We conservatives seem to be giving Paul Krugman a headache with our carping over the Detroit bankruptcy:
Are Detroit’s woes the leading edge of a national public pensions crisis? No. State and local pensions are indeed underfunded, with experts at Boston College putting the total shortfall at $1 trillion. But many governments are taking steps to address the shortfall. These steps aren’t yet sufficient; the Boston College estimates suggest that overall pension contributions this year will be about $25 billion less than they should be. But in a $16 trillion economy, that’s just not a big deal — and even if you make more pessimistic assumptions, as some but not all accountants say you should, it still isn’t a big deal.
Yes, in the age of deficit spending, a prominent economist (who won a Nobel Prize, if he hasn’t personally knocked on your door to tell you recently) can argue that a $1 trillion pension burden is just small potatoes. As Eileen Norcross recently noted, Detroit’s pension funds have a combined unfunded liability of close to $10 billion. Using market valuation – rather than actuarial – accounting techniques, we find that one of Detroit’s pension funds is 37 percent funded; the other is 44 percent funded. Don’t worry though: Governments are taking steps.
Krugtron the Invincible argues in a separate post that Detroit, unlike Pittsburgh, didn’t keep up with internal improvements, which drove residents out of the city and created suburban sprawl:
It’s hard to avoid the sense that greater Pittsburgh, by taking better care of its core, also improved its ability to adapt to changing circumstances. In that sense, Detroit’s disaster isn’t just about industrial decline; it’s about urban decline, which isn’t the same thing. If you like, sprawl killed Detroit, by depriving it of the kind of environment that could incubate new sources of prosperity.
Pittsburgh is something of an urban Cinderella story, having turned around its moribund, post-industrial economy so emphatically that it was one of only three cities experiencing recovery during the recession, as of last year. Part of this is because Pittsburgh has invested in health care, which is heavily subsidized by the federal government. The old U.S. Steel building in downtown Pittsburgh is now home to UPMC, an emblem of the city’s transition. Nationwide, health care jobs have increased by 10.5 percent since the economy crashed in late 2007, lifting Pittsburgh’s boats.
But there’s another reason Pittsburgh’s economy is relatively robust:
Douglas Heuck, director the Regional Indicators for Pittsburgh Today, a research affiliate of the University of Pittsburgh, said the Pittsburgh region has enjoyed slowly rising housing prices, a rarity given the nation’s housing crisis. He added the region’s economy also has been well-supported by its health care, higher education and financial services segments.
“And Marcellus shale drilling has been a shot in the arm, coming during the teeth of the recession,’ said Heuck. (Emphasis added.)
He isn’t kidding. While shale drilling is illegal in Pittsburgh, nearby fracking has driven the city’s economy, bringing jobs and people to an urban area once regarded as a basket case. Pittsburgh’s mayor recently compared fracking to the “eds and meds” of today and the steel of yesterday as a crucial economic catalyst. Wells Fargo economists have called Pittsburgh a “logistical hub” for the natural gas industry.
Not all is bright in Pittsburgh. Many suspect that its health care growth is occurring on a bubble, which will pop once the federal funding goes dry. Its pension fund is still a mess, though not as dilapidated as Detroit’s.
Still, there are lessons to be learned from Pittsburgh, and one of them is: Don’t listen to Paul Krugman:
So what you need to know is that nothing you hear from these people is true. Fracking is not a dream come true; solar is now cost-effective. Here comes the sun, if we’re willing to let it in.
I don’t know how to save Detroit, but putting a solar panel on the roof of every collapsing house seems unlikely to trigger a thunderous economic recovery. On the other hand, Michigan has one of the largest natural gas reserves in the country. Something to consider.
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That’s right, the Grinch (Joe Biden) is coming for your pocketbooks this Christmas season with record inflation. Just to recap, here is a list of items that have gone up during his reign.
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