The Quicksand Economy
When Treasury Secretary Timothy Geithner spoke to the Economic Club in Washington yesterday and said the United States bears a substantial share of responsibility for a global economic crisis and its multi-trillion dollar costs, he might have pointedly singled out the epicenter of the housing market crash– the state of Florida– where the absence of regulations governing financial derivatives matched laws designed to fail: in particular, regulations protecting the public from the excesses of suburban sprawl.
Official pronouncements from White House officials are still far from informative. Geithner said, "Never before in modern times has so much of the world been simultaneously hit by a confluence of economic and financial turmoil such as we are now living through." Yes, well. Neither Geithner, nor President Obama, seem interested to explain how much turmoil and loss originates from the culture of deception expressed through this formula: that increase in tax base through construction and housing in new, low density "communities" is the primary purpose of government. Never mind the end result whether measured by foreclosures, a declining quality of life, degraded environment, standard of living, and a permanent, immoveable incumbency welded to the interests of production home builders, cement manufacturers, their lobbyists, engineering firms, and trade associations.
This culture is not humbled or bowed by hubris. Far from it, it has states like Florida in a vise grip. These interests are also joined by the state’s other big industry: agriculture and land speculation.
Here is an contrast from recent news in Florida that helps illustrate these points. In the St. Augustine Record, the preturnaturally sunny Gov. Charlie Crist pumps up the state’s economy: "Florida has seen home sales grow by 20 percent over the past year… "Home sales nationwide are up 5.1 percent… and in Lee County in Southwest Florida, once Ground Zero for foreclosures, sales are up 90 percent. If I had money, I’d put it into Florida real estate." Crist is ready to declare the recession over and the race he plans to join to be the next US senator from Florida, complete.
In the New York Times David Leonhardt has another perspective, grounded in another reality.</a> He reports on a Miami foreclosure auction recently where homes" … sold for just a fraction of what they would have even a year ago. The rate of decline in Miami hasn’t even slowed noticeably in recent months, according to data kept by Real Estate Disposition Corporation, known as R.E.D.C., which runs the auctions." A recently transplanted New Yorker named Michael Houtkin won the bidding on a one-bedroom condominium on the outskirts of Boca Raton, a few blocks from three golf courses, for the incredible price of $30,000. “Things were almost being given away,” he said later.
Out with the old, in with the new.
The St. Pete Times reports, rising from the rubble that is still falling: "A development boom is brewing under the radar of Floridians distracted by deteriorating real estate values and record foreclosures. The state is processing an unprecedented number of proposals for new homes and commercial development. If approved, these projects could pump more than 600,000 rooftops onto a market suffering from a surplus of product and slowdown in population growth." (Florida Builders poised to pounce, April 17, 2009)
Crist "said increases in real estate sales have come at the same time property taxes are going down, sweetening the market. Property insurance rates have also dropped by 18 percent in the past two years. "There are bright days ahead," Crist said. It is not clear if those bright days include the forecast for US banks that are being pressured to write down "toxic" derivative debt tied to mortgages, ten cents to the dollar, while being forced to make loans for new housing at one hundred cents to the dollar, and at the same time private equity is redeeming credit default swaps– bets against the market–at par.
Again, the New York Times: "… Fannie Mae, like many banks, is inundated with foreclosed properties. In recent weeks, banks have begun accelerating foreclosures again, after having held off while waiting to find out which homeowners would be eligible for the Obama administration’s assistance program. The glut of foreclosed homes creates a self-reinforcing cycle. Falling prices lead to more foreclosures. Foreclosures lead to an excess supply of homes for sale. The excess supply then leads to further price declines."
Today, the Florida legislature is speeding a new bill toward Gov. Crist’s desk to eliminate the pesky business of growth management, by eliminating the Florida Department of Community Affairs, the state agency that regulates growth. In last year’s legislative session, the DCA budget was slashed to the bone. The remaining officials are literally like the last soldiers at the Alamo. The St. Pete Times reports, "When the department recently pulled together data on all major developments pending and approved since 2007, the totals were staggering: projects covering 410,126 acres, with a potential for 630,965 new homes and 479.5 million square feet of non-residential space. "This really catches me by surprise," said Denslow, who is with the University of Florida’s Bureau of Economic and Business Research. "I’ll have to revise my thinking."
Speaking of revised thinking, The Augustine Record reports, "In his real estate percentages, Crist was actually conservative. Realtor Ed Paucek cited figures from the Florida Association of Realtors that indicate the state’s increase is really 27 percent, not 20. And Lee County’s sales were up 97 percent, not 90 as Crist said. "Sales in the Greater Jacksonville area, which includes St. Augustine, are up 6 percent," Paucek said. "Fort Myers’ sales, though higher, are down 50 percent in dollar value. Here, sales are down 11 percent in dollar value. But that’s a good indicator of stability. We’re obviously not rising as quick as some (counties), but also not losing as much value."
The end is near. The end probably isn’t near. For Jennifer Seney, an environmental activist who lives in Wesley Chapel, overdevelopment is not an abstract threat. "In her Pasco neighborhood, about one-third of the houses are for sale. Home prices are down 27 percent from a year ago. The Cypress Creek well field, on which Seney’s home depends for water, is bordered on all but one side by residential development. Now the county wants to put more than 4,000 homes on the untapped portion. "It’s like we can’t win against this force of money and greed," Seney said. "I’m just sitting here waiting for my well to go dry." (St. Pete Times, cited above.)
Moreover, the fiscal stimulus trillions are being used by the status quo to build hardened bunkers against reality’s bunker-busting bombs.
Today, at the very same time the Florida legislature is humping for the Growth Machine, another new bill aimed at suppressing Florida voters –hand delivered to the legislature by Miami state senator Alex Diaz de la Portilla and Growth Machine lobbyists– is moving at lightning speed. The bill was allowed six minutes debate in committee. It would: expand the "no-solicitation zone" at polling places creating an area, constantly shifting and impossible to enforce; restrict voters’ ability to receive important non-partisan information about voting at the polling place; limit acceptable IDs for voter registration without proposing acceptable alternatives, preventing eligible citizens from registering to vote, and preventing properly registered voters from exercising their right to vote; increase the frequency of "list maintenance programs" causing more validly registered voters to be removed from the voter rolls; and discourage voter registration drives by authorizing fines up to $250 if completed registrations aren’t turned in within 48 hours.
An economy built on foundations of sand cannot stand. The longer that fictions are maintained in the service of a status quo that controls local and state legislatures, the risk increases of an economic collapse different from anything the United States has experienced in its short history. Whether the end comes in five minutes, five hours, or five months; count on the ratings for Florida’s general obligation bonds first be downgraded. The rating agencies are on the case. The frikkin chickens are coming home to roost.
ALAN FARAGO, who writes on the environment and politics from Coral Gables, Florida, and can be reached at email@example.com