A new White House economic report indicates that the U.S. economy has been growing at its fastest pace in decades, but faces strong international headwinds and income inequality at home. Of note, the report specifically calls out local land use restrictions on housing as a major factor in holding the economy back, according to the AP report:
The advisers also made several recommendations to reduce income inequality, though many of them rely on cooperation from a wary GOP-led Congress as well as state and local governments.
For example, the Obama administration supports an increase in the minimum wage, which GOP lawmakers generally oppose. At the local level, the report said that that the expansion of state licensure requirements has made it harder for workers to switch jobs and that local land-use restrictions can constrain housing supply and make it more expensive.
This is a theme that Jason Furman, chairman of the White House Council of Economic Advisers, has been stressing since at least November, when he gave an extended talk on it [PDF] at the Urban Land Institute.
And there’s good reason to believe that local restrictions on housing are a major factor in income inequality, per the Wall Street Journal back in November:
One reason for the breakdown in [income] convergence, said Mr. Furman, is that only high-income workers can afford to relocate to those high-productivity cities that have tighter land-use regulations.
Of course, there are limits to what federal policy makers can do on an issue that’s largely handled by states and localities, a point readily acknowledged by Mr. Furman. In that sense, the latest policy discussion reflects an attempt to nudge cities and states to be more thoughtful in designing restrictions, just as an earlier push by White House economists this year has spotlighted the hazards of occupational licensing in hindering mobility.
The land-use and affordability issue isn’t just some idle worry of economists, Mr. Furman added.
“It’s something the president is personally concerned about,” he said.
I’m glad to hear that President Obama is focused on this issue, although as the article points out, the federal government has a limited role in these state and local matters. But shining a light on the problem is a good first step.
In his State of the Union speech this week, President Obama spent a lot of time discussing energy and the country’s progress on clean technology and lowering carbon emissions. He specifically referenced the 2009 stimulus investments:
Seven years ago, we made the single biggest investment in clean energy in our history. Here are the results. In fields from Iowa to Texas, wind power is now cheaper than dirtier, conventional power. On rooftops from Arizona to New York, solar is saving Americans tens of millions of dollars a year on their energy bills, and employs more Americans than coal – in jobs that pay better than average. We’re taking steps to give homeowners the freedom to generate and store their own energy – something environmentalists and Tea Partiers have teamed up to support. Meanwhile, we’ve cut our imports of foreign oil by nearly sixty percent, and cut carbon pollution more than any other country on Earth.
As the New York Times reports, however, some experts are disputing these claims:
“That paragraph as it relates to energy and climate issues — I thought it was the most troubling paragraph of the whole speech,” said David Victor, an expert on energy policy at the University of California, San Diego. “It’s very hard to attribute the bulk of what’s happening now in terms of bending the emissions curve and increasing renewables specifically to the stimulus.”
The article does a good job going through the arguments on both sides.
To my mind, the stimulus was critical for boosting clean technology by extending existing tax credits for renewable investments and converting them to much-needed cash grants. It also provided life-saving loans for critical companies Tesla, as well as highly effective tax credits for electric vehicle purchases. Finally, it funded advanced research in clean technology through the most important new agency on climate change in the federal government, ARPA-E.
But it’s worth putting this progress in context. For example, California, an economy larger than India, has boosted demand greatly for solar through state policies, as have the majority of states in the union. China has brought down solar panel costs dramatically with manufacturing investments. And the switch to natural gas from coal, brought about by technology changes related to fracking, are largely responsible for the country’s reduction in carbon emissions.
Still, it’s been a confluence of events that has resulted in the progress we’ve made to date, and I think it’s fine for Obama to take credit as he did. The efforts of his administration have been a necessary — but probably not sufficient — part of that success.
The U.S. Environmental Protection Agency (EPA) will finally release its “Clean Power Plan” today to regulate carbon emissions from the power sector. The agency was required to do so by a 2007 Supreme Court decision. Yet due to what must be the brutal politics of trying to regulate coal-fired power plants, the Obama Administration dragged its feet until now — six years into the Obama presidency.
The final rules require a 32 percent drop in emissions by 2030 from 2005 levels. But this target is extremely watered down, to the point where it actually projects a slower rate of progress going forward on carbon emissions than we’ve been experiencing since 2005 to date, given that we’re already halfway to those targets with business-as-usual progress. Yet this is still better than the draft rules, which had targets so low that five states (!) were actually already in compliance with the 2030 goals.
Michael Grunwald pretty much sums it up in Politico:
If you’re really ranking them, the Clean Power Plan is at best the fourth-strongest action that Obama has taken to combat climate change, behind his much-maligned 2009 stimulus package, which poured $90 billion into clean energy and jump-started a green revolution; his dramatic increases in fuel-efficiency standards for cars and trucks, which should reduce our oil consumption by 2 million barrels per day; and his crackdown on mercury and other air pollutants, which has helped inspire utilities to retire 200 coal-fired power plants in just five years. The new carbon regulations should help prevent backsliding, and they should provide a talking point for U.S. negotiators at the global climate talks in Paris, but the 2030 goals would not seem overly ambitious even without new limits on carbon.
I couldn’t agree more with Grunwald on his rankings. The stimulus in particular is underestimated in its impact on boosting the clean technology sector. The sad part is that even this weak action today on climate will provoke endless litigation. And if a Republican wins the presidency in 2016, expect the EPA to gut and delay these rules and approve weak state implementation plans.
All relatively depressing, but these rules are still better than nothing. And maybe we can hold out hope that they will be strengthened over time.
