How To Build A City

Economics Without The B.S.**: How To Build A City

[**  Double entendre intended.]

How To Build A City

OP-ED from the Los Angeles Times, October 7, 2013

How to build a better Los Angeles

By Eli Broad and Richard J. Riordan *

The civic engagement it took to complete Disney Hall is a lesson in what's required to move L.A. forward.

The Walt Disney Concert Hall, which opened its doors 10 years ago this month, is rightly celebrated as the most recognizable jewel in Los Angeles' cultural crown.

But we should remember that Disney Hall came very close to not being built at all.

Despite a singularly generous $50-million donation from Walt Disney's widow, Lillian, in 1987, a brilliant design byFrank Gehry and an expenditure of nine years and $30 million, there was no Disney Hall by the early 1990s, and it looked like there never would be.

The city was attempting to recover from a devastating earthquake, the image-tarnishing O.J. Simpson trial and the shrinking of the local defense industry. In addition, Gehry's design was under fire — Los Angeles was suffering what contemporary art critic Robert Hughes called "the shock of the new" — and the additional fundraising required to supplement the Disney donation had slowed to a trickle. The New York Times Magazine even ran a cover story about the hall under the headline "A Phantom Hall Filled with Discord."

In 1996, county officials demanded that an additional $50 million be raised in the next year before construction could start. Without the money, the county was prepared to pull the plug. As longtime friends and devoted supporters of our adopted home city, it was clear to both of us that such an ambitious project needed mayoral backing and take-charge fundraising.

We vowed to raise double the money the county wanted, including $10 million from our own pockets. Andrea Van de Kamp, one of the city's most gifted fundraisers, joined our team. Together, we devised a new campaign to appeal not just to fans of the Los Angeles Philharmonic but to everyone who loves Los Angeles. "The Heart of the City" campaign emphasized that Disney Hall could be more than a home for great music and a work of brilliant architecture; it would be the linchpin of a downtown revitalization that would extend from the sports and entertainment district in the south to a cultural corridor in the north. Disney Hall would join the monumental buildings of Grand Avenue — MOCA by Arata Isozaki and the under-construction cathedral by Rafael Moneo — and would be unmatched by any street in the world for its architectural virtuosity.

For many months, every breakfast, lunch, dinner and cocktail party we organized included a pitch to support Disney Hall. We guaranteed all donations would go entirely to construction of the hall, not to consultants or studies. The city's corporate and philanthropic communities stepped up. We met the county's fundraising target and went on to raise more than $200 million to complete the hall. There were hurdles along the way, but everyone stayed committed.

In the end, the city rallied together around a vitally important project. Without that upwelling of civic commitment, the concert hall would probably still be a hole in the ground and Grand Avenue would still sit largely fallow.

Today, another roadblock threatens the completion of the long-delayed Grand Avenue Project, and the story of Disney Hall offers an important lesson for city leaders. The region's public institutions and private citizens are generous, and Los Angeles can match any city for ambitious civic projects that are vital to our economic, cultural and social identity. But citizens need leaders who sketch a vision of what is possible and rally them to the cause.

There were those who complained about Disney Hall's final price tag. But most Angelenos today would agree that Disney Hall is priceless. It is to Los Angeles what the Eiffel Tower is to Paris and the Opera House is to Sydney. And Disney Hall isn't just a great building. Gehry's magnificent work catalyzed the development of Grand Avenue, including an architecturally distinct arts high school by Wolf Prix, the beautiful and well-programmed Grand Park and, by the end of next year, a new contemporary art museum, the Broad. Thanks in large part to Disney Hall, cultural tourism to Los Angeles has tripled. We have become one of the four cultural capitals of the world.

The lesson Disney Hall's story teaches might be summed up in this formula: Private generosity plus political will equals civic success. It's a lesson Los Angeles can't afford to forget.

·         Philanthropist Eli Broad and former Los Angeles Mayor Richard J. Riordan co-chaired the Walt Disney oversight board, which raised much of the money to build Walt Disney Concert Hall.

Do Elections Matter?

Economics Without The B.S.**: Do Elections Matter?

[**  Double entendre intended.]

The Election That Wasn’t???

The Election of 1936 and the Reaffirmation of the New Deal

There are only a few elections in American history that really make a change, a change that fundamentally alters the course of history and the American way of life.

The election of Andrew Jackson in 1828 brought in an egalitarian spirit and the mythology of the ‘Common Man’ after the previous presidents established the bedrock of the Founding Fathers – a Common Man identity that we still cling to today.  The election of 1860 initiates a great Civil War with the election of Abraham Lincoln and as a result of the consequences brings about a new birth of freedom and national identification and reconciliation that replaces partisan sectionalism.

The election of Franklin Roosevelt in 1932 brought in the New Deal – re-defining a more activist role for the Federal Government that we are still under the influence of today after eighty years.  The role of the Federal Government was changed during the first days of the New Deal to integrate the industrial, commercial, and agricultural sectors of the economy into a national network and to bring the advantages (e.g., water resources, electricity, better transportation, farming techniques taught at land-grant colleges, etc.) of urbanized centers to rural, isolated areas of the country.  [See the post for Congressman Wright Patman of East Texas.]

