Month: June 2016

Take Note: A New Poverty Reduction Experiment in Oakland, CA

Source: Ars Technica

OAKLAND, Calif.—Earlier this month, Y Combinator, the famed Silicon Valley incubator dropped a bombshell: it had selected this city to be the home of its new “Basic Income” pilot project, to start later this year.

The idea is pretty simple. Give some people a small amount of money per month, no strings attached, for a year, and see what happens. With any luck, people will use it to lift themselves out of poverty.

In this case, as Matt Krisiloff of Y Combinator Research (YCR) told Ars, that means spending about $1.5 million over the course of a year to study the distribution of “$1,500 or $2,000” per month to “30 to 50” people. There will also be a similar-sized control group that gets nothing. The project is set to start before the end of 2016.

The notion of guaranteed minimum income has been kicking around globally for centuries, especially among 20th century thinkers (Martin Luther King, Jr. famously advocated for it). But it’s only recently that extensive trials have begun in various places, including Canada, the Netherlands, Finland, and now in Oakland. (Another organization, called Give Directly, operates a similar program in Kenya.)

Tapped to run the project is Elizabeth Rhodes, an academic who recently arrived in Oakland. She says the project’s goal is “to empower people and give people the freedom to be able to meet their basic needs.”

But the details have yet to be fully worked out, and a lot of questions remain. How exactly will people be chosen? Will they come from a truly random sample of Oakland’s population? Will high-income people be automatically excluded? By what mechanism will people be notified? How will the money actually be transferred? Most of all, will it actually work?

If Y Combinator’s Basic Income project is successful, it would expand over the next five years to hundreds of citizens and perhaps include people beyond Oakland. And it would make the Bay Area’s venture capitalist class feel good about helping the poor.

“Overall the idea is to take money we make from YC [and], rather than all of the partners cashing out… putting it into research,” Krisiloff told Ars. “I think that there’s a culture at YC that just making money isn’t that interesting. [YC president Sam Altman] really likes to talk about how the overarching mission of YC is to create the most innovative thing. Money is a vector for change, but money in and of itself isn’t that interesting.”

It’s obviously difficult to lift people out of poverty. According to the White House, as of 2012 (decades after President Lyndon Johnson’s “War on Poverty”), approximately 15 percent of Americans (or 49.7 million people, including 13.4 million children) live below the poverty line. Worse still, “only about half of low-income Americans make it out of the lowest income distribution quintile over a 20-year period.” (As the old saying goes: “It’s expensive to be poor.“)

Here in Oakland, for all of its gentrification and new shiny downtown restaurants and cocktail bars, just under 20 percent of the population (specifically, 18.7 percent, or 71,599 people, as of 2010) live in poverty. And yet, it has also become the fourth-most expensive rental market in the country, thanks to spillover from nearby San Francisco.

Like many American cities, Oakland is divided along economic and racial lines, which also manifest themselves as large differences in access to quality education, public health, fresh produce, and more. As Mayor Libby Schaaf herself put it in her October 2015 State of the City address: “It’s hard for us to celebrate the overall health of Oakland knowing that two people can live just one mile apart and be nearly twice as likely to be unemployed—and live 15 years less.”

As soon as YC announced its Basic Income plan, it got lots of support from the municipal government. Mayor Libby Schaaf instantly said on Twitter that she was “excited” that Oakland had been chosen.Public records show that Rep. Barbara Lee (D-Oakland), loves it, too.

However, some groups, including Causa Justa :: Just Cause, are skeptical that Y Combinator—an institution worlds away from the needs of working-class Oaklanders—is capable of managing such a project.

Still, YC’s Oakland project is in its very early and experimental stages.

“Because the main goal of this pilot is to gather data, it’s a useful to run it in a socio-economically diverse city like Oakland,” Matt Zwolinksi, a philosophy professor at the University of San Diego, told Ars.

“That way we can see what differences there are in the responses of the wealthy and the poor, the educated and the uneducated, skilled and unskilled laborers, and so on. And we can tweak future studies or the final public policy in light of that information.”

IEDC: Germans plan to capitalize on Britain and the Brexit vote

Everyone should be concerned about the impact of Brexit in the short and longer terms. So much for non-raiding policies or prohibitions against nations, states, regions and communities taking advantage of natural disasters, wars, and other major disruptive events in other places. Read this article from IEDC about how Germany aims to capitalize on the Brexit vote.

Earlier this month, ED Now reported that Paris was positioning itself to attract London-based financial companies should Britain opt to leave the European Union. Now that Brexit looks like a reality, Berlin also is setting its sights on British businesses – specifically the tech sector (BBC).

