Archive for December, 2007
I attended the Finance Advisory Board meeting last week and one of the new appointees to the Board, Robert McConnaughey, (who replaced the previous incompetent), raised an interesting and insightful point — how will downgrades to bond insurers impact public sector debt?
To unpack his question a bit — much public sector (i.e. municipalities, authorities, states, etc.) debt is enhanced with bond insurance, which provides a higher bond rating and reduces borrowing costs. If these bond insurers themselves get downgraded (largely as a result of exposure to bad subprime debt that they insured), it flows through the market and affects the bonds that they insured.
Mr. McConnaughey’s question is already looking even more timely. S&P just downgraded a major bond insurer from “A” to “CCC”, cut outlooks to negative for two other insurers, and issued negative outlooks for two other insurers. The initial result:
S&P cut ratings on nearly 3,000 municipal bonds, affecting city and county programs around the country.
Keep an eye on this issue. It appears that public sector borrowing is going to get more expensive. Soon.
UPDATE — Enter the Warren!! A sharp-eyed reader points to today’s news that Warren Buffett is bringing the vast balance sheet of Berkshire Hathaway to the bond insurance business. Seeing a vulnerable field of competitors, this probably makes sense but, as the linked article suggests, this is not a charity effort.
December 27th, 2007
What level of concentration of poverty is the right amount? Is it right for the state to create destination cities for the poor?
As it stands, the state will, whenever possible, place the poor it is “helping” in areas of cities where housing values are extremely low in order to maximize their own ability to give people shelter.
Seems to be right from the immediate bean-counting standpoint, but if you think about it, it can create a death spiral for cities, which are already deep in the trough fiscally.
Let’s start with the numbers. In Massachusetts, the following Middle Cities have easily met their “state target for affordable housing”:
- Holyoke – 21%
- Springfield – 17%
- Lawrence – 15%
- Worcester – 14%
- Brockton, Lowell, Lynn – 13%
- New Bedford - 12%
Do we really want to have the state concentrate even more poverty in Holyoke, Springfield or these other cities? Shouldn’t other towns have to pick up a share of the responsibility?
How do they afford to provide the kinds of services these new arrivals need? How much of an additional public safety burden is it? What level of disruption to or limitation on the schools–and more importantly to the kids–is it? How is it possible for the poor to find work in areas where unemployment is higher than elsewhere in the state? How can you attract middle-class residents and businesses when your streets aren’t safe and your schools stink? Aren’t we locking in a culture of low expectations in these cities?
The long-term costs associated with the policy of “stackin em high” are higher than you might think.
Can we all at least agree intelligently that we are being stupid?
December 21st, 2007
At a critical moment in The Verdict perhaps the best Boston movie ever made (considerably better, anyway, than the wildly overrated The Departed), Paul Newman’s character, a Boston defense attorney, is advised by his mentor (played by the incomparable Jack Warden, who, as you movie buffs out there may know, played the grandfather in one of the all time great cheesy movies, Problem Child) that there will be other cases. In response, Newman repeats over and over, more to himself than to Jack Warden, that “There are no other cases. This is the case. There are no other cases. This is the case.”
I was reminded of this scene this morning reading Ed Moscovitch’s op-ed in the Boston Herald, Soaring health costs sicken school reform. Dr. Moscovitch’s point is simply that as health care costs for school employees across Massachusetts rose 12.3% annually between 2002 and 2006 they crowded out other spending priorities, such as textbooks and professional development.
I have made the point before and been scoffed at, but, at the continuing risk of my colleagues’ scorn, I will say it again and again: There are no other issues. This is the issue. There are no other issues. This is the issue.
The United States spends roughly 16% of GDP on health care. Health care accounts for more than 25% of the Massachusetts state budget. By 2050, local, state and federal government health care spending will roughly equal today’s local, state and federal government budgets. A recent Pew study put the cost of pension and health care benefits state governments have made to public employees at $2.73 trillion (that’s correct, trillion with a tr), of which $731 billion is conservatively estimated to be outstanding liability.
