To Make America Great Again, Focus on the People, Not Places
America's economy is gaining traction, but you wouldn't know it in hundreds of distressed communities. From coast-to-coast we elect officials who offer ready fixes to end decades of decline in America's Rust Belt and other former industrial regions, whether it's tariffs on steel imports, state and local subsidies, or tax credits to lure businesses. There's one problem: It doesn't work.
The policies we count on to save distressed communities have it backwards by putting place before people. We must empower individuals rather than points on a map, by helping them to build up their skills, innovate, and acquire social, human, and financial capital.
The disparity between vibrant and distressed communities is stark. Deep poverty, pervasive joblessness, and little educational attainment are widespread on one side. New jobs, new businesses and educated workers are abundant on the other. The disparities go beyond economics: Residents of prosperous areas can expect to live five years longer than their neighbors in distressed areas.
Today's distressed were not always so. In the mid-20th century, few could have envisioned remote Seattle as the center of a tech boom or a leader in aerospace engineering. Detroit was booming, and few anticipated the harsh aftermath of a restructured auto industry with ripple effects across the Midwest.
Over time, industries and the places where they are rooted rise and fall. In "The Death and Life of Cities," renowned economist Ed Glaeser documents this. Two key lessons emerge: Leaders must respect the mobility of their populations, and place-based policies meant to resurrect declining areas are futile.
To see the futility, just look at the 52 million Americans living in highly distressed areas. They span thousands of zip codes across thousands of miles -- far too dispersed to target with place-based policies.
Yet we spend vast amounts of resources trying. According to Timothy Bartik at the W.E. Upjohn Institute for Employment Research, business incentives (read: giveaways) to attract industry cost state and local governments $45 billion in 2015. The Lincoln Institute of Land Policy estimates that state and local governments forgo between $5 and $10 billion in property tax incentives annually.
Beyond lost revenues, the sheer complexity of these programs distorts tax systems and encourages lobbying and gamesmanship. A federal audit of the New Markets Tax Credit was unable to conclude that it effectively boosts local growth -- but it did find it to be overly complex and duplicative. Still, each year private investors are claiming more than $1 billion in similar tax credits.
The evidence is overwhelming. An Upjohn comprehensive review of targeted incentives found fleeting or no effects on employment and growth. The effects (if any) were temporary and limited.
Promises of regional revival simply don't materialize. Their failure is not due to lack of trying but rather the basic nature of government. Elected officials and policymakers don't bear the risks of a bad decision, but pass it on to the taxpayer.
Policies focusing on the individual will have far greater payoff. Lawmakers, for example, can streamline state occupational licensing requirements and allow state-to-state reciprocity. Making work certifications portable increases their value. It also increases worker mobility, which tends to be lower for workers with little education and could help them stay in the labor force.
Job training is also important, though we should recognize the limits of federal job training. We have 47 of these programs with no clear evidence of their effectiveness. Why not take a fresh approach and redirect the $18 billion currently spent here toward no-strings-attached vouchers for community college, vocational training, apprenticeships, and education, even for current workers? This could enable people to stay competitive in their field or make a necessary move to a new one.
It's a cliche, but it's true -- progress, innovation, and change are inevitable. While New York, Los Angeles, and other megacities are likely to remain magnets for talent and capital, small and midsize cities are more vulnerable. Regional leaders are naturally inclined to save their area. But cities are ultimately collections of individuals.