Berlin has emerged as one of Europe’s leading tech cities (Wall Street Journal). In the past two years, venture capital into Berlin has edged out London by $2.1 billion to $1.7 billion respectively. “We had competition in the last two or three years between London and Berlin,” said Cordelia Yzer, Berlin Senator for Economics and Technology, who has been courting U.K. startups and venture funds over the past few days. “I am convinced that more funds will now make the decision in favour of Berlin.”

Berlin offers tax incentives and grants for angel investors and public funding for certain startups that struggle to find private financing (Politico). Berlin also has a clear cost-of-living advantage over London, one the world’s most expensive cities. The German capital could conceivably leverage its affordability much like Provo, Utah, or Lincoln, Neb., have done to attract entrepreneurs out of Silicon Valley.

Of course, London is Europe’s financial capital, which is a clear advantage to retaining venture capital groups and the entrepreneurs who seek their support. But some fear this advantage will erode if banks relocate to EU financial hubs such as Paris, Frankfurt, Dublin, or Milan.

More than “fresh air and exercise,” outdoor recreation industry gains stature

This could be good news for Ashtabula County because we are rich in outdoor recreation.

An article in the Denver Post details the sizable economic impact that skiing, hiking, rafting, and all the various forms of outdoor play deliver to the state. Colorado is not alone; the Outdoor Industry Association estimates the sector employs 6.1 million Americans and contributes to $646 billion in direct consumer spending.

Only a handful of states house an outdoor recreation office in their economic development departments – Utah was the first, followed by Colorado. Montana just joined their ranks earlier this month, where Governor Steve Bullock has directed the new office to:

  • Attract recreation industry anchors, such as gear companies;
  • Improve workforce development opportunities for the industry;
  • Market the state as a four-season tourism destination; and
  • Advocate for sustainability (Billings Gazette).

Outdoor recreation is also getting a boost from the federal government. Oregon Senator Ron Wyden has introduced “Recreation, Not Red Tape,” a bill that would expedite permitting from the Forest Service and Bureau of Land Management and improve local value-capture. The Department of the Interior is advocating for outdoor recreation to be added to GDP calculations.

CNN: Brexit’s broken promises

According to CNN, the U.K. government and just about every independent forecaster, including the International Monetary Fund, said that a vote for Brexit would trigger financial and economic turmoil.

Those warnings were dubbed “Project Fear” by Brexiteers, who said the U.K. would thrive outside the EU.

Consider this: Since the results of the vote became known early Friday, the pound has crashed 12% against the U.S. dollar to its lowest level in decades, U.K. bank stocks have collapsed, and growth forecasts for the British economy have been slashed.

Companies are putting investments on hold, and warning of lower profits. Chancellor of the Exchequer George Osborne said Monday the economy and government finances will suffer, but an emergency budget won’t happen until a new prime minister is chosen in October.

Business says it can’t wait that long. Banks are already thinking about moving staff out of London.

“What we need is a plan,” said CBI Director-General Carolyn Fairbairn. “The government must act with urgency to minimize the uncertainties that affect investment decisions and slow job creation.”

Analysts say the contrast between promises and results will cause huge headaches for the new prime minister.

Daily Signal: Why Americans Should Celebrate the Brexit Vote

According to the Washington-based Heritage Foundation’s Daily Signal, the United States should seize upon Brexit as a tremendous opportunity to sign an historic free trade agreement with the United Kingdom—a deal that would advance prosperity on both sides of the Atlantic. Brexit will also strengthen the Anglo-American special relationship, the most important bilateral partnership in the world.

Britain outside the EU will be a stronger ally for the United States, from confronting Russian aggression in Eastern Europe to defeating the Islamist terror threat.

Britain’s decision to leave the EU should be a cause for celebration here in America. Brexit embodies the very principles and ideals the American people hold dear to their hearts: self-determination, limited government, democratic accountability, and economic liberty. A truly free and powerful Great Britain is good for Europe and the United States.

Read the complete story here.

Britain Votes to Leave EU

This is an historic moment. Britain has voted to leave the EU. What does this mean? It’s unclear, but a process will be set in motion to manage the transition.

Voters have voted in favor of Brexit: British exit from the European Union. That means that in the coming months, British and European leaders will begin negotiating the terms of Britain’s departure.

Britain’s exit will affect the British economy, immigration policy, and lots more. It will take years for the full consequences to become clear. But here are some of the most important changes we can expect in the coming months.

Read more here.

IEDC: Can your real estate win over the most selective site selectors?

Can your real estate win over the most selective site selectors? In Ashtabula County’s case, the answer is NO! We need competitive real estate product moving forward. 

Here is what IEDC has to say about competitive real estate for economic development.

