Tag Archives: federal government

Summarizing “How the Federal Government Built White Suburbia”

Posted on by

Richard Rothstein discusses how white suburbia was promoted by the federal government. Here are some of the ways in which white neighborhoods were promoted:

  • Federally funded public housing got its start in the New Deal. From the very beginning, public housing was segregated by race. Harold L. Ickes, the U.S. Secretary of the Interior and the most liberal member of President Franklin D. Roosevelt’s brain trust, proposed the “neighborhood composition rule,” which said that segregated public housing would preserve the segregated character of neighborhoods. (This was the liberal position. Conservatives preferred to build no public housing for black people at all.)
  • After World War II, the Federal Housing Administration (a precursor to HUD) and the Veterans Administration hired builders to mass-produce American suburbs—from Levittown near New York to Daly City in the Bay Area—in order to ease the post-war housing shortage. Builders received federal loans on the explicit condition that homes would not be sold to black homebuyers.
  • The Housing Act of 1949, a tentpole of President Harry Truman’s Fair Deal, greatly expanded the reach of the public housing program, which was then producing the most popular form of housing (!) in the country. In an effort to kill the bill, conservatives tried to tack on a “poison pill” to the legislation: an amendment that would have required public housing to be integrated.

Read on for more of the influential policies and decisions. In other words, that the American suburbs were dominated by whites was not a mistake or accident; it was the intent. And even though suburbs today are increasingly diverse, these earlier government actions still have significant consequences that can’t be ignored simply because they occurred in the past.

Using behavioral science to improve interaction with government

Posted on by

President Obama signed an executive order yesterday that promotes using behavioral science to make the government more user-friendly and efficient:

The report features the Social and Behavioral Sciences Team’s first year of projects, which have made government programs easier to access and more user-friendly, and have boosted program efficiency and integrity. As a result of these projects, more Servicemembers are saving for retirement, more students are going to college, more Veterans are accessing their benefits, more farmers are obtaining credit, and more families are gaining healthcare coverage.

The Federal Government administers a wide array of programs on behalf of the American people, such as financial aid to assist with college access and workplace savings plans to promote retirement security. Americans are best served when these programs are easy to access and when program choices and information are presented clearly. When programs are designed without these considerations in mind, Americans can incur real consequences. One behavioral science study found, for example, that a complex application process for college financial aid not only decreased applications for aid, but also led some students to delay or forgo going to college altogether.

Behavioral science insights—research insights about how people make decisions—not only identify aspects of programs that can act as barriers to engagement, but also provide policymakers with insight into how those barriers can be removed through commonsense steps, such as simplifying communications and making choices more clear. That same study on financial aid found that streamlining the process of applying—by providing families with assistance and enabling families to automatically fill parts of the application using information from their tax return—increased the rates of both aid applications and college enrollment.

On one hand, the administration suggests this improves efficiency and helps people make use of the help available to them. On the other hand, there are predictable responses from the other side: “Obama issues Orwellian executive order.”

These are not new ideas. Richard Thaler and Cass Sunstein (who tweeted the news of the executive order) wrote the 2008 book titled Nudge that makes policy recommendations based on such science. For example, instead of having people opt-in to programs like setting aside matched retirement savings or organ donor programs, change the default to opting out rather than opting in and see participation rates rise.

I imagine both parties might want to use this to their advantage (though it might might rile up the conservative base a bit more if it was made public) when promoting their own policies.

New Federal website shows complaints about mortgage lenders

Posted on by

Thanks to the Consumer Financial Protection Bureau, there is a new website for narratives of consumer complaints regarding mortgage lenders:

The bureau logs each complaint by category in a publicly viewable database and gives the company that is the subject of a complaint time to respond via a nonpublic online portal connecting it with the consumer through a bureau intermediary. In the past three years, according to the bureau, it has received and worked on more than 627,000 complaints. They range from alleged harassment by debt-collection attorneys, to foreclosures, student loan defaults and poor treatment of customers by loan servicers. Roughly 28 percent of all complaints filed to date have been about mortgage issues — the largest single category. What’s been missing, though, has been any real detail about the troubling circumstances that triggered the complaint in the first place expressed in the customer’s own words.

Starting in late June, that all changed. The bureau began posting what it calls “narratives” that name the bank or company involved and go into sometimes excruciating detail. Allegations get pretty serious — charges of lending fraud, violations of federal regulations and illegal overcharges. Some are heartfelt, such as one from a Virginia homebuyer whose closing was repeatedly delayed by the bank: “Who compensates us for the loss of income for the days taken off from work (to attend closings)? For the movers that have been scheduled? For the pre-move-in renovations that cannot now be done because the contractors are fully scheduled for the rest of the summer?” (To see the narratives, go to http://tinyurl.com/phnkq99)

The first batch of 7,700-plus narratives was posted June 25, including hundreds of mortgage complaints. The consumer’s name and address — other than state of residence — are redacted, as are all details the bureau or the consumer considers ?private.

