Fudging Differences between Legal and Illegal Immigrants

Big difference in educational attainment between legal and illegal immigrants.

The big difference in educational attainment between legal and illegal immigrants doesn’t come through in this graph. Credit: Commonwealth Institute

Immigrants residing in Virginia are better educated and more entrepreneurial than commonly perceived, says a new report by the Commonwealth Institute (CI), “Virginia Immigrants in  the Economy.”

That’s true.

Yet immigrants’ contributions to the U.S. economy are often minimized by “some state and federal lawmakers,” adds a press release accompanying the report. In truth, immigrants make our communities and economy stronger, says Laura Goren, CI research director and co-author. “Too many politicians are using scare tactics and divisive rhetoric about immigrants to advance their own agendas.”

Grrrr. I must take issue.

In attributing “scare tactics and divisive rhetoric” to shadowy others, Goren is guilty of the very behavior she decries. Whether due to simple naivete or deliberate obfuscation, I don’t know, she conflates legal immigrants with illegal immigrants. Thus, legal immigrants, who make a large positive contribution to Virginia’s economy, provide statistical cover for illegal immigrants, whose net contribution is problematic.

That’s an turn-off to readers who otherwise might find value in the report, which does contain some useful information. Foreign-born inhabitants now constitute 12.2% of the state’s population, for instance, with the heaviest concentration in Northern Virginia. More than half the foreign-born population has become naturalized.

…Neither does the difference in entrepreneurial vitality.

Virginia immigrants are more likely than native-born Americans to hold a college degree, the report informs us. They have slightly higher incomes, and they are more likely to be self-employed or own a business.

“In sum, Virginia immigrants are relatively young, well educated, fluent in English, and more likely to participate in the workforce,” says the study. “This powerful combination reflects the substantial capacity for immigrants to contribute to the state’s economy.”

But average numbers obscure important differences between different categories of immigrants. Forty percent of Virginia immigrants are well educated (college or graduate degrees) and wind up working in professional and technology fields. But, according to CI’s data, 20% lack a high school degree, a much higher percentage than for the native-born population. In other words, we are looking at two very different groups — one highly educated and affluent (mostly legal) and one ill-educated and poor (mostly illegal).

I know of no respectable voices in Virginia who say we should clamp down on all immigrants. (There might be a tiny percentage of white nationalists who advance that argument, but their numbers are insignificant.) The controversy over immigration focuses on poor, ill-educated immigrants, mostly though not exclusively from Latin American countries, who compete with similarly poor, ill-educated native-born Americans. These immigrants (mostly illegal) drive down wages of unskilled occupations, and put a burden on educational and social services.

I’ve never heard anyone hint that there’s too darn many Indians, Chinese, Vietnamese or Koreans in Virginia. That’s because Asian-Americans quickly learn English, rapidly assimilate to mainstream norms, become educated, launch job-creating businesses, and place minimal stress on the welfare state. Their presence is indisputably a net benefit to society.

By contrast, the Commonwealth Institute concedes that there are “challenges” associated with between 275,000 and 300,000 unauthorized immigrants. Nearly one in five live below the poverty line, and 58% lack health insurance. When one calculates the impact of illegal immigrants on the wage levels of unskilled workers, on schools, on the welfare state, and on the criminal justice system, this sub-set does not look like a net benefit to American society.

The study contends that illegals make a positive contribution, contributing $250 million in state and local taxes. If provided a path to citizenship, they could generate an estimated $100 million more. To the Commonwealth Institute, the problem isn’t foreigners illegally entering the U.S., but the mean people who treat illegals as second-class citizens. Says the report: “Lack of access to health care and threats of deportation and discrimination all make unauthorized immigrants and their families less able to contribute to the communities in which they live.”

I don’t believe in demonizing illegal immigrants for the sin of wanting to build better lives in Virginia. I don’t bear them any animus. I think it is wrong to abuse or mistreat them. But I also believe that a sovereign state has the inherent right to choose who can enter the country and upon what terms and conditions they do so. Foreigners have no right to live in the United States. One can make an argument that the U.S. should expand opportunities for foreigners to enter the country legally, but only on the purely utilitarian grounds that their presence benefits the rest of us. Accordingly, I think we should give preferential treatment, as many other countries do, to those who can contribute to the national wealth and well being over those who cannot.