You probably already know that workforce availability, cost competitiveness, and accessibility are critical determinants in the site selection process. But many places can claim all three of these assets. So what are the finer details that help a company whittle down to its final location? Consultancies Camoin Associates and the Timmons Group have noted several emerging trends determining companies’ ultimate location decisions:

  • Time to market is increasingly critical; sites must be shovel-ready (or close to it) to even be considered.
  • Available land is becoming less important, with a shift toward spec buildings.  According to some site selectors, 60-75 percent of their clients are looking for a building first and a site second.
  • Publicly controlled sites take precedent over privately controlled sites.
  • More businesses are moving toward “asset light” models and are less willing to take on a development project themselves.
  • Quality of place is an important driver to attract top talent, and the location of development sites can support this. Connectivity to the overall community and its quality-of-life assets such as an urban core, parks, trails, cultural amenities, transportation hubs, etc., are increasingly important.
  • Water is making a comeback as a top factor for many businesses, but geography dictates why. In the west, the concern is typically about access, whereas in the east it’s more about quality.

Another trend they’ve noticed is that of EDOs marketing sites that aren’t truly ready for development. Camoin and Timmons break down the odds of a successful sale based on several readiness stages:

1. Raw land and a willing seller (<10 percent)

2. The site is controlled by the municipality and zoned as part of a comprehensive plan, but minimal due diligence has been conducted.  (<20 percent)

3. The site is part of a master plan, costs of development have been estimated, and significant due diligence has been done. (40-50 percent)

4. The site is certifiable (meaning it can meet rigorous standards certifying it is ready for development), infrastructure has been added, and all property issues have been cleared. (70-80 percent)

5. The site is ready for construction, and all permits are in hand. (90 percent)

Gallup: U.S. Economic Confidence Index Edges Down to -15

WASHINGTON, D.C. — Americans’ confidence in the economy declined slightly last week, driven by their worsening views of the economy’s direction. Gallup’s U.S. Economic Confidence Index score for the week ending June 19 was -15, down from -12 the week before, but still roughly similar to readings since early April.

U.S. Economic Confidence Index -- Weekly Averages Since January 2015

Overall, confidence remains lower than it was in the first half of 2015, when plummeting gas prices boosted Americans’ confidence. Gallup’s U.S. Economic Confidence Index is averaging -12 so far in 2016, a drop from the average of -8 for 2015, but slightly better than the averages for 2014 (-15) and 2013 (-16). Confidence remains significantly higher than it was in the years during and immediately after the Great Recession, when it averaged -37 from 2008 to 2010.

Business Filings Up in Ohio

A record number of companies filed to do business in Ohio in May, Secretary of State John Husted said in a release Wednesday. Almost 8,600 companies filed to do business in Ohio in the month, an improvement over the 7,495 that filed in the same period last year.

It indicates optimism,” said Bill LaFayette, founder of Regionomics LLC, a consulting firm in Columbus. He said the numbers show people are optimistic enough to open businesses in Ohio at time when some indicators “aren’t so optimistic.”

Every month in 2016 so far has broken 2015’s filing records. More than 4,000 entities have filed this year than in the same 5-month period last year.

Ohio has seen a 21.8 percent increase in new filings since 2010, something Husted attributes, at least in part, to his implementation of an online system for business filings.

Read the article here.

New rule seeks to rein in payday lenders

From IEDC on Pay Day Lending

The Consumer Financial Protection Bureau (CFPB) has proposed new regulations aimed at disrupting payday lenders that provide short-term loans with high interest rates and fees (NPR).

In the United States, payday lenders outnumber McDonalds and Starbucks combined (Last Week Tonight). With interest rates that can surpass 500 percent, the industry has a reputation for predatory lending that disproportionately falls on poor and minority individuals. Google bans them from advertising on its site (New York Times).

The new rule is designed to protect borrowers from becoming trapped in ever-mounting debt by requiring lenders to verify that borrowers are capable of repayment under the terms of the loan. It would also limit the number of successive loans borrowers can take out. It has the potential to seriously impact the industry, as its business model relies on a portion of borrowers being unable to make payments, forcing them to roll their debt over into additional loans. CFPB research has found that 80 percent of single-payment loans end up being re-borrowed within a month.

Some feel the CFPB hasn’t gone far enough (Pew Charitable Trusts). While the rule would limit the pool of individuals eligible for loans, it won’t cap interest rates. Currently, sixteen states and Washington, D.C., limit interest rates, which has kept the industry at bay in these places. The CFPB rule won’t preempt state laws, butsome fear state governments will buckle under pressure from industry lobbyists to lift these caps as a compromise (Morning Call).

While some find their practices reprehensible, others argue payday lenders are simply filling a market need(The Conversation). According to the Federal Reserve, 46 percent of U.S. households report they would have trouble paying for an emergency costing $400. The typical payday loan borrower has poor credit or does not own a credit card and would have difficulty finding quick cash from other sources. Some fear the CFPB is simply playing “regulatory whack-a-mole,” forcing borrowers to seek loans from even less-savory individuals.