Lenders are not permitted to post their own narratives, but instead must use one of several stock responses, such as “company can’t verify or dispute the facts in the complaint” or “company believes it acted appropriately as authorized by contract or law.” Lenders can also decline to participate in the narratives process by saying, “Company chooses not to provide a public response.”

The article suggests two large threads emerge from the complaints: dislike of being placed in customer service hell without getting answers from anyone and problems with escrow accounts.

Not surprisingly, lenders are not happy with this information on the website. The issue is similar to that which plagues many online reviews: how can businesses or readers be sure that the story or review is credible? Yet, this certainly puts more information on the side of consumers and this is needed in an industry that holds so much debt for so many people.

These narratives posted online would make for some good coding opportunities for social scientists…

When government policy reinforced and added to residential segregation

Posted on by

The federal government may today be viewed as a party that wants to end residential segregation (see a recent argument by conservatives) but this was not always the case:

On how the New Deal’s Public Works Administration led to the creation of segregated ghettos

Its policy was that public housing could be used only to house people of the same race as the neighborhood in which it was located, but, in fact, most of the public housing that was built in the early years was built in integrated neighborhoods, which they razed and then built segregated public housing in those neighborhoods. So public housing created racial segregation where none existed before. That was one of the chief policies.

On the Federal Housing Administration’s overtly racist policies in the 1930s, ’40s and ’50s

The second policy, which was probably even more effective in segregating metropolitan areas, was the Federal Housing Administration, which financed mass production builders of subdivisions starting in the ’30s and then going on to the ’40s and ’50s in which those mass production builders, places like Levittown [New York] for example, and Nassau County in New York and in every metropolitan area in the country, the Federal Housing Administration gave builders like Levitt concessionary loans through banks because they guaranteed loans at lower interest rates for banks that the developers could use to build these subdivisions on the condition that no homes in those subdivisions be sold to African-Americans.

Both of these policies had long-term effects that helped lead to poor urban neighborhoods and whites moving to the suburbs. The federal government had enforcement power and resources to do things that other parties could not.

But, the federal government wasn’t the only force at work. Take Chicago, for example. Local government units, such as the city or the Chicago Housing Authority, made decisions about segregated public housing projects (a few projects were initially all white while the majority were non-white) and where they were to be located (largely in existing poor areas and as a burden to punish certain aldermen). Realtors weren’t exactly open to showing housing to blacks outside of the Black Belt. Residents tended to react angrily for decades when blacks moved in with little interference from police or local officials; see cases from the late 1910s to the 1951 case in Cicero where white mobs made their voices known. This all happened even until the late 1960s where Martin Luther King Jr. was opposed in fighting for open housing during the summer of 1966 and Wheaton was the first Illinois community with an open housing law (passed July 3, 1967 – as a point of comparison, this was nearly one year before Oak Park in May 1968).

It wasn’t just a tyrannical or misguided federal government that promoted residential segregation or that still continues to promote similar ideas today…

Obama administration proposal to limit tax-free government bonds for stadiums

Posted on by

Federal policy might change how sports teams and municipalities negotiate stadium deals:

That’s what the Obama administration proposed in its budget last month: to end the issuance of tax-free government bonds for professional sports facilities, a practice that has, according to research by Bloomberg, siphoned $17 billion of public money into arenas for NFL, MLB, NBA, and NHL franchises over the last 30 years and cost Americans $4 billion in forgone federal taxes on top of that. It’s too late for residents of Cobb County, but Congress might yet save the rest of us some dough…

So how did we wind up in this situation? Local authorities have long used tax-exempt bonds to raise money for certain private uses—whether factories, train stations, or home mortgage loans—in addition to schools, sewers, and other infrastructure projects. In most cases, the ensuing economic growth was at least intended to pay back the municipal investment. Sports stadiums were no different: Governments could raise money in exchange for a share of future revenue…

Much of the rest of the article summarizes the research that shows cities and taxpayers tend not to come out ahead in these deals. So, this new policy might solve the problem?

Still, it wouldn’t stop cities from paying for stadiums. The last time Congress made public financing more onerous, in 1986, the result was a disaster: Cities jumped to meet the new, harsher terms, opening a three-decade stadium construction spree.