Some people attribute this insight on FDR’s part to his experience in the 1920’s traveling (by land) from the Hudson Valley of New York to the Appalachian hills of Warm Springs, Georgia.  Warm Springs was where he spent his time recovering from polio and had to learn all over again how to be somewhat self-sufficient while overcoming a mishap that was not of his own making.  While at Warm Springs he would drive out to the countryside and visit farmers and sharecroppers and he could compare this to other agricultural enterprises in the county.
          The other big change in the role of the Federal Government occurred at the advent of WWII.  And that was disentangling America from its isolationist past and integrating America into world affairs.  It was an attempt to try and spread an American practice of self-government where a legislative body would be the arena for partisan factionalism to evolve into peaceful political compromise rather than having the differences spill over to where the streets became the battleground for one side to triumph over another.  Does this sound familiar?  We are still at it seventy years later; but, unlike our experience after WWI, we have never returned to our isolationist past.
          But, rather than pick the election of 1932 as being crucial, I would point to the re-election of FDR in 1936 as the key election that cements the legacy of the New Deal into the framework of American society.  I point to this because over the recent decades there is an attempt by the Right Wing and Libertarians to give a revisionist view of this period and its influence.  Milton Friedman, Henry Hazlitt, and Bill Buckley, just to name a few, spent many decades mischaracterizing the New Deal influence and now we have Amity Shlaes and George Nash writing several books doing the same.  First, let’s examine what led up to the election of 1932.

During the whole decade of the 1920’s the Republicans controlled not only the Presidency but also both the Senate and House of Representatives.  This did not change until after the Stock Market Crash of 1929 and the Great Depression which resulted.  In the off-year election of 1930, the Democrats got control of the House of Representatives and the Republicans barely hung on to control of the Senate by just one vote.  In the main election of 1932 , it was a Democratic Party sweep – the Presidency and both houses of the Congress, by wide margins in each.

During FDR’s first term he initiated banking reforms, public works projects, the TVA and rural electrification projects, and had a very productive first 100 Days with major legislative accomplishments.  His main program, the National Recovery Administration (NRA), was eventually declared unconstitutional by the second term.  Did it get us out of the Depression?  NO!  But it helped and showed an administration that was doing something from the get-go and not waiting for an eventual economic recovery.

In the off-year election of 1934, the Democrats increased their margins in controlling both houses of the Congress.  In the election of 1936, in the midst of the Depression with only a little improvement over the past four years, a re-election for FDR and re-affirmation of his first term, it was a Democratic Party wipe-out of the Republican Party.  Not only did FDR defeat Alf Landon by taking just over 60% of the popular vote -- Landon ran not on Hoover’s platform, but as a Populist from the Great Plains; but, the Democrats increased their hold on both houses of the Congress with the Republicans having less than 20 Senators out of a total of 96.

To put this in perspective with other landslide re-elections since:

(1)  If you look at LBJ’s victory over Goldwater 1964 as a re-election of the Kennedy Program, the Democrats had a sweep but their margins in Congress were not as great as FDR’s in 1936.

(2)  Nixon in 1972 could take over 60% of the popular vote but had no coat-tails as the Democrats retained control in the Senate and the House of Representatives.

(3)  Reagan in 1984 took over 60% of the popular vote; but, had no coat-tails as the Republicans lost a couple of seats in the Senate while gaining a few seats in the House but the Democrats still maintained control.

In short, FDR had coat-tails that swept in other Democrats with him by even wider margins than they had before; and, we have not seen this one-sided an election since.

          Now you could make an argument that people do not always know what they are voting for.  And in 1932, when people voted for FDR they knew it would be a New Deal, but they didn’t know, or care, what that was as long as it wasn’t Hoover.  People felt abandoned by the big corporations and looked to the Federal  Government to step in and do anything.  After all, the major corporations hardly had one quarterly loss during the whole period of the Great Depression while Main Street and Small Town America suffered.  From the last couple of years of the Hoover Administration to the first year of FDR's Administration, the country experienced a deflationary spiral of 25% and a GDP that was half of what it was during the Roaring 20's.  But, by 1936, after four years of FDR and the New Deal, people had some idea of what they were in for and this was their chance to ‘APPROVE’ or ‘REJECT’ the previous four years.  The results were so one-sided that the Republicans did not get control of another branch of the Federal Government until the 1946 election.

So, how do we account for this re-interpretation of history by Amity Shlaes and her cohorts?   As one-sided as all of these elections are, there is still almost 40% who did not vote for the victor – FDR, LBJ, Nixon, or Reagan.  That is still a sizeable minority that has to be dealt with even while proponents move forward with implementing their programs.  Try as they might, the Republicans have never been able to un-do the New Deal programs or the influence of the role of the Federal Government in our modern democracy.  The intellectual elite can re-interpret with their revisionist history, but there is still plenty of foundation left in the New Deal legacy for them to chip away at.  A foundation that was embedded into the American fabric eighty years ago.

