The Meltdown on Wall Street and America's Cities

Michael Dudley's picture
Blogger

With the subprime mortgage and housing bubble crises now metastasizing into the full-blown implosion of the U.S. economy, global markets have been gasping to keep up with the turmoil. Later this week Congress will be pressured to approve a mind-boggling $700 billion "bailout" package which would effectively transform Treasury Secretary Henry Paulson Jr. into an "overseer" of the entire economy, with complete and unassailable power to purchase so-called "toxic" debts from any bank he chooses.

Critics have been swift to decry the bill, which appears to be giving Wall Street investors everything they want while leaving nothing for "Main Street". For example, economist Robert Kuttner argues at the Huffington Post that instead the bill needs to include provisions for

"mortgage refinancing, and authority for cities and towns to acquire foreclosed properties and put buyers and renters back in them. The package should include at least $200 billion of new economic stimulus, in the form of aid to states, cities, and towns, for infrastructure rebuilding, more generous unemployment and retraining benefits, and green investment."

Eric Lotke of the Campaign for America's Future agrees. The answer to the crisis is to rebuild America's bridges, dams and schools:

"America needs rebuilding. And the American people need jobs. Put one and one together. Make two. And build a bridge while you're at it. It's a real way out of our economic mess. Every $1 billion of federal funding invested in transportation infrastructure creates 47,500 jobs. Every $1 billion spent on our water infrastructure creates 57,400 jobs. Catching up on $20 billion in deferred school maintenance would generate 250,000 jobs."

These calls to keep the interests of cities in mind are significant. There is after all a fundamentally urban dimension to this crisis: the unbridled expansion of suburban sprawl was largely financed in recent years through patently insane lending practices, which are now bringing down the economy. At the same time, the federal government has long neglected funding infrastructure upgrades, to the point where the U.S. is facing an estimated (2005) $1.6 trillion infrastructure deficit.

Now with the federal government taking control of Fannie Mae and Freddie Mac (which may eventually cost taxpayers $300 billion) and set to pour almost a trillion more dollars of taxpayers' money into the hole created by the "sprawl economy", there will likely be very little capacity at the federal level to fund these vitally necessary upgrades to the country's infrastructure.

So unless such provisions for infrastructure funding can swiftly be made a part of this bailout, it is questionable whether such an enormous commitment will otherwise be possible. Indeed, this crisis may mean a reduced role for the federal government in America's cities for years to come.

Michael Dudley is the Indigenous and Urban Services Librarian at the University of Winnipeg.

Comments

Comments

No Cash for Trash

The Bush/Paulson proposal does not solve real economic problems of the country.

There are alternative methods to deal with Wall Street that don't involve taxpayers bailing out those described by Theodore Roosevelt as "malefactors of great wealth."

For details, read Krugman in the NYT, or Ferguson/Johnson in the Nation, or any number of other good economists in any number of places.

Seconded

While I completely disagree with Mr. Dudley that we need to load a bunch of pork into an already ridiculous federal bailout, I agree with PollyTeek above... the bailout as proposed has a very good chance of a) not working, b) rewarding the people who don't need to be rewarded and c) basically screwing the rest of us who did not get caught up in the rush to get rich (or d) all of the above).

More Bridges To Nowhere

"America needs rebuilding. And the American people need jobs. Put one and one together. Make two. And build a bridge while you’re at it. It’s a real way out of our economic mess. Every $1 billion of federal funding invested in transportation infrastructure creates 47,500 jobs. Every $1 billion spent on our water infrastructure creates 57,400 jobs."

Whether or not we need the bridges and dams, even if the bridges make our cities less livable and the dams destroy ecosystems, we should still build them purely to create more work.

The average American worker spends about one-third more hours working per year than the average Dutch worker. Americans work longer hours than the people in any developed nation. It is because of this crazy ideology that we have to produce more, whether or not we want it, purely to create more work.

Charles Siegel

Not the argument

"Whether or not we need the bridges and dams, even if the bridges make our cities less livable and the dams destroy ecosystems, we should still build them purely to create more work."

I think the argument the author was suggesting is that we have this huge infrastructure bubble as well that is eventually going to pop (some of it clearly already is). Why not kill two birds with one stone and invest in public infrastructure while putting a large number to work.

Prepare for the AICP Exam

Join the thousands of students who have utilized the Planetizen AICP* Exam Preparation Class to prepare for the American Planning Association's AICP* exam.
Starting at $199
Planetizen Courses image ad

Planetizen Courses

Advance your career with subscription-based online courses tailored to the urban planning professional.
Starting at $14.95 a month

Stay thirsty, urbanists

These sturdy water bottles are eco-friendly and perfect for urbanists on the go.
$19.00

City Coasters

Hand-drawn engraved maps of your favorite neighborhoods are divided up across 4 coasters making each one unique.
$36.00