The Observation Deck

Is Lakewood ready for a new day?

Over the past couple of days we have been talking of budget shortfalls, and Kasich
destroying the state and the cities of Ohio with cutbacks. One of the things that have
popped up now and then is that "no one could have seen this shortfall..."

Could they?

Now almost 9 years ago I was part of the Visionary Alignment for Lakewood, that looked
at a world that is not so different from today, tomorrow and the next years. Gas over $4
a gallon, actually as high as $7. The inability to get any more money for taxes as
unemployment was over 10%, and the housing market dead. A devastated Cleveland, with
little money coming from the state. The simple thought, Let's plan for a terrible scenario
so that anything else is better. *

Now that was a rare moment in a rare project that is still unfolding today. But some say
it is easier for non-elected officials to see the future than elected officials. Is it?

Cleveland Heights another city where there is a paper is also going through many of the
issues Lakewood is going through. But there their City Manager(not elected) has given
them a long range plan, to be ready for the coming years. Cutting way before cuts need
to be made. Instead of like Lakewood putting all of their eggs in one small unresponsive
basket, they have more than one CDCs, EDCs, SIDs all working independently, and all
making incredible progress in shoring up the city during these tough times.

Is it because, the leaders could see the future? Were smart enough to plan for a rainy day?
That the leadership, aka City Manager is not running constantly for election so can focus?
Or are they just lucky?

In talking with friends yesterday, not a single person saw the economy coming back in the
next 5 years. Most said 15 years or more before any real impact is felt, where we as a city,
or as residents in this city, could afford to spend money without actual accounting for if
that spending. And measuring for all to see if that spending had any positive impact on this
city. That Lakewood, as with every other city has a right, no the need to make sure
everything is working as they say it is, and constantly looking for improvements.

So some simple questions...

1) When did you think the national and the local economy will improve?
Bonus points for describing how?

2) When Kasich got elected did you think there would be more money for Lakewood or less?

3) Can Lakewood still afford to spend, spend, spend on frosting the cake, or do we turn
to making bread, and other things of more substance?


FWIW

* For the record, Lakewood was found to be perfect no matter how bad we made the forecast.
Walkability, small shops, easy access to airport, freeways, farmland, fresh water,
electricity, etc. Made this city damn near bullet proof. As long as we stayed focused on
being what we do best. A great city to live, and raise a family. Whenever we strayed to
far from that simple goal, it began to get dicey.

.

1) When did you think the national and the local economy will improve?
Bonus points for describing how?
A: When we can successfully attract more business and jobs into this region.

2) When Kasich got elected did you think there would be more money for Lakewood or less?
A: Less, I assumed there would (or should) be cuts across the board in Ohio / Lakewood.

3) Can Lakewood still afford to spend, spend, spend on frosting the cake, or do we turn
to making bread, and other things of more substance?
A: Well, the question itself seems somewhat based on opinion with the 'frosting the cake' comment... but i would say we need to do both and always be diversified.

1) When did you think the national and the local economy will improve?
Bonus points for describing how?

We are seeing a slow improvement. I expect that to continue. The improvement won't be great enough to lower the real unemployment rate or to increase wages. This region will continue to struggle because it has no entrepreneurial spirit. Our economic "engines" depend on taxpayer subsidies and are run by bureaucrats. Our economic development plans move people or offices 3 miles down the street and call it growth.

Years ago the Post Office thought it could compete by offering fax services and email services.

If they had their way if you wanted to send a fax or an email you would have to wait in line at the Post Office. That's how bureaucrats think.

Bureucrats do not create wealth, they feed off it.

The "Great Leveling" (courtesy of "free trade") means third world countries will see a rising standard of living and the United States a lower standard of living. Nothing we do at the local level will change that.


2) When Kasich got elected did you think there would be more money for Lakewood or less?

Less and I'm fine with that. The subsidies provided by the State gave City and School Board employees a shorter work day, longer vacations, bigger paychecks and earlier retirement. The subsidies did very little to improve the economy. Even with all the caterwalling his budget will spend 10% more than the previous budget. Senate Bill 5 will give Cities and School Boards much needed control over their budgets; if they choose to take it.


3) Can Lakewood still afford to spend, spend, spend on frosting the cake, or do we turn
to making bread, and other things of more substance?