The re-election of 1936, and re-affirmation of the New Deal, there has never been another election like it since!

Government Shut-Down?

Economics Without The B.S.**: Government Shut-Down?

[**  Double entendre intended.]

The Ripple Effects of

Our Intrusive Federal Government Economy

With the Federal Government shut-down because of a dispute over ObamaCare (aka Affordable Care Act), the question Liberals, Conservatives, Libertarians, Democrats, and Republicans are all trying to answer is “Will you feel the effects of a Federal Government Shut-Down?”

Well first we need to define what a Federal Government Shut-Down is.  Is it just a layoff of federal workers so that no work gets done?  Is it stopping funding of government operations?...stopping spending on federal contracts?...freezing government spending at current levels (of the last year)?  Judging by the last government shut-down during the Clinton Administration, federal workers were laid-off for less than 30 days total.  However the threat of a government shut-down started at the end of a fiscal year (September) going into the new fiscal year with the threat that funding would be stopped.  That threat lasted for over 100 days and it affected the way some bureaucrats hold or transferred money to keep some programs going while holding other programs in check.  It was estimated that the Shut-Down during 1995/1996 cost GDP growth around one percent, and that was at a time when we had a much stronger economy.

Will it hurt the economy this time?  Will I feel the results when the Federal Government shuts down?   The Federal Government portion of our GDP (the economy) is running between 22-24%, which is sizeable but it depends on what you do and where you live.  Social Security and Medicare, two of the biggest government programs, are funded by their own accounts and not by the general funds that are affected by a government shut-down -- and there is over $2.5 trillion in the Social Security Trust Fund and it has been operating at annual deficits only in the past couple of years at approximately $40-$50 billion.  The biggest portion of government spending that would be affected would be defense spending.  So it depends on if you live in a community with a big defense presence or military contractors/suppliers doing business with the government.  Farming communities may see a direct Federal Government presence; and, there may be a few other programs like the Small Business Administration or a university research project funded by the National Institute of Health.  But a lot of other federal spending comes through state and local government entities, like highway funding and education.  So, a federal government shut-down is not always that visible or easy to figure the impact.

Who will know if the Shut-Down hurts the economy?  It is somewhat ironic that the people who track unemployment and GDP growth statistics are considered non-essential workers and are part of the laid-off workforce.  I don’t know how these figures will be reported if the shut-down drags on for a while.

We have a $16 trillion economy.  Every ¼% loss of GDP amounts to $10 billion each three month period.  Some have estimated a ½% loss of GDP if the shut-down is prolonged.  In 1995/1996 the loss was estimated at 1%.  We have a weak economy this time and it is hard to determine just what the impact will be.  Also, if this shut-down is prolonged, lasting more than three months, there could be a multiplier effect since we have a consumer economy that dominates instead of a large commercial/industrial sector to supplement a consumer economy.  We do not know what an economic slowdown here would do to the international economy that is tied to us and we to them.

More ironic is the people who want to shut the Federal Government down are the ones who have been preaching fiscal responsibility and giving economic arguments for economic growth.  If they continue in their ways, we will find out.

The threat of a shut-down this time has been coupled by Republicans to defunding ObamaCare.  But ObamaCare has already been funded, so shutting down Government doesn’t stop implementation of ObamaCare.  Or is it political gamesmanship?  Who takes the blame in the eyes of public opinion when the Federal Government is shut down?  Who will yield first?  Politically, if you want to hang yourself, will your opponent save you from the rope or feed you more rope?  Will public opinion shift as this drags on?  Aside from public opinion, the Mother’s Milk of Politics is money and both sides have used the Shut-Down to raise money.  So, when they have milked the situation for all it is worth, will they be ready to settle?  Moderates and Independents await the results after the food fight is over.  The final irony is that the nihilists among the Libertarians and Conservatives who constantly warn us of an intrusive Federal Government are now telling us that we will not feel the effects of a government shut-down.  [Just go on the web site for Cato Institute or the Heritage Foundation and follow their messages.]

NOTE:  By the way, when the finance industry and investors want to do calculations and need to determine a risk-free investment return, what statistic do they use?...Federal Government bonds, notes, and treasuries.  Why?  Because there has never been a U.S. default in our history, and we have never failed to pay our debts, and we have the power to print our own money, and the U.S. debt  that is held by foreigners is held in U.S. dollars (and not a foreign currency like Euros, Yen, Chinese Yuan, etc – which is what happened to Argentina years ago when they had a huge foreign debt held not in the Argentine currency but in foreign currency like U.S. $ or the German DM.).

P.S.  In February 2014, when this issue came up again, Republicans and Right Wing organizations no longer made the Government debt ceiling an issue.  If it wasn't important enough to make it an issue in February 2014, why was it so important months before in 2013 to bring the Government to a close?