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Interesting discussion. Bankruptcy may be a negative short term solution but I think in the intermediate term it would be a good thing for pittsburgh and result in improvements to the tax base and infrastructure, assuming pittsburgh is then free to renegotiate it's pension obligations. there's a reason bankruptcy exists. I'd also point out, the former boom areas (excepting Texas) may be meeting their Great Depression. places like phoenix have been luring people with jobs based on population growth. the housing bust killed that population growth and thus the "secure" job market. I thought the article did a reasonable job in presenting all views, even if the gist is that no one knows what's driving the sale.
It actually isn't clear what a city can do about pensions in bankruptcy--they can certainly void existing labor contracts, but last I knew no city had tried to trim legacy pension obligations in bankruptcy, so it was a murky area of law.
I might note that states have to authorize cities to enter bankruptcy, and they can attach conditions. So it is also unclear whether the state would authorize the City to try to trim its legacy pensions.
So the long wait for Pittsburgh to match national trends, as some have been predicting, continues.
My point about unemployment numbers was that they are not in themselves reliable indicators of economic health and you are echoing just that. Pittsburgh's industry is dominated by "recession proof" industries so its only natural that its unemployment rate is below the national trend. The below average unemployment numbers do not necessarily signal economic health.
Anyhow, I would not expect unemployment to worsen in Pittsburgh unless there is a major budget crisis.
I might note that states have to authorize cities to enter bankruptcy, and they can attach conditions. So it is also unclear whether the state would authorize the City to try to trim its legacy pensions.
If not the city will remain a tomb, Pittsburgh will not be able to compete with other areas that lack these legacy costs. The migration patterns match pretty well with legacy costs, the states with the lowest legacy costs and hence a better tax vs benefit ratio are gaining people:
My point about unemployment numbers was that they are not in themselves reliable indicators of economic health and you are echoing just that.
Sort of, but I am also pointing out we know that in this case, the unemployment rate is actually understating how well the Pittsburgh employment situation has been doing relative to the national averages. The unemployment rate could also have independent significance--for example, it is reasonable to hypothesize that places with relatively low unemployment rates will attract migration during a recession.
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Pittsburgh's industry is dominated by "recession proof" industries so its only natural that its unemployment rate is below the national trend. The below average unemployment numbers do not necessarily signal economic health.
I'd suggest resistance to recessions was actually one criterion of economic health. In any event, the national pattern shows a strong correlation between a lack of a housing bubble and relatively good performance to date in the recession, so I think that is likely part of the causal explanation as well.
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the states with the lowest legacy costs and hence a better tax vs benefit ratio are gaining people
I'm not sure that map demonstrates that claim--net interstate migration isn't the same thing as population growth, and the correlation with legacy costs is far from perfect.
Note there is also a chicken and egg problem when considering population and legacy costs: more rapid population growth will naturally lead to lower legacy cost ratios. It will be interesting to see if some of the places that had been experiencing rapid population growth prior to the recession but are now stagnating will end up with legacy cost issues of their own (assuming the previous population dynamic is not quickly restored).
Anyway, there is more than one way to reduce a legacy cost burden. A bankruptcy might (or might not) be a relatively rapid way, but there are alternatives if that isn't available.
the unemployment rate is actually understating how well the Pittsburgh employment situation has been doing relative to the national averages. The unemployment rate could also have independent significance--for example, it is reasonable to hypothesize that places with relatively low unemployment rates will attract migration during a recession.
The unemployment rate could be overstated, but its not surprising that Pittsburgh has a below average unemployment rate.
I'm not so sure that is a reasonable hypothesize, a low unemployment rate tells you little about job turnover and job creation. Which is my point, the unemployment rate really does not tell you that much.
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Originally Posted by BrianTH
I'd suggest resistance to recessions was actually one criterion of economic health.
An area that is more resistance to recession is going to also be an area that lacks significant start-up activity. Although not having busts is a good thing, not having booms is a bad thing.
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Originally Posted by BrianTH
I'm not sure that map demonstrates that claim--net interstate migration isn't the same thing as population growth, and the correlation with legacy costs is far from perfect.
When I said "gaining people" I meant people are migrating, not more general population growth.
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Originally Posted by BrianTH
Note there is also a chicken and egg problem when considering population and legacy costs: more rapid population growth will naturally lead to lower legacy cost ratios.
In the long term, but in the short-term it can make matters worse. If you are losing working age adults, but gaining from births you are both adding costs and losing revenue.
The unemployment rate could be overstated, but its not surprising that Pittsburgh has a below average unemployment rate.
I'm not sure surprising is the right word, but this isn't the same pattern we saw in the last recession--that time, it was true that Pittsburgh only briefly tracked ahead of the national averages, but when the recovery started Pittsburgh fell behind. This time, Pittsburgh is still tracking ahead during the recovery phase, at least so far.
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I'm not so sure that is a reasonable hypothesize, a low unemployment rate tells you little about job turnover and job creation. Which is my point, the unemployment rate really does not tell you that much.
It may not be the perfect measure, but a relatively low unemployment rate during a recession is generally a decent proxy for a more favorable climate for jobseekers. As a result, historically in U.S. recessions, people have migrated from higher unemployment rate areas to lower unemployment rate areas. And the data indicates the same thing is currently happening in Pittsburgh.