A friend of mine who is a retired City employee (really!) was complaining about the fancy new traffic lights, flower pots, cross walks and anything else that made the City a little less dreary. He thought the money would have been better spent on bigger raises for City employees.

That illustrates the great divide in opinion on the purpose of City government. Are we better off with the peninsula project or subsidizing the DROP Program?


Vison is important, maybe more important than competence. But whose vision? The reason local officials don't offer visionary projects is because 50% of the people would oppose the vision.

Of course we have had some visionary projects in Lakewood.

Marc's Plaza could not have been built without huge taxpayer support. Personally I'd prefer the parking lot that was there to what is there now.

The current bankrupt state of Drug Mart Plaza is the result of a still born vision backed by the City.

Rockport is a vision that never made any sense. I was at the ground breaking. I remember thinking: "Do these people really believe this stuff?"

1) When did you think the national and the local economy will improve?
Bonus points for describing how?
The corporate world hates uncertainty. Especially uncertainty about taxes, future costs and future legislation. When events happen that cause uncertainty or even talk of them (Obamacare, cap and trade, tax increases, etc) they conserve cash and hide like a frightened turtle. The result is little investment and little hiring. Gradually they come out of their shell and eventually resume some resemblance to normal operations. The best thing would be for government to do nothing. Well, maybe repeal Obamacare. Even then it will take 5-8 years for total recovery.

2) When Kasich got elected did you think there would be more money for Lakewood or less?
Less, but not this much. Cutting 25% in 2011 and 50% in 2012 is harsh for local governments who have felt the pain long before the State. At the same time, this right pocket left pocket stuff drives me nuts. It would be much simpler if the state reduced the sales tax rate, cities increased their income tax rate and not rely on the state for funding. A whole bureaucracy is created to take and give back dollars to the same people all in the name of equality.

3) Can Lakewood still afford to spend, spend, spend on frosting the cake, or do we turn
to making bread, and other things of more substance?
I think what we need to do is return to the fundamentals. Forget about the 360 degree slam dunks that look all flashy and bring the fans to their feet. A layup scores the same number of points. People will move to Lakewood because of Safe, Clean and Fun. Not because there’s a giant convenient store masquerading as a drug store within walking distance of every house or a Quaker Steak and Lube. Invest in Safe, Clean and Fun.

1) When did you think the national and the local economy will improve?
Bonus points for describing how?

I don't know if everyone is aware of this, but the economy is already improving according to national statistics. The Recession ended in 2009.

I think what you mean to ask in this question is when we will feel the effects of the recovery, which is much different than just statistical improvement, which can be proved.

This requires quite a long answer, but I will try to keep it as short as possible. The most recent financial crisis exposed a great deal of underlying economic problems and assumptions that people in this country made. It exposed short falls in the mortgage lending system and it highlighted the inability of this country to reallocate funds appropriately. People always are ok with other people's benefits being cut, but no one wants to see an across the board change in tax policy or anything else that might actually take a chunk out of the deficit and help with growth.

But I think that local governments will be the last to see recovery to its fullest extent. I feel like that is almost a given.

If you want to see improvement in the economy, there needs to be a change in regulations for the financial system in Money Market Mutual Funds and Derivatives, you need to see a change and simplification of the tax code that rids it of all those exemptions, you need to see changes in Social Security that tax all earned income at the same rate, and changes Medicare/Medicaid that curtail the prescription of unneccessary treatment and allow for a better choice between health care plans.

If you want to see improvement in the local economy, you need to attract businesses and get the existing businesses to work together, much like LakewoodAlive has been doing. But you also need to improve the housing stock in Lakewood and build up aspects of the city that attract young families here instead of causing them to leave. I hate to mention education, but if we ever finish the High School, I think that might be, I don't know, a positive thing. I mean good God, that think was under construction starting 4 or so years ago and it STILL isn't finished. That's pathetic really, but slightly unrelated.

And also, improvement in the local economy can be seen in cohesion within the region. I do not want to say strictly regionalization, but I just think that there are ways in which smaller suburbs could would with bigger cities to better their chances at fighting off big problems. This is something I believe to be true of all major cities, because really a suburb doesn't stand a chance without the city it is a suburb of.

