Moving from the Recession to Growth & Competitiveness

One of the best analyses of the causes of the recession and how we can return to health has been written by three authors under the auspices of the New America Foundation (a non-partisan, non-profit, public policy institute with Newton’s own Atul Gawande serving as a Board member). Look to your right for the link – it’s long but worth the read.

The authors point to three primary causes for the recession:

1.       - Debt-Deflation: We borrowed against the inflated values of our homes and now face a significant debt overhang

2.      -  Excess Global Supply: In Asia, there has been an emergence of export-oriented, high savings, low wage countries that has resulted in excess supplies of labor, capital and productive capacity in the US

3.      -  Stagnant Wages & Increased Levels of Income/Wealth Inequality

Two of the important solutions:

1.       - Significant public investment in public infrastructure (energy, transportation, education, R&D, water treatment) to put people to work and to lay the foundation for a more efficient and cost effective national economy

2.       - Comprehensive debt restructuring, especially in banking and real estate

States, Cities & Towns: Going Bust?

Check out the article to the right by Michael Lewis on the financial issues facing states, cities and towns. (Yes, this is the Michael Lewis that wrote The Big Short, Liar's Poker, Moneyball, and The Blind Side.) His level of anxiety is captured in the quote below:


"From 2002 to 2008, the states had piled up debts right alongside their citizens’: their level of indebtedness, as a group, had almost doubled, and state spending had grown by two-thirds. In that time they had also systematically underfunded their pension plans and other future liabilities by a total of nearly $1.5 trillion. In response, perhaps, the pension money that they had set aside was invested in ever riskier assets. In 1980 only 23 percent of state pension money had been invested in the stock market; by 2008 the number had risen to 60 percent. To top it off, these pension funds were pretty much all assuming they could earn 8 percent on the money they had to invest, at a time when the Federal Reserve was promising to keep interest rates at zero. Toss in underfunded health-care plans, a reduction in federal dollars available to the states, and the depression in tax revenues caused by a soft economy, and you were looking at multi-trillion-dollar holes that could be dealt with in only one of two ways: massive cutbacks in public services or a default—or both. Whitney thought default unlikely, at least at the state level, because the state could bleed the cities of money to pay off its bonds. The cities were where the pain would be felt most intensely." 


A few other issues that Lewis explores: "Everywhere you turn you see Americans sacrifice their long-term interests for short-term rewards....What happens when a society loses its ability to self-regulate, and insists on sacrificing its long-term interest for short-term rewards?"

Lowering Health Care Costs

Read the article titled "New Efficiencies in Health Care? Not Likely" over to the right under Interesting Articles.


Dr. Anthony Daniels comes to a grim conclusion in the last paragraph.  He writes, "If we are to have health-care systems that don't bankrupt us, people will have to accept paying more bills out of pocket and perhaps lowering their standard of living. Tiresome as the advice might be, we had better start saving a good deal more."

But, he also suggests one possible solution: "The long-term solution ... is the same for health care as it is for pensions: to pay for it with the income generated by dedicated savings accounts, which can be transferred to the next generation after death."

Water and Sewer Pipes

We’re facing serious deterioration in our water and sewer pipes. We’ll have to invest significantly in the next 5 to 10 years to repair them.  

Sewer: In January 2010, the MWRA estimated that 56.3% of Newton’s average daily sewage flow was clean water that had infiltrated the system through leaks in the sewage pipes. With the MWRA charging the City of Newton $19.7 million for sewage treatment, that means that $11.1 million is being spent unnecessarily. By investing additional money in repairing the leaking sewer pipes, the City will have significantly lower average daily flow of sewage which is the basis for the MWRA assessment. The Chief Operating Officer has estimated that the City needs to invest approximately $50 million in the sewer lines to repair leaks.

Water: The Commissioner of Public Works noted that the City is experiencing 26.7% of “unaccounted” water but the goal is 10%. In other words, between leaks in unlined water pipes and meters underreporting the amount of water being used (possibly as well as flushing of hydrants), the City is not able to account for 26.7% of the water for which the City is charged. While the installation of new water meters should decrease the amount of unaccounted water, leaks need to be stopped as well.

Investing in the pipes translates into raising water and sewer rates. The Board of Aldermen sets water and sewer rates.  Fees are meant to cover 100% of operating costs in these stand-alone enterprise funds, including debt service for capital projects and regular maintenance. Despite all the increases in fees in recent years, we’re still not investing sufficiently to improve the condition of the pipes in a meaningful way.

Revitalizing Newton Center

Two recent articles highlight innovative strategies for downtown locations.

The Boston Globe on Jan. 16th (see the article to the right) focused on Quincy. Quincy (population of 91,000 -- slightly larger than Newton) is partnering with a private developer, Street-Works, to remake its sleepy downtown center into a dense commercial and residential hub.

The plan is to take advantage of the MBTA's Red Line while upgrading the road system and utilities and building 8 more parking garages. Simultaneously, they will add a 4 acres public green, 700 to 1200 homes, 1 million square feet of office space, 600,000 square feet of stores and restaurants, 2 hotels, and a health and wellness center.

They are using an innovative financing approach. The Globe notes, "To support the new construction, the city needs new downtown utilities, roadways, sidewalks, public spaces, and eight public parking garages. Street-Works will secure private financing for these improvements up front. Once revenues start flowing from new taxes and the public garages, Quincy would purchase the new infrastructure from Street-Works. The city has agreed to borrow $227 million for this purpose."

The New York Times had a front page article on Jan. 24th (link is to the right) on a garage! In Miami Beach, a private developer built a stunning $65 million parking garage in the cener of the city. Designed by a world-renowned architecture firm, it includes a loft apartment, a designer clothing store, and a top floor that can serve as an event space.

Perhaps some additional innovative thinking can get the ball rolling again on renovating Newton Centre.