If, as a nation, we are unable to reign in health care spending, we will have very little money to spend on anything else - education, homeland security, national defense, it doesn’t matter. There are no other issues. This is the issue.
December 21st, 2007
Jane Jacobs was the maven of public input, but she is also in many respects a common sense proponent of organic, private market growth in our cities. Try this on for size, from The Death and life of Great American Cities, published in 1961 when Robert Moses still held the marionette of New York in his hands:
There is a wistful myth that if only we had enough money to spend — the figure is usually put at a hundred billion dollars — we could wipe out all our slums in ten years, reverse the decay in the great, dull, gray belts that were yesterday’s and day-before yester-day’s suburbs, anchor the wandering middle class and its wandering tax money, and perhaps even solve the traffic problem.
But look what we have built with the first several billions: Low-income projects that become worse centers of delinquency, vandalism, and general social hopelessness than the slums they were supposed to replace…
Yup, yup, yup. There is an argument to be made that the state housing agencies, by stuffing more and more poor people into our major urban centers, is making them unsustainable. Fix the schools and focus on public safety, and frankly you could tell the state housing agency staff to pack up their things and go home.
December 20th, 2007
Could, for instance, more services be privatized? Could state and local workers’ benefits be more closely aligned with those in the private sector?
Give up? The lead editorial in today’s Boston Globe!!! Be still my beatin’ heart.
December 20th, 2007
…and he’s wondering why he loses the New Hampshire primary while it appears that Mitt Romney is trying to win Iowa and New Hampshire with the same tactic.
A tip of the pen to Adam Reilly of the Phoenix for pointing this out, and recalling a previous teary moment from the candidate.
December 19th, 2007
For the small (but highly vocal) group of readers of this blog interested in Ukrainian affairs, we salute Yulia Tymoshenko’s return to the premiership of the country. We look forward to a stable government free of corruption and backstabbing!!
Did you not get the headline reference? The PM’s signature is her braided hair, first popularized by Carrie Fisher.
December 19th, 2007
No, not the silly kerfluffle whipped up by Bill O’Reilly and Company.
Its the slow decline of the incandescent Christmas light, gone from our State Capitol and the birthplace of the American Revolution.
Congress has now gotten into the act. Its new energy bill will make incandescents “extinct by the middle of the next decade”, per the Boston Globe.
I know, I know, LEDs and florescents are much more efficient, but c’mon, aren’t real incandescent Christmas lights nicer? 
December 19th, 2007
Breaking news: The fight to repeal 40B via the 2008 ballot is already over. The Secretary of State’s Office reported this morning that it certified 33,849 signatures for the initiative, short of the required 66,593 to get it on the ballot.
According to CHAPA’s 2006 count, 40B is responsible for the creation of approximately 43,000 housing units in 736 developments statewide since its inception in 1969.
In an ideal world, there would be no need for 40B. Better for the housing to be built in accordance with local and regional plans and zoning - if only that zoning allowed for all kinds of housing to be built. But our communities erect paper walls of regulations to keep out apartment buildings, townhouses, nanny flats, you name it, everything but single family homes on large lots.
We need 40B as a mechanism to get something else built. We could use a few more tools as well. At least now advocates for smart growth can focus on meaningful zoning reform, and not on the fight to save 40B. Phew.
December 19th, 2007
In Radiohead’s latest, In Rainbows (buy it here!), there is a cut called House of Cards about love gone awry… (Already, stop with the carping! I know it’s a been-there, done-that kind of theme. After all, what else does love do?)
But Pioneer demonstrates its impact across the globe when Thom Yorke quotes in House of Cards that “infrastructure will collapse.” And to think that the band wrote the song before the Minneapolis tragedy. Prescient, though I have a sneaky feeling that the line was lifted directly from Pioneer’s A Legacy of Neglect, which was equally prescient.
We are looking forward to the new release from Radiohead, perhaps a follow-up to Kid A that will support school choice and some real action on education.
December 19th, 2007
Previous Posts
