By diminishing energy and climate change’s importance as a campaign topic, we lose another chance to analyze the plans, discuss their merits, and make actual progress toward putting out the global fires that await the next president.  

Finding the light switch

The biggest challenge to analyzing their energy solutions is that the candidates don’t agree on the problem or the goals. Most of the attention in this election has been on the candidates’ belief in climate science. Clinton has publicized her confidence in climate science, while Trump has variably denied its findings or reframed questions about his position.

The evidence on climate change has been clear for some time, yet the same debate has been rehashed for several election cycles going back as far as 2000. That debates over fundamentally accepted science are still at the center of political attention 16 years later prohibits any substantive conversation about energy beyond monitoring today’s price at the pump.

Keeping the lights on

Both candidates actually agree on at least two goals: to provide enough energy for current need and future growth, and to be “energy independent”—that is, to rely solely on US or allies’ energy sources.

Clinton has framed the latter as a national security issue while Trump has focused on its domestic economic and employment benefits. Both are accurate assessments of the outcomes of self-reliance, but the platforms have benefitted from the fact that US-sourced natural gas has increased as a share of electrical power plants’ fuel compared to coal—reducing greenhouse gas emissions from coal plants by about half while depressing energy prices and making us ostensibly more self-reliant. Considering that we still import a sizeable amount of fuel (especially petroleum) from not-so-friendly sources, we’re actually a bit far from independence.

Where candidates diverge is on how they plan to get to this state, and how other goals (like mitigating climate change) guide their paths. Clinton supports the Obama administration’s signature Clean Power Plan (CPP), as well as US ratification of the Paris Climate Agreement. She proposes an aggressive shift toward more renewable energy production that exceeds current industry expectations, while using existing fossil-fuel based sources in the near future as a “bridge.”

Clinton has also supported “fracking” (hydraulic fracturing of deep rock to extract natural gas) in the past, too, with certain qualifiers.  

Trump plans to dramatically expand natural gas extraction and coal production as well as open up all other untapped sources of energy including those on federal lands but not necessarily at the exclusion of cost-competitive renewables. Trump plans to scrap the CPP along with other EPA regulations and pull out of the Paris agreement.

Paying the bills

The CPP (still held up in court) would foreseeably lead to price increases in energy but with consequent savings on health care costs as well as other cobenefits. The additional focus on low-income households’ energy use through the CPP’s Clean Energy Incentive Program would also provide opportunities to diminish the cost burden on this group, though programs to date have had mixed successes.

Clinton proposes regulations, incentives, and expanded assistance to low-income households. She also proposes paying special attention to energy needs and climate change effects on the most environmentally vulnerable communities. Clinton supplements these sticks with carrots for household solar installations, with similar programs in places like Arizona having massive success in transitioning energy sources while reducing household energy costs. Other cities and states are already producing energy efficiency and renewable programs by the day, too.

Trump’s “energy revolution” is proposed to wean the country off all foreign energy imports while purportedly not causing any adverse environmental impacts. The revenues from energy production, according to his statements, would then be used to rebuild “roads, schools, bridges and public infrastructure,” though that transfer of funds is not detailed. He also labels his opponent’s plan as “job killing” when combined with other environmental regulations, energy efficiency standards, reductions in fossil fuel-industry subsidies, and renewable energy incentives.

The biggest sector for job transition is certainly in the coal industry, and Clinton has proposed retraining and other assistance plans, though the success of these kinds of programs is still mixed as Urban colleagues describe. But the job-killing aspects of energy transitions for energy workers—or, for the economy as a whole from higher energy prices—are not fully supported even with more aggressive policies beyond either candidate’s current positions like a carbon tax (a position neither candidate currently supports).

For both platforms, there will be immediate costs to the country and to individual Americans’ pocketbooks. And, as science is showing us, there will be future costs to our energy policies. These costs have all been lurking in the shadows in this year’s debate spotlight. But, the light from the world’s burning just might be the one that lets us see the candidates’ platforms.

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How would the candidates deal with the natural disasters that lurk ahead?

October 17, 2016

During this election season, we’ve already seen several natural and environmental hazards wreak havoc. The Louisiana floods this past August and the current wake from Hurricane Matthew are the most recent examples of the 39 major disaster declarations in 2016—so far. Government aid has come to Louisiana while damage is still being assessed along the southeastern seaboard.

We’ve also seen the two major presidential candidates talk about these recent disasters, visit them in some cases, and invariably offer their “thoughts and prayers.” Neither candidate has an explicit policy platform on disaster management. To be fair, few presidential candidates in recent history have brought up disaster planning and assistance in their stump speeches.

What should happen during and after disasters?

A new president needs to know two fundamental things about disaster management: how it works administratively between the various levels of government and how much it costs the federal government.

Neither candidate has said much about the latter or about the ongoing trend of increasing federal resources for disaster relief and recovery.

With regard to intergovernmental management, though, some past comments give insight. After Katrina, for example, then-Senator Clinton argued for a reorganization of the Department of Homeland Security so that FEMA could better equip itself to its former capacity under former President Clinton’s FEMA Chief James Lee Witt—an organization described by most disaster experts as competent and efficient in the face of disasters like Hurricane Andrew.

After 9/11, Clinton was also involved in congressional disaster recovery appropriations.

After Hurricane Sandy, private citizen Trump accused the Obama administration of excessive, politically motivated relief handouts. 

What should happen before disasters?

There is even less in either candidate’s past statements to suggest that they have considered how best to prepare for disasters. Disaster preparedness and mitigation—improving infrastructure, homes, and communities before disasters—has received bipartisan support. A promising policy improvement would be to allocate relatively more resources to mitigation than recovery compared with current policy.

Trump noted recently that revisiting infrastructure due to phenomena like rising sea levels is “probably not the worst thing [he’s] ever heard.” Clinton said recently that disasters pose a threat to local infrastructure and national security. Going further back to the Democratic primary, Clinton also referenced “resilience and mitigation” as a growing need that required bipartisan action.

What should our next president focus on?

We’ve talked before the increasing quantity of disasters and the magnitude of disaster damages. Though there are many natural hazards like earthquakes that are unrelated to climate change’s effects, the severity and frequency of others—tornadoes, hurricanes, wildfires, droughts, and severe storms and floods—are likely to continue increasing.

Having some basic commitment to increasing mitigation in proportion with recovery resources is a start for either candidate. Getting into a few weeds about infrastructure spending is even better. But working out the details of the property insurance—especially National Flood Insurance Program—and disaster planning and awareness at the local levels is going to get us further down the path.

Clinton has stated a link between climate change and disasters, while Trump has (arguably) dismissed climate change, its effects on disaster rates, and the impacts of disasters on communities. If scientific evidence provides any indication of what is to come, whoever is elected will have to reckon with these crises—and how to pay for them.

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