One of the themes of the financial and economic crisis we've faced over the past two years is that government, pressed into responding to serious economic pain, has often found itself supporting the activities that got us into this mess in the first place.
Irresponsible behavior by banks led them to the brink of collapse -- a collapse which would have sent the global economy into a terrifying period of decline -- and so the government stepped in to prevent bank failures (after learning a lesson from the dreadful experiment with Lehman). But these interventions have put banks in a situation where they stand to gain enormously from taking large and dangerous financial bets.
Similarly, government policies such as low gas tax rates and import protections on light trucks encouraged the development of a bloated domestic auto industry focused on the production of inefficient SUVs.
When high oil prices and deep recession then threatened to push General Motors and Chrysler into bankruptcy, leading to hundreds of thousands of lost jobs, the government felt it had no choice but to step in to keep the companies afloat.
Now the government owns large stakes in companies that will only profit if the American public goes car-buying crazy over the next few years.
The list goes on. The economic crisis that currently afflicts us has made it clearer than ever that we need to change the way we do many things, but because the economy is in such difficult shape, it is hard to pursue anything other than policies designed to keep the economic engine from stalling out completely. Big transitions must wait for later.
Can the same be said for sprawling urban development? Have government interventions essentially bailed out the very places that proved most vulnerable amid oil shocks and housing busts?
Chris Leinberger argued that very point in a recent blog post at The New Republic's Avenue:
While there is no federal or private ... dataset that
identifies where exactly in metropolitan areas the most mortgage
defaults are, local analyses and some news reports indicate the bulk of
the problem is on the fringe...Thus,
some of the biggest beneficiaries of federal efforts to stem
foreclosures and keep families in their homes are those located in
exurbia.
He has a point. Foreclosures have been concentrated on urban fringes, so federal efforts to modify mortgages and otherwise reduce defaults have tended to direct more aid to exurbs than inner suburbs and city centers. In addition, rates of home ownership and car ownership are higher in the suburbs than in city centers, so federal housing subsidies (including the new home-buyer tax credit and low interest rates generally) and automobile subsidies ("Cash for Clunkers") have had a geographic bias toward suburbanites.
To a certain extent, this has been unavoidable. Most Americans live in auto-oriented areas in suburban places, and a large share of those Americans are facing financial difficulty. Any measure that helped stressed households, including checks of equal value cut to all workers, would tend to benefit suburbanites more than urban dwellers.
One should also be careful not to oversell the value of the interventions. Efforts to reduce foreclosures have actually had pretty depressing results.
But certainly the government might have done things differently -- and pursued policies designed to help households as much as possible -- rather than those aimed at keeping households in homes they couldn't afford, or moving families into homes in unsustainably sprawling locations. So it's important to ask: What can we expect for exurban areas and how will the government's policy choices affect them?
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