City-States

There’s a tiny op-ed in the Washington Post this morning that offers just a tantalizing hint of an idea:

With all the despair over the American economy’s disappearing jobs and plummeting growth, here’s mind bender for you: There is no U.S. economy. The national economy, as we traditionally think of it, is a myth. A fake. Over.

So contend Bruce Katz, Mark Muro and Jennifer Bradley in the latest issue of the journal “Democracy.” The United States is not a single unified economy, they say, nor even a breakdown of 50 state economies. Instead, the country’s 100 largest metropolitan regions are the real drivers of economic activity, generating two-thirds of the nation’s jobs and three-quarters of its output. The sooner we reorient federal economic policies to support this “MetroNation,” the quicker we can fix the mess we’re in.

“America can no longer pretend that it is a single economy, nor can it imagine that it is a nation of independent, small towns, punctuated by large but isolated urban centers,” the Brookings Institution scholars argue. “It must embrace its metropolitan future.”

The authors criticize one-size-fits-all federal rules — on everything from transportation infrastructure policy to workforce training programs — that stifle the creativity of metro areas and hamper their ability to tailor growth and development efforts to local needs.

But before trying to rework the relationship between the states and Washington, step one may be rethinking what we should even call these places. The “California” economy is really the “San Francisco-Los Angeles-San Diego-San Jose” economy, with those metro areas making up 72 percent of the state’s GDP. And Chicago is not Chicago, but the “Chicago-Naperville-Joliet, IL-IN-WI” region, the authors write, almost apologetically. “Unwieldy as they may be, these bureaucratic handles encode the boundary-jumping, state-spanning, increasingly complex reach of metropolitan life.”

Unwieldy puts it mildly. But if we can have the Los Angeles Angels of Anaheim, why not the Naperville-Joliet Cubs of Greater Chicagoland? Hey, whatever breaks the curse.

Contrary to my practice I’ve quoted the op-ed in full. That’s the whole thing. The complete article the author refers to is here. Unfortunately, I don’t think its authors have a great deal more to say beyond the basic idea which they acknowledge isn’t novel. I think they ignore the issue of incentives: the federal government has absolutely no incentive to plan along the lines that they recommend. We are stuck with the sort of federalism we have now and the only prospective way of changing that is by deemphasizing the role of the federal government, an idea which appears directly contrary to the preferences of the authors.

This notion dovetails beautifully with the point I’ve been making here for some time, that issues like the mortgage foreclosure problem or the number of people without healthcare insurance are not national ones but localized problems with national implications.

I haven’t digested the implications of re-thinking the national economy as one of divergent and even competing city-states. I do think we should recognize that these megalopolises largely determine their own governments’ budgets and there are limits to the percentage of total revenues that can be taxed away before various forms of noncompliance take hold. That, in turn, implies that there’s a cap at something below 100% (I think it’s around 40%) on the revenues that any government can expect that’s limited by the growth in its revenue steams, e.g. incomes, property values, etc.

Once one of the megalopolises has reached that cap it can only harness the federal government to divert funds from one of the other megalopolises. I doubt this can be a Good Thing.