In other words, the policy might close the loophole for this particular financial instrument but there are other ways to make such deals. As I’ve said repeatedly, few politicians are willing to let the big team get away. Of course, the historical record suggests that everything does not necessarily fall apart when teams move. Many of the cities since the 1950s that saw teams move away later saw new teams take their place. Sports teams only have limited numbers of places they can move to make the kind of money they want; this is the reason Los Angeles looms so large right now in the NFL’s urban landscape because the next options are not very good.

The bigger question may be whether cities and suburbs can stop themselves from making bad deals, even with federal policies that take away some of their options.

Federal move toward making more credit available for homeownership

Posted on by

New actions announced this week are intended to help more Americans own homes:

On Tuesday, Mel Watt, the newly installed overseer of Fannie Mae and Freddie Mac, said the mortgage giants should direct their focus toward making more credit available to homeowners, a U-turn from previous directives to pull back from the mortgage market.

In coming weeks, six agencies, including Mr. Watt’s, are expected to finalize new rules for mortgages that are packaged into securities by private investors. Those rules largely abandon earlier proposals requiring larger down payments on mortgages in certain types of mortgage-backed securities.

The steps mark a sharp shift from just a few years ago, when Washington, scarred by the 2008 crisis, pushed to restrict the flow of easy money that fueled the housing bubble and its subsequent bust. Critics of the move to loosen the reins now, including some economists and lenders, worry that regulators could be opening the way for another boom and bust.

For the past year, top policy makers at the White House and at Federal Reserve have expressed worries that the housing sector, traditionally a key engine of an economic recovery, is struggling to shift into higher gear as mortgage- dependent borrowers remain on the sidelines.

Both Treasury Secretary Jacob Lew and Federal Reserve Chairwoman Janet Yellen last week noted the housing market as a factor holding back the economic recovery.

Two thoughts:

1. It is not surprising that the federal government would want to support homeownership: pretty much every President since the 1920s has extolled the virtues of owning a home. Additionally, since the late 1800s homeownership has been a key marker of the American Dream.

2. The comments made earlier this week make it sound like the government sees housing as a sector that should help lead the economy. In other words, housing is an industry with a wide impact from developers to the construction industry to real estate agents to individuals looking for a home. Housing doesn’t necessarily have to be viewed this way; the article also hints that housing is lagging behind other parts of the economy. Put differently, housing improves after other parts of the economy improve.

A $3 billion funding shortage for relieving Chicago area railroad gridlock

Posted on by

A House hearing suggested there is a major funding shortage for the construction necessary to relieve railroad traffic in the Chicago region:

A potential drop of more than 60 percent in Metra delays.

That number alone makes an ambitious $3.2 billion fix for rail congestion in the Chicago region attractive in the eyes of area commuters. And railroads, with the backing of the business community, also support the Chicago Region Environmental and Transportation Efficiency Program, or CREATE.

But where funding for the $2 billion worth of work remaining will come from is a question both U.S. congressmen and industry officials pondered at a Monday hearing of the House Subcommittee on Railroads, Pipelines and Hazardous Materials.

The Chicago region hosts about 1,300 trains a day — 800 Amtrak and Metra trains and 500 freights. But the outdated infrastructure and numerous street level crossings make it a major chokepoint for freight trains, not to mention the delays caused for drivers.

State dollars for the project run out this year and there’s nothing forthcoming in the federal government’s latest transportation plan.

Funding is hard to come by these days. Yet, these are infrastructure improvements that affect not only the Chicago area but perhaps the entire United States railroad system. A large amount of freight traffic in the United States moves through the Chicago region. The railroads as well as local, state, and federal government have been chipping away at this for years including moving intermodal facilities and switching yards further from the city and making at-grade crossings safer and rarer.

Another question that could be asked: should money be spent on high-speed rail if there are still significant problems in the regular railroad system?

US government behind in regulating automated features for cars

Posted on by

As car makers pursue new technologies including driverless cars, the US government is struggling to keep up with the changes:

While truly self-driving cars are years away—if they ever arrive—consumers are seeing far more car models bearing sophisticated semi-autonomous features. These include radar assisted cruise-control, which can keep a fixed distance from the car ahead; systems that warn drivers if they veer out of their lanes; and technologies that can prevent oversteering or even apply the brakes when they detect that a crash is imminent (see “Self-Driving Tech Veers into Mid-Range Cars” and “Proceed With Caution Toward the Self-Driving Car”)…

With three states and the District of Columbia having passed legislation to allow researchers to test such prototypes on real roads, Washington is grappling with how to regulate the cars. John Capp, the director of active safety systems for General Motors, says federal regulators are “trying to understand these things and trying to figure out what role they should have.”…

Unsurprisingly, NHTSA’s statement said that fully autonomous technology isn’t ready for the general public. But the fact that the agency is calling for more study is a reminder of the glacial pace of regulation: in the case of lane-departure warnings and crash-avoidance systems, it’s studying technologies that have already been on the market for several years.