Having a rational conversation requires that we draw distinctions between immigrants on the basis of education, skills, wealth, age, ability to assimilate, and proclivity to become a burden on the state. It is difficult to have that conversation when we lump all “immigrants” together.

Rappahannock Water Quality Endangered by Fracking?

Rappahannock River

Rappahannock River. Image credit: American Rivers.

American Rivers has listed the Rappahannock River as the fifth “most endangered” river in the United States. The environmental group claims the river is threatened by industry interest in hydraulic fracturing (fracking) operations in the Taylorsville Basin lying thousands of feet beneath the river. The quality of drinking water of three million people in eastern Virginia are at stake.

The Rappahannock joins company with the Lower Colorado River (the most endangered), which is threatened by excess water consumption; California’s Bear River, which is imperiled by a new dam; the South Fork Skykomish River in Washington, which is jeopardized by a new hydropower project; and six other rivers. These rivers are not necessarily the most polluted. Rather, American Rivers highlights in its “America’s Most Endangered Rivers 2017” report ten rivers whose fates will be affected by the political process in the upcoming year.

The watershed of the Rappahannock, the longest free-flowing river in Virginia, encompasses all or parts of 18 counties, the report notes, and supports thriving agricultural and seafood sectors as well as recreational activity.

American Rivers is concerned that 85,000 acres in five counties along the tidal Rappahannock are leased for oil and gas exploration. Only one of the five counties has enacted a land use ordinance to protect against the impact of fracking. Last year, Governor Terry McAuliffe approved new regulations that would require baseline water testing and monitoring along with the disclosure of any chemicals used in the fracking process. The oil and gas lobby introduced legislation to weaken the regs in the 2017 General Assembly session, but the effort was beaten back. Says American Rivers:

It is clear that the threats that industrial gas development and fracking pose to the rural and agricultural communities along the Rappahannock River are not going away. The first line of defense lies with local government, which has the power to establish local protections to protect the drinking water for millions of citizens.

Last  year Prince George County amended its zoning ordinance to require hefty setbacks for gas wells, effectively making 91% of the county unavailable for drilling. But Westmoreland, Essex, Caroline, and King and Queen Counties have yet to act.

Here’s the source of concern: Gas companies must drill through the Potomac Aquifer to reach the gas in the Taylorsville Basin, which is reported to contain more than 1 trillion cubic feet of gas, equivalent to two-and-a-half times the volume of gas consumed in Virginia in a year. Fracking injects sand and chemicals under high pressure to fracture the rock sufficiently for oil and gas to flow through it. Although oil and gas companies seal off drill holes where they pass through aquifers, environmentalists claim that potentially toxic chemicals still can leak into the Potomac Aquifer and, from there, eventually into the Rappahannock River.

Bacon’s bottom line: Environmental groups are adamant that fracking represents a danger to the aquifer and water supply. The oil and gas industry is equally insistent that fracking poses minimal risk. Each side cites seemingly authoritative studies. Who knows?

The Taylorsville Basin contains maybe one-fortieth the volume of gas contained in the famed Marcellus Basin, which has transformed energy economics in the United States, but it’s nothing to sneeze at. The gas has an economic value of $2 billion to $4 billion, maybe more, depending upon the current price of natural gas. That represents a lot of economic activity for five economically depressed rural counties.

Admittedly, a billion dollars or so in local payroll and royalties won’t be much consolation if fracking ruins the water supply. But more than 8,000 wells have been hydraulically fractured in Southwest Virginia with no documented instances of surface or groundwater contamination, according to state geologist David Spears.

The McAuliffe administration made a prudent decision, it seems to me, to establish a baseline of data on Potomac Aquifer water quality and to require gas companies to disclose the chemicals they use in fracking. If chemicals used in fracking are not found in the aquifer but suddenly appear after drilling begins, it is not unreasonable to conclude that fracking created the problem. Conversely, if none of the chemicals show up in the aquifer, no harm is likely being done.

Regardless, the American Rivers report signals that the Taylorsville Basin is on the radar screen of national environmental groups. I expect they will pour considerable resources into fighting development of the basin. Linking that fight to the conservation of the treasured Rappahannock River is shrewd public relations.

How National Monopolies Drain Rural Economies

Dilapidated buildings along Main Street in Pamplin City, Prince Edward County. Photo credit: OnlyInYourState.com.

