Politicians, places, and bad policies
WHEN A politician starts talking about a nifty plan to subsidize a sports stadium or a monorail to turn around a troubled city, it pays to be skeptical. Even when attempts at reversing urban decline have reflected the purest motives, they have usually been expensive failures. The powerful economic forces that drive urban change are just too hard to overcome.
Moreover, national policies that try to prop up declining regions must be paid for by residents of growing regions, so these policies implicitly bribe people to live and work in less productive places. Perhaps most important, policies aimed at rejuvenating places take resources away from policies that help people. We can educate a lot of children for the price of a commuter rail line.
If place-based policies are such a mistake, then why are they so popular? Most place-based policies are pushed by place-based politicians who want the rest of the state or country to provide more resources for their constituents. Mayors are elected to represent those constituents, so they can't be blamed for wanting programs that transfer funds to their cities, any more than mayors can blame economists for questioning those programs.
But we should demand more from presidential candidates who are asking to represent all of us. Prospective presidents should oppose federal handouts aimed at reinvigorating any particular city or region. The federal government owes states, cities, and businesses a level playing field, not one that taxes one company to enrich another or one that taxes Massachusetts to revive Michigan.
Unfortunately, the primary system creates strong incentives for candidates to promise all sorts of place-based strategies to win key primaries. Last month in Detroit, Republican presidential candidate Mitt Romney declared that "if I am president, I will not rest until Michigan has come back." He promised to quadruple spending on "energy research, fuel technology, materials science, and automotive technology" to $20 billion per year. Romney railed against Corporate Average Fuel Economy standards as "another anvil on Michigan." Apparently, the new job of the federal government is to eliminate environmental regulations and spend billions so that "Michigan can once again lead the world's automotive industry."
Romney is hardly alone in his passion for place-based policies. Mike Huckabee offered a general theory of place-based intervention: "we owe it to Michigan to help it, just like to do for the people of the Gulf Coast." John McCain has done more than just talk about place-based policies - in 1985 he helped to legislate tax incentives to encourage companies to locate on Indian lands. When Hillary Clinton was bidding for Buffalo in 2000, she argued that: "I believe upstate New York needs targeted economic help to catch up with the rest of the state and the nation."
The last, desperate act of Rudy Giuliani's campaign in Florida was to distinguish itself as the strongest supporter of a "National Catastrophic Fund" that would subsidize home insurance in high-risk areas. Taxpayers nationwide already spend on relief for people who live in those areas. The sensible policy would be to discourage people from living in the paths of hurricanes, not to subsidize their insurance. Does anyone doubt that Giuliani's proposal was politically motivated?
By contrast, Barack Obama's support for place-based programs seems heartfelt and therefore more dangerous. His poverty program is packed with place-based ideas like investing in small rural businesses and building 20 Promise Neighborhoods. Not all these programs are mistakes. Sometimes the best way to deliver aid to people is through place-based organizations, like the Harlem Children's Zone. Yet Obama's policy proposal shows little sense of the profound weaknesses of government programs that encourage people to stay in troubled places. His sincerity makes these proposals more dangerous, since they cannot be discounted as political ploys, and it is more likely that he will push them if he is elected.
We cannot prevent candidates from currying favor by offering place-based policies in valuable primary states. We should, however, remember that these proposals are more likely to be motivated by political ambition than by any serious consideration of the adverse consequences and costs of failed federal place-making. We should pay particular attention to the place-making promises that presidential candidates make far from the Bay State. Promises made in Des Moines will be paid for in Boston. Maybe if we held candidates more accountable for such promises, they might make fewer of them.
Edward L. Glaeser, a professor of economics at Harvard University, is director of the Rappaport Institute for Greater Boston.