And I think a lot more focus should be put on improving the country than on undoing the stuff the most recent party just did. I don't care what side of the aisle you are sitting on, but wasting the first few months of your time in office as a Congress to repeal what the other Congress just did (especially when it wasn't strictly negative) is moronic. Try doing something different.

2) When Kasich got elected did you think there would be more money for Lakewood or less?

Less, because he ran on budget cutting and people in their silliness and anti establishment fervor believed this was the only answer. And for the record, knowing that he used to work at Lehman Brothers I could already see that he was going to treat this state as a business and not a part of a country, which is a huge, huge mistake. If you want to know more about what I mean, look up Paul Krugman's A Country is Not a Company. It's short and explains why people who think that economics and business are basically the same deal are idiots.

3) Can Lakewood still afford to spend, spend, spend on frosting the cake, or do we turn
to making bread, and other things of more substance?

On the one hand, I would like to be cut and dry about saying of course we should return to fundamentals.

But then again, to do this we need to attract more business to the city. And to do that we need to make the city look appealing to entice these businesses here. We are not going to attract businesses because we are desperate, but because we look like we are trying to make the city look its best. I also think we need to work on improving the appearance of our housing and our residential area, although I do not know whether we consider those as fundamentals or frosting. I think the are fundamental but that is one opinion.

So I would say that it is most important to do a little of both, with the end goal being the overall improvement in the appearance, perception, and growth of the city both residentially and in the business community.

That was a great post Thealexa. I think your answers are right on target. I'm waiting for that high school to be finished too so my street can get fixed. Apparently the rest of the money to finish it and remodel the last two schools is tied up in the state budget and it's not looking good with the new gov. Anyone know where the school funding stands?

I think the mom and pop store fronts need some massive amounts of money dumped into them. I don't care where it comes from. Other cities make it happen. We can do it too. It's gotten a lot better recently but it didn't take this long to build up the short north in Columbus or beef up Coventry into what it is now. Stores open and close every other day on Madison. Someones got to get control of the situation. Other than that I think we've got a lot of bright spots and big improvements.

Lastly, everyone should read krugman.

1) When did you think the national and the local economy will improve?
Bonus points for describing how?

The economy is doomed to failure with the current monetary system. It requires "growth" in order to cover the interest and wealth created from nothing. It is nothing more than a corporate ponzi scheme. The local and national economy will only improve when the we realize that growth cannot be sustained and instead is replaced with a emphasis on sustainability. In the biological systems I manage their is an initial rapid growth phase when plentiful resources are present. As those resources dwindle increased competition result in the most efficient and many times more complex systems surviving. If this is accomplished the system reaches equilibrium, if it is not the system begins to consume itself and collapses. Local government must become more efficient and not rely on outside funding from state and federal sources. We are in competition with the communities around us. While those communities are moving toward homogenization with their Walmarts and chain restaurants, I think Lakewood's competitive edge lies in bucking this trend and remaining unique: both in its people and what is offered to them.

2) When Kasich got elected did you think there would be more money for Lakewood or less?

We should not count on any money from the state and work towards independence from external funding.

3) Can Lakewood still afford to spend, spend, spend on frosting the cake, or do we turn
to making bread, and other things of more substance?

That's a decision to be made by the people. Currently the "frosting" in this city is not provided by the dismal failure of a government. It's in the interaction I have everyday with the people who live, work and play in the best city that I've ever experienced: Lakewood.

Interesting Steve. I wrote the below a couple days ago but I did not post it because I felt like it would be “there goes that Liston again….”

You have emboldened me, so here goes Liston again….

1) When did you think the national and the local economy will improve? Bonus points for describing how?

I don’t think the economy will ever be what it once was. The “growth” of the last several decades was predicated on “pulled-forward” demand, not on organic production surpluses. We bought and built things that we hadn’t earned yet. Pulled-forward demand was made possible by massive debt expansion and incredibly cheap energy. Those two factors are becoming pretty much played out, especially the former. Fiat money creation also played a big part but fiat money is just more debt. Baby-boom demographics also played a role.