Virginia’s rural communities suffer from huge disadvantages when competing for job-creating corporate investment. Low density makes it expensive to install high-bandwidth Internet service. The small size of rural communities makes it difficult to support the amenities that skilled, educated workers are looking for. And, most important, corporations prefer locating in metropolitan areas with “deep” labor markets where they can tap employees with specialized skills.

Perhaps we can add one more disadvantage to the list: a national economy increasingly dominated by monopolies and cartels. So suggests Lillian Salerno, a former Texan who served as deputy under secretary for rural development in the Obama administration.

“For decades,” she writes in a Washington Post op-ed, rural America has been punished by bad policy that places too much power in the hands of distant financiers and middlemen through the formation of monopolies, which undermines small, local businesses and drains communities of resources.”

New business formation has plunged since the Great Recession, and nowhere more dramatically than in counties with fewer than 100,000 people. Why? Because, Salerno says, the federal government stopped enforcing monopoly laws.

This slow-rolling wave of corporate mergers has left almost all major markets — airlines, telecommunications, health care, retail, milk, seeds for growing crops, hardware, even cowboy boots — dominated by a cluster of mega-corporations, cloaked behind a plethora of brand names. These behemoths now hold unprecedented power over thousands of once-thriving community economies.

Corporate concentration has hit farmers, ranchers and agricultural workers especially hard, she writes. Many markets are monopolized by a single company that dictates the terms of business to suppliers. The seed industry has dwindled from 600 independent companies two decades ago to six today. Similar levels of concentration exist in the pork, chicken and dairy industries.

I don’t know if Salerno is right or not — I would like to see more specifics — but her argument is worth close examination. If her theory holds up, it is discouraging indeed for rural economies, for a decades-long drift toward a cartel-dominated economy is not easily reversed. If it’s any consolation, monopolies are not good for most metropolitan economies either.

How Higher Ed Taxes the Poor and Gives to the Rich

Why do the richest colleges and universities providing education to the smartest and most affluent students get the biggest tax breaks? More and more people — both on the left and right ends of the ideological spectrum — are asking that question.

Controversy is sure to grow with the release  of a study, “The Ivory Tower Tax Haven: The state, financialization, and the growth of wealthy college endowments,” by Charlie Eaton with the Haas Institute for a Fair and Inclusive Society at UC Berkeley. Eaton argues that private colleges with substantial endowment wealth have become “ivory tower tax havens,” creating “islands of privilege” that perpetuate social and economic stratification.

Since the 1970s, elite universities have benefited from three big tax benefits: (1) tax deductions for donors giving to endowments, worth about $1.2 billion in 2012, (2) the non-profit exemption of endowment investment returns, worth about $12.9 billion; and (3) municipal bond tax exemption for higher education, worth about $5.5 billion. The total benefit in 2012: about $19.6 billion.

Per-student spending from endowments, 1976 to 2012, broken down by endowment wealth per student. Graphic credit: “The Ivory Tower Tax Haven.”

The result has been a growing disparity in resources and expenditures per student. For U.S. undergraduate-enrolling institutions in the 99th percentile for endowment wealth per student,” writes Eaton, “annual spending per student from endowments increased by 751% to a mind-boggling $92,736 between 1977 and 2012. … Public universities and less wealthy private schools saw no comparable increase in resources from endowments or other areas of support.”

Who benefits from this increase in spending? Rich kids mostly. Elite schools with the biggest endowments enroll the wealthiest kids. Recent research shows that 38 of the most elite schools in the U.S. enroll more students from the top 1% of the income spectrum than from the bottom 60% combined.

Prior to the 1970s, the logic behind tax exemptions for higher education was “to protect intergenerational equity by providing comparable levels of effort towards the university’s mission from one generation to the next,” writes Eaton. Over the years, colleges and universities have used the tax breaks instead to maximize the size of endowments and increase instructional spending per student, thus enhancing institutional prestige.

One commonly pursued strategy is to retain and reinvest income from endowments rather than spend it. Since 1990, the average investment return for what Eaton classifies as “wealthy endowments” has been 10%, but spending amounted to only 5%, leaving the balance to be applied to asset growth.

Another strategy has been to engage in indirect tax arbitrage, in which universities direct donations to endowments rather than operational spending or non-financial capital investments. Universities can make more money by investing their endowment wealth than they lay out in payments on tax-free municipal bonds.

Rather than using the income to increase enrollment, elite private universities have preferred to increase instructional spending per student. “Flat enrollment makes sense,” writes Eaton, “because low admission rates to undergraduate programs tend to improve schools’ position in college and university rankings.”