See my post last week on the NHSTA statement. More broadly, this raises interesting questions about technology and the ability of regulators to keep up. For those who want to push technology forward, how much in terms of time, convenience, and dollars is lost if the government slows down the process? At the same time, how much regulation is needed to help protect the public? There is likely some sort of sweet spot when the government has time to declare technology safe and inventors and producers can still get things to the public in a reasonable amount of time…but I suspect this could vary widely across different sectors and the politics involved could change quite a bit. Take, for example, the scandal a few years back involving Toyota and the lack of findings. It cost the company quite a bit, the government still had a duty to step in, but there was little conclusion – except that perhaps we’re all going to have black boxes in our cars  soon. Imagine a few incidents like this happening with a new widespread technology like driverless cars. How much could that set the industry back and feed perceptions that the technology really wasn’t ready?

Adding creative endeavors to GDP

Posted on by

The federal government is set to change how it measures GDP and the new measure will include creative work:

The change is relatively simple: The BEA will incorporate into GDP all the creative, innovative work that is the backbone of much of what the United States now produces. Research and development has long been recognized as a core economic asset, yet spending on it has not been included in national accounts. So, as the Wall Street Journal noted, a Lady Gaga concert and album are included in GDP, but the money spent writing the songs and recording the album are not. Factories buying new robots counted; Pfizer’s expenditures on inventing drugs were not.

As the BEA explains, it will now count “creative work undertaken on a systematic basis to increase the stock of knowledge, and use of this stock of knowledge for the purpose of discovering or developing new products, including improved versions or qualities of existing products, or discovering or developing new or more efficient processes of production.” That is a formal way of saying, “This stuff is a really big deal, and an increasingly important part of the modern economy.”

The BEA estimates that in 2007, for example, adding in business R&D would have added 2 percent to U.S. GDP, or about $300 billion. Adding in the various inputs into creative endeavors such as movies, television and music will mean an additional $70 billion. A few other categories bring the total addition to over $400 billion. That is larger than the GDP of more than 160 countries…

The new framework will not stop the needless and often harmful fetishizing of these numbers. GDP is such a simple round number that it is catnip to commentators and politicians. It will still be used, incorrectly, as a proxy for our economic lives, and it will still frame our spending decisions more than it should. Whether GDP is up 2 percent or down 2 percent affects most people minimally (down a lot, quickly, is a different story). The wealth created by R&D that was statistically less visible until now benefited its owners even those the figures didn’t reflect that, and faster GDP growth today doesn’t help a welder when the next factory will use a robot. How wealth is used, who benefits from it and whether it is being deployed for sustainable future growth, that is consequential. GDP figures, even restated, don’t tell us that.

On one hand, changing a measure so that more accurately reflects the economy is a good thing. This could help increase the validity of the measure. On the other hand, measures still can be used well or poorly, the change may not be a complete improvement over previous measures, and it may be difficult to reconcile new figures with past figures. It is not quite as easy as simply “improving” a measure; a lot of other factors are involved. It will be interesting to see how this measurement change sorts out in the coming years and how the information is utilized.

Illinois Governor suggests freezing money provided to local governments from Illinois income tax

Posted on by

Economic times are tough so Illinois Governor Pat Quinn has floated the idea that the state limit how much income tax is shared with local governments:

Gov. Pat Quinn has proposed that the state bolster its own troubled finances by freezing the amount of state income taxes shared with local governments at 2012 levels, which could cost some towns hundreds of thousands of dollars.

Quinn estimates the plan would generate an additional $68 million for the state budget. Because income taxes are disbursed on a per capita basis, the impact to local budgets would be $5.30 per resident, according to the state.

But the Illinois Municipal League estimates the impact would be more than twice that — a $148 million payday for the state, but an $11.50-per-resident cut to local budgets…

Illinois’ income tax, enacted in 1969, was meant to be a shared venture between the state and local municipalities, said Larry Frang, executive director of the Illinois Municipal League. Both the state and local governments alike felt the effects of any dips or spikes in revenue, he said.

This is not a huge surprise given the issues of tax revenue facing various levels of government. To some degree, local governments should get used to this. Plus, if local government is at least partly about local control, then how much do some communities want to rely on money from higher levels of government anyway? On the other hand, raising property taxes and introducing new fees is not attractive to local governments.

Thinking more broadly about the connections between local and state government, does these ongoing economic issues suggest the relationships between the two bodies are more fragile than we might think? When times are good, this probably doesn’t come up much. What recourse do communities, or lower levels of government, have to fight back if the higher level of government, like the county, state, or federal government alter the existing relationship?