Bonus point for describing how? The only way our economy can really recover is to default on our debts at many levels, ratchet back growth and expectations for our standard of living, and start from scratch. But this won’t be permitted to happen, just as we didn’t let the banks fail back in 2009, instead we created money (!) to recapitalize them. We’ll continue to do this with repeated rounds of QE until our money is sufficiently debased that debts and entitlement promises are immaterial. We are starting to see this happen with the price of food and oil, even equities, and of course the “price” of gold.

BTW there is no such thing as “the price of gold.” Gold does not go up and down. Gold is what it is. Instead the dollar goes down and up. Gold was around $30 an ounce in the early 70’s, and around $250 ten years ago when fiat money creation really took off. Now it’s over $1400. That shows what a chimera our money really is.

2) When Kasich got elected did you think there would be more money for Lakewood or less?

Nobody in their right mind could have thought that Kasich was going to find more money for Lakewood. We all knew he had an $8 billion budget hole, and would and could not raise taxes to maintain the spending status quo. I find the criticism of his new budget inconceivable. What was he to do?

3) Can Lakewood still afford to spend, spend, spend on frosting the cake, or do we turn to making bread, and other things of more substance?

There is no money for frosting and there will be rapidly diminishing money for cake. If we get QE3, QE4, etc. to bail out state and local governments there will be a continuation of the illusion of stability but eventually it will cause rapidly increasing prices and living standards will decline anyway.

(One additional note: I notice that the Clifton Boulevard enhancement project is now officially dead.)

Steve Hoffert wrote:1) When did you think the national and the local economy will improve?
Bonus points for describing how?

The economy is doomed to failure with the current monetary system. It requires "growth" in order to cover the interest and wealth created from nothing. It is nothing more than a corporate ponzi scheme. The local and national economy will only improve when the we realize that growth cannot be sustained and instead is replaced with a emphasis on sustainability. In the biological systems I manage their is an initial rapid growth phase when plentiful resources are present. As those resources dwindle increased competition result in the most efficient and many times more complex systems surviving. If this is accomplished the system reaches equilibrium, if it is not the system begins to consume itself and collapses.

Mr. Hoffert, I can understand your readiness to fault the monetary system and call the disaster a corporate ponzi scheme, because to the average consumer that is what it appears to be, but the financial crisis was actually much more involved than that. Theoretically, the economy should always be growing. Your analogy to a biological system does not quite fit in relation to an economy because the stability of an economy must be based off of continual growth. What I think you might be referring to is an increase in wealth overall, but I am just not sure I agree with you that we should not focus on growth. Macroeconomics shows us that developed countries such as the United States eventually will grow at a slower rate, but because of technological advancements and improvements in production of resources that we need and the increase in skill and education, the country will always grow. Economies with stagnant growth end up collapsing.

I agree local government should be more self sufficient just because there is nothing wrong with self-sufficiency.

Tim Liston wrote:1) When did you think the national and the local economy will improve? Bonus points for describing how?

I don’t think the economy will ever be what it once was. The “growth” of the last several decades was predicated on “pulled-forward” demand, not on organic production surpluses. We bought and built things that we hadn’t earned yet. Pulled-forward demand was made possible by massive debt expansion and incredibly cheap energy. Those two factors are becoming pretty much played out, especially the former. Fiat money creation also played a big part but fiat money is just more debt. Baby-boom demographics also played a role.

The growth of the last decade was based largely on the assumption that prices of housing and other assets that were intrinsic to our economy would not decrease in value. There has also been natural growth because of technological advancements and of course the invention of the internet. The tech-bubble did accelerate growth, but the kind of exaggerated growth that everyone seems to be referencing really only happened within the past 20 years from the inflation of housing prices. Again, this is because investors and home owners mistakenly believed that the prices of housing were so solid they would not fall, and sadly, all of their models were based off of this assumption and completely broke down at the slightest decrease.

I do not think that there was really any fiat money creation, as much as there was the creation of new types of assets and derivatives that had previously not existed. These are not considered fiat money strictly speaking because their value is based off of the value of underlying assets such as stocks or mortgages or the price of gold etc. The creation of these new types of assets, like ABS or CDS or CDOs are what exacerbated the financial crisis because they were not secured by the FDIC like deposits are.