Eaton lists 24 private institutions with large endowments. Most are located in the Northeastern states, but two are located in Virginia. Washington & Lee University, with a $2.2 billion endowment, had endowment spending per student of $27,000 in 2012. The University of Richmond, with a $1.9 billion endowment, had $24,000 in spending.

Bacon’s bottom line: Eaton’s work shows how universities behave rationally from the perspective of prestige-maximizing, not profit-maximizing, institutions. Ten percent of the U.S. News & World-Report “Best Colleges” ranking algorithm comes from average per-student “instruction, research, student services and related educational expenditures.” Another 12.5% is determined by student selectivity. Thus, higher-ed institutions have an incentive to build their endowments, lavish large sums on student instruction and services, and keep enrollments small and selective. Which is exactly what most have done.

As regular readers know, I do not favor punishing the rich through increasing tax rates. The rich already pay a hugely disproportionate share of income taxes, and high tax rates distort economic behavior to the detriment of all. But neither do I favor heaping additional privileges upon the wealthy. Anyone who wants to create a more egalitarian society, as I do, would do better to focus on the $20 billion a year in annual subsidies for wealthy colleges.

Real change must come from Congress because the special tax treatment originates mainly from the federal tax code. But from a Virginia public-policy perspective, perhaps it is worth examining the repeal of state breaks for contributions to higher-ed endowments, income generated by endowments, and university municipal bonds. Do we, as polity, really deem it a priority to subsidize the education of the wealthiest among us?

Your Money Ain’t No Good Here, Dems Tell Utilities

Antipathy toward Virginia’s electric power companies is entering the realm of electoral politics. More than 50 Democratic candidates running for the Virginia House of Delegates have signed a pledge saying that they will “never” accept campaign contributions from Dominion Virginia Power or Appalachian Power, reports Graham Moomaw with the Richmond Times-Dispatch.

The pledge was circulated by Activate Virginia, a progressive Political Action Committee dedicated to electing more Democrats to the House of Representatives, calling for a “principled stand” against the fossil-fuel industry to prevent “environmental catastrophe,” Moomaw writes. Activate Virginia did not circulate the petition to House of Delegates incumbents, most of who have already accepted campaign contributions from electric utilities.

According to the Virginia Public Access Project, Dominion has donated $767,000 to political candidates in 2016-2017, while Appalachian Power has contributed $278,000.

The Activate Virginia initiative threatens to drive a wedge in the Democratic Party between those who place environmental priorities foremost and those who seek a balance between environmental and economic-development considerations. Lieutenant Governor Ralph Northam, viewed as the establishment Democratic candidate, has accepted Dominion money. Rival Tom Perriello has called upon him to reject further donations, saying that Virginia’s next governor “must aggressively promote clean, renewable energy.”

Although Republican gubernatorial candidate Corey Stewart has been highly critical of Dominion Virginia Power’s plans to dispose of coal ash, Dominion and Apco are less toxic to Republican sensibilities. Cutting CO2 emissions isn’t a priority for Republicans, who tend to be skeptical of the idea that global warming presents a crisis for human health and prosperity.

A confluence of factors has caused the surge in anti-utility sentiment.

First is a shift in fuel mix from coal to other energy sources that has prompted utilities to re-engineer their electric transmission systems and natural gas delivery systems. The result has been a wave of major new or upgraded infrastructure projects, both electric transmission lines and natural gas pipelines, which are visually intrusive and potentially environmentally disruptive.

Second is the relatively slow pace in Virginia of adopting renewable energy, especially solar. Under the current regulatory structure, Dominion and Apco have no incentive to cooperate with independent companies seeking to build solar projects and sell electricity directly to consumers. Instead of seeking regulatory reforms to alter the incentives — a formidable undertaking — environmentalists have taken to attacking Dominion and Apco for pursuing their self interest.

Third is the unexpected emergence of coal ash disposal as a major environmental issue. No one anticipated this two years ago when the Environmental Protection Agency enacted regulations to close coal ash pits in order to prevent spills into public waterways. The debate over how best to dispose of the ash — whether to bury in place or to convey millions of tons to lined landfills — has become enormously contentious.