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An area that is more resistance to recession is going to also be an area that lacks significant start-up activity. Although not having busts is a good thing, not having booms is a bad thing.
I'm not sure that is obviously true, but in any event I would suggest a more moderate but steady path is likely better over the long run than a more volatile boom-and-bust cycle. In a nutshell, that is because many economic resources are perishable (including willing labor), so deeper and more prolonged recessionary periods end up destroying economic value.
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When I said "gaining people" I meant people are migrating, not more general population growth.
But why does domestic migration alone matter? For example, places like New York and California are immigration gateways, which means they have long experienced net domestic outmigration. But that hasn't stopped them from having growing populations and growing economies.
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In the long term, but in the short-term it can make matters worse. If you are losing working age adults, but gaining from births you are both adding costs and losing revenue.
As an aside, I'm not sure this is responsive to the point I was making, which is that if excessive legacy costs are correlated with population loss/stagnation, the causal order may be that population loss/stagnation cause excessive legacy costs, not the other way around.
In any event, almost nowhere in the United States is gaining significant net population from births/deaths (our fertility rate is too low for that to happen). Again, the way places with lots of net domestic out-migration tend to maintain stable or growing populations is through net international in-migration (in fact without immigrants and their children, the U.S. as a whole would be losing population). The economic effects of that pattern somewhat depend on the nature of the immigrants in question, and so vary by locale.
I'm not sure surprising is the right word, but this isn't the same pattern we saw in the last recession--that time, it was true that Pittsburgh only briefly tracked ahead of the national averages, but when the recovery started Pittsburgh fell behind. This time, Pittsburgh is still tracking ahead during the recovery phase, at least so far.
This time its much different though, much of the "recovery" is from government stimulus. Now that the effects of the stimulus have peaked, the recovery will slow and perhaps we will see a double dip. It would be interesting to know how much stimulus cash the Pittsburgh area received.
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Originally Posted by BrianTH
It may not be the perfect measure, but a relatively low unemployment rate during a recession is generally a decent proxy for a more favorable climate for jobseekers.
Its very far from a perfect measure, many of the states with the lowest unemployment rates are not good for job seekers right now. If you just looked at the states with larger populations it would be a better measure.
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Originally Posted by BrianTH
I'm not sure that is obviously true, but in any event I would suggest a more moderate but steady path is likely better over the long run than a more volatile boom-and-bust cycle.
Economic booms are a rather natural part of an industrial economy, what you are asking for would only be possible with god-like powers to manipulate and control the economy. Hence, realistically speaking when you lack the busts you also lack one of the major components to growth, namely a boom.
Also, certainly a bust can destroy value but a boom can create value. After all many of the things that attract people to Pittsburgh are things that date back to Pittsburgh's boom days.
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Originally Posted by BrianTH
which means they have long experienced net domestic outmigration.
This is not true of California, California has been adding people domestically. The exceptions are right now and in the 90's when the military industrial complex started to leave Los Angeles.
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Originally Posted by BrianTH
the causal order may be that population loss/stagnation cause excessive legacy costs, not the other way around.
I was not trying to make the causal claim that "legacy costs -> population loss". Obviously, population loss will make any legacy costs more dramatic. I'd suggest instead that high taxes that provide poor value create incentives for business and people to leave, if a net loss starts to occur then the situation feeds on itself.
Average per capita US was $1170, PA was $1086. For the counties in the Pittsburgh Metro it was Allegheny $667, Armstrong $775, Beaver $409, Butler $394, Fayette $681, Washington $500, and Westmoreland $523.
Some sort of business cycle is likely impossible to eliminate, but it doesn't have to take the form of prolonged booms and busts. Again, the problem with more severe and prolonged busts is they waste perishable resources, and booms don't have the power to compensate. So, for example, while it is true Pittsburgh has some legacy assets from its boom era, lots of resources were wasted along the way.
According to Census estimates, California had negative net domestic migration every year in the 2000s, and every year in the 1990s. The Census doesn't break it out annually before 1990, and in the 1970s and 1980s California did have a small net positive gain (about 500,000 total in the 1980s and 300,000 total in the 1970s). But the 1960s was the last time California had more net domestic migration than net international immigration.
There is some evidence poor governance measures may be associated with disinvestment and population loss. There just isn't much evidence to support a tax effect.
Some sort of business cycle is likely impossible to eliminate, but it doesn't have to take the form of prolonged booms and busts.
You say this but what reason is there to believe it? Booms and busts have been part of economies before macro economic theory existed. A number of recessions throughout the world over the last 1-3 decades show that modern economic theory has done little to avoid booms and busts as well.
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Originally Posted by BrianTH
Again, the problem with more severe and prolonged busts is they waste perishable resources, and booms don't have the power to compensate. So, for example, while it is true Pittsburgh has some legacy assets from its boom era, lots of resources were wasted along the way.
I don't think anybody thinks busts are a good thing, the real question is how the harm created by the bust relates to the boom. You merely state that "booms don't have to the power to compensate", but why?
The boom in Pittsburgh was not exactly a short-term event, it latest decades and transformed the area. Without the steel boom its unlikely you'd be living in Pittsburgh right now as it would be at best a small city. Furthermore, the bust of the steel industry does not explain the decades long decline in population observed after the 50's.
Without booms most major cities would not exist, they were ultimately formed by some sort of boom in industry. Show me an example of a major US city that slowly grew over the last 200 years.
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