Tim Liston wrote:Bonus point for describing how? The only way our economy can really recover is to default on our debts at many levels, ratchet back growth and expectations for our standard of living, and start from scratch. But this won’t be permitted to happen, just as we didn’t let the banks fail back in 2009, instead we created money (!) to recapitalize them. We’ll continue to do this with repeated rounds of QE until our money is sufficiently debased that debts and entitlement promises are immaterial. We are starting to see this happen with the price of food and oil, even equities, and of course the “price” of gold.

BTW there is no such thing as “the price of gold.” Gold does not go up and down. Gold is what it is. Instead the dollar goes down and up. Gold was around $30 an ounce in the early 70’s, and around $250 ten years ago when fiat money creation really took off. Now it’s over $1400. That shows what a chimera our money really is.

If the United States were to default on our debt, it would be a catastrophe. That being said, the United States will never be in as dire a debt crisis as everyone thinks. Yes, it is true that we have a huge national debt and deficit, however, if we ever are asked to suddenly pay up by China or any other country, all we have to do is print more money. Yes that has consequences, and I'm not by any means suggesting that we do that because it would cause unreal inflation, but since the most used currency in the world is the US dollar, it isn't like anyone could stop us from doing it. That is why all those chicken littles screaming about how the US is going to go bankrupt are just fear mongering. There is a reason why US Treasury bills are considered the safest asset, because the US will never default and doesn't have to.

I think you are mistaken about the price of gold. There is such a thing as the price of gold. It's called the gold standard. However, there are very few countries if any that still use this. It was wildly inefficient and caused quite a great deal of arbitrage from speculators and other countries who were capitalizing off of the mispricing of gold between governments. The US left the gold standard in the 1970s and that is why our currency is now truly fiat money because it is literally only worth what the government says it is, it is not backed by gold or any other commodity.

Regardless, gold will always have intrinsic value because it is a limited resource and therefore will always be worth something.

Not to get too sidetracked.

Thealexa Becker wrote:all we have to do is print more money.

The Federal Reserve prints our a money, not the USA. The Federal Reserve is a private institution owned by
banks. While no one is eager to let the USA fail, many believe it is in the cards and inevitable.

FWIW


.

1) When did you think the national and the local economy will improve?
Bonus points for describing how?

It won't be any time soon, especially locally. The problem with Ohio is myriad. We have too many government jurisdictions, too many taxing jurisdictions, and too many social conservatives passing stupid laws that make people not want to move to this state. We have poor weather, we have socially backwards policies, and we have a poor national reputation. We can't change the weather, but the rest needs to change if we ever hope to attract the talent and then the companies that are needed to sustain Ohio into the future.

Taxing especially is a problem. Ohio is only one of four states that allow local income tax which places a huge bureaucratic tax burden on corporations not to mention the wild inefficiency of having to staff and run all those hundreds of taxing authorities. I would venture to say that if 46 other states can do away with local income tax, so we could we.

Notice, I'm not saying our overall tax burden is necessarily too high, just the way we decide to tax creates an undue burden on both companies and individuals which makes the entire system unattractive.

On the flip side, we have to think more regionally. I know it's all the rage here to say we don't need Cleveland, or anyone else in the region, but the simple truth is that's not accurate nor realistic. Like it or not, if Cleveland tanks, so do we. Until we all start acting like adults rather than spoiled municipal brats only looking out for ourselves, ultimately the future of the entire region is in doubt.

Now I'm not saying we all need to necessarily merge into Cleveland, but there needs to be a much better job of working together to improve the prospects and long-term planning of the entire region to make it attractive and "sell" it to businesses and employees. There's a reason right now why so many of our companies and so much of our college talent leave the region.

2) When Kasich got elected did you think there would be more money for Lakewood or less?

Less of course because Kasich would rather gut the state to give money to his rich friends than actually govern responsibly. Kasich's priorities could be an entire thread on its own, but mark my words, he will go down as one of the worst governors in Ohio history...maybe even worse than Taft. While Taft was just incompetent (and honestly Strickland wasn't much better), Kasich is just destructive.

3) Can Lakewood still afford to spend, spend, spend on frosting the cake, or do we turn
to making bread, and other things of more substance?

Depends on what you call "frosting" and what you call "cake" sometimes you need the frosting to attract the cake. The trick is knowing how much frosting you need and not using too much before you have the cake in place.