Fourth is a regulatory freeze in base electric rates, negotiated in a legislative deal two years ago in response to the Obama administration’s Clean Power Plan. The Trump administration likely will seek to scuttle the plan, which would render the need for a rate freeze moot. Critics contend that the freeze has allowed Dominion and Apco to lock hundreds of millions of dollars of excess profits in place; the utilities deny the charges.

Because these conflicts are complex and deep-rooted with no easy resolution, they will persist for years. Indeed, multi-billion dollar decisions over the future of nuclear power in Virginia could add a new element to the debate. Popular agitation over electric-utility policies could well intensify, and utility campaign contributions, now dispensed without regard to political party, could well become a partisan litmus test.

A Brain-Frying Foray into the Regulatory Maze


OK, folks, it is time to plunge into the arcana of environmental regulation. The subject matter might prove of interest if you’ve been tracking the Atlantic Coast Pipeline (ACP) and Mountain Valley Pipeline (MVP) controversies, especially if you’re deeply immersed enough to be familiar with the dust-up over seemingly contradictory press releases issued by the Virginia Department of Environmental Quality (DEQ) on April 6 and April 7, and the Freedom of Information Act request that ensued. If these matters have escaped your notice, however, be forewarned. We cannot guarantee that your eyeballs won’t glaze over, turn to stone, and drop out of your skull sockets.

On April 6, the DEQ issued a press release which was widely reported in the Virginia media — to wit, that the department had “notified ACP and MVP that in addition to utilizing the U.S. Army Corps of Engineers nationwide permit 12 for wetland and stream crossings, DEQ will be requiring individual 401 water quality certifications for each project.”

That sentence is incomprehensible unless you know what “nationwide permit 12” means, what “401 water quality certification” means, and what the difference is between a “nationwide” permit and an “individual” permit.

At issue are hundreds of wetland and stream crossings along the proposed routes of the two pipelines. Environmentalists are concerned that rugged slopes and karst geology of the mountains in Virginia and West Virginia will make it impossible to dig pipeline trenches without creating erosion and releasing sediment into rivers, streams and wetlands. The pipeline companies say they are equipped to handle the challenging conditions.

As part of the Federal Energy Regulatory Commission-led regulatory review of interstate pipeline projects, the U.S. Army Corps of Engineers must grant a “401 certification,” which states that a project meets the requirements of Section 401 of the Clean Water Act. The DEQ, the agency in charge of state water-quality regulation, has the option of accepting the Corps of Engineers 401 certification or getting more deeply involved. In this instance, given the magnitude of the pipeline projects, DEQ decided that it, too, had to grant 401 certification, meaning that the projects must abide by Virginia water-protection regulations. (See the Update below.)

By mentioning “Permit 12” in its press release, DEQ was alluding to a particular category of projects that include “energy generation facilities, living shorelines, aids to navigation, dredging, utility line activities, aquatic habitat restoration, and removal of low-head dams.” The ACP and MVP are both covered under the rubric of utility line activities.

The big news in the press release was DEQ’s shift from “general” permits to “individual” permits. To obtain a general permit, a pipeline company must demonstrate that it meets a basic checklist of requirements. “All you have to do is turn in your checklist,” explains DEQ spokesman Bill Hayden. By contrast, the “individual” permit required by DEQ entails going beyond the checklist. Among other requirements, DEQ will hold public hearings for each project and provide extended periods for public input.

Groups opposed to the pipelines hailed this news as a positive development. The reaction of the pipeline companies was along the lines of, meh, this wasn’t what we were looking for, but we can live with it.

The next day, DEQ issued another press release. This one stated that DEQ “has provided water quality certification for the U.S. Army Corps of Engineers 2017 Nationwide Permits.” More specifically:

DEQ found that there is a reasonable assurance that the activities permitted under the Corps’ Nationwide Permit program, including the Norfolk District Corps’ Regional Conditions, will be conducted in a manner that will not violate applicable water quality standards, provided permittees comply with all applicable Section 401 conditions.

The coincidence in timing between the two press releases created the impression that they were connected. People in the environmental community wondered if the communique represented a rollback, or partial rollback, of what DEQ had stated the previous day. At the very least, wrote Rick Webb, project coordinator for the Dominion Pipeline Monitoring Coalition, DEQ had “muddied the waters.”

“We do not agree that the Corps’ NWP  12 (nationwide 12 permit) is appropriate for either the ACP or MVP and have made that argument to the [Corps of Engineers,” says David Sligh, regulatory system investigator with the DPMC.