[quote="Bryan Schwegler]

3) Can Lakewood still afford to spend, spend, spend on frosting the cake, or do we turn
to making bread, and other things of more substance?[/b]

Depends on what you call "frosting" and what you call "cake" sometimes you need the frosting to attract the cake. The trick is knowing how much frosting you need and not using too much before you have the cake in place. [/quote]

I like how you stated this... well said.

Jim O'Bryan wrote:Not to get too sidetracked.

Thealexa Becker wrote:all we have to do is print more money.

The Federal Reserve prints our a money, not the USA. The Federal Reserve is a private institution owned by
banks. While no one is eager to let the USA fail, many believe it is in the cards and inevitable.

FWIW


.

For the record, the Treasury actually physically prints the money. The Treasury is a department of the United States government. So yes, the government does print the money. The Fed is the central bank, it exercises monetary policy to influence the money supply. I think what you are trying to do is combine the two and they are very different. The Treasury handles the debt and the Fed is the bank that tries to control inflation and bank panics and interest rates. It is easy to confuse, but important not too.

Jim, the Fed is NOT owned by banks. I have no idea where you got that from. The Fed is an independent institution, but it is NOT owned by private banks. In fact, in normal circumstances (which was not the most recent crisis), private investment banks have no access to the funds given by the Fed. The only banks that by the mandate of the Fed have access to the lender of last resort are those that accept commercial deposits. Please do not try to tell me the Fed is a conspiracy either, I assure you, no matter how angry you were with the investment banks, the Fed is not working against the average American.

Those people who believe that the US failing is in the cards are, like I said, chicken littles, who want to fear monger and make people listen to their bad economics. Ask any rational economist, because they will say that the US is in no danger of economically collapsing and is in fact recovering. We were in a much much worse situation in the Great Depression and recovered. I am not saying there are not problems with our economy, but it is nowhere near dire enough for us to collapse.


In general, I agree that taxation needs to be altered. There are some proposals in the works that suggest a simplification of the tax code to remove a lot of the deductions. Right now, only 41% of income is even eligible to be taxed before other deductions. We wouldn't even have to change the marginal tax rates, which is always an incendiary topic. I feel like because people do not 1) understand the math behind it and 2) people don't really understand the tax system and 3) there are too few people who understand basic economics, that these proposals are always unpopular, even if they would benefit everyone.

And yes, it is foolish to want to seperate ourselves from Cleveland and rule out this regionalism idea. Lakewood is a suburb. It would never thrive economically without Cleveland. I am not saying that we merge or anything drastic, but there needs to be much much more collaboration. There is not significant way that it could hurt, if done honestly and correctly that is.

Steady State Economics is an accepted alternative to "Technological Optimists" or "De couplers" who believe that economic growth can last forever. An analysis of commodity supply and demand charts, crop efficiency per acre, energy production and consumption and population clearly shows that growth is unsustainable.

Unfortunately education without experience leaves one fluent but hollow.

Steve Hoffert wrote:Steady State Economics is an accepted alternative to "Technological Optimists" or "De couplers" who believe that economic growth can last forever. An analysis of commodity supply and demand charts, crop efficiency per acre, energy production and consumption and population clearly shows that growth is unsustainable.

Unfortunately education without experience leaves one fluent but hollow.

There are different points of view on growth, steady state is a popular theory, but there are also some ideas about growth that are postive, but not aggressive. Some economists and scholars think one way is better, others feel the other is true. I tend to fall in the category that believes that we will eventually, in a very very long time, fall naturally into steady state, but that in the short run and even in the long run, we will continue to experience boom and bust periods and generally experience slower and slower growth due to improvements in technology. Neither point of view is wrong, they are just different, but I think that for certain in our lifetimes, and lifetimes for a while after ours we will continue to grow, so I feel it is unrealistic to think about steady state when we are still in such a great state of flux. But that is just the side that I prefer, you are welcome to disagree.

You are right, education makes you fluent, but I don't think either of us (and a lot of the politicans in office) really has practical experience in managing an economy's long term growth or writing economic theory. I guess we both have to go off of our relative fluency and call it even. But at least unlike some pundits and politicians, you know the actual terminology you are referencing, its refreshing.