In order to gain insight into the basis for DEQ action, DPMC filed a Freedom of Information Act request. DEQ responded that it would require a seven-day extension beyond the normal five days it had to respond. The anti-pipeline people replied that DEQ should be able to respond more quickly and did not accept its reasons justifying the delay. On April 12, DPMC delivered a petition for injunctive relief, demanding the DEQ meet the legal requirement of five-day delivery. In an widely distributed email, Webb took issue with DEQ’s inability to deliver the documents on the grounds of “the complex nature” of the request, and accused the department of “changing its story.”

DEQ staff explained that the records could not be obtained immediately because the staff who held them were out of the office. DEQ and DPMC eventually reached an agreement for the records to be furnished by April 25.

The irony is that the second press release, though addressing the same regulatory process, DEQ contends, was unconnected to the previous day’s announcement. The department had completed a routine, five-year review to see if Nationwide 12 permits were consistent with Virginia water-quality regulations. The review concluded that they were, and DEQ issued the press release to say so. The timing — one day after the first press release — was coincidental, Hayden tells Bacon’s Rebellion. The complexity of the regulatory process contributed to the confusion over the announcement’s meaning.

Bacon’s bottom line: Conclusion #1: The regulatory process is insanely complicated. Conclusion #2: DEQ and environmental groups need to develop a better way to communicate with one another than issuing press releases and filing FOIA requests.

Update: David Sligh says my description of how the regulatory process works is wrong. Here’s how he describes it:

“As part of the Federal Energy Regulatory Commission-led regulatory review of interstate pipeline projects, the U.S. Army Corps of Engineers must grant a Clean Water Act section 404 permit for work done directly adjacent to streams and wetlands. The Corps has a Nationwide Permit that can cover such work related to a broad group of utility line waterbody crossings but the Corps also may conduct reviews and issue individual 404 permits where it deems that option preferable or where a project cannot meet the standards allowing coverage under the NWP. To proceed with a project under either the nationwide or individual 404 permit, the State of Virginia must issue a Clean Water Act section “401 certification,” which states that a project meets the requirements of water quality standards designed to protect state waters. Again, the state may cover a particular project under a blanket 401 certification, that says the whole class of activities covered under the NWP will meet water quality standards, or Virginia may conduct individual 401 reviews, which the state has now announced they will do for each of the major pipelines (the MVP and ACP).”

Tom Perriello — the Radical Chic Candidate

George Soros

After Virginia gubernatorial candidates filed their campaign finance updates yesterday, all eyes turned to Democratic Party candidate Tom Perriello. The progressive populist, who decries the role of big money in politics, was himself the largest beneficiary of big money of the six announced candidates.

The Perriello campaign pocketed $385,000 from hedge fund billionaire George Soros and two sons, as well as $230,000 from Avaaz, a global activist organization that Perriello co-founded.

Perhaps of greater interest is the large stash raised from Charlottesville, Perriello’s hometown. Never in all my years as an observer of Virginia politics have I seen such large contributions bubble forth from the People’s Republic. Whether this gusher of campaign contributions portends an inflection point in Virginia politics, I don’t know. But it is remarkable.

Here is a list of Perriello’s top donors, with details added from a couple of hour’s worth of Googling:

Sonjia Smith — $500,000. A University of Virginia graduate and Charlottesville resident, Smith is married to hedge fund manager Michael D. Bills, founder of Bluestem Asset Management. In a Roanoke Times column explaining why she supports Perriello, she described herself as a “single-issue voter” on the issue of women’s reproductive rights. According to the Virginia Public Access Project, she had donated $968,000 to Democratic candidates in Virginia through 2016 before stroking the big check to Perriello.

George Soros — $250,000. New Yorker, hedge fund manager, chairman of the Open Society Foundations, and prolific funder of progressive causes.

Avaaz –$230,000. Global, not-for-profit activist group.

Alexander Soros — $125,000. Alexander Soros, son of multibillionaire George Soros, is a New York philanthropist who promotes social justice and human rights causes.

Courtney C. Smith — $75,000. ???

Stephen Silberstein — $50,000. Northern Virginia semiconductor executive.

Christopher Weitz — $25,000. There is a Christopher Weitz who is a New York-born film producer and screen writer. I’m not certain he is one and the same as the donor to Perriello’s campaign.

John Grisham — $25,000. Best-selling author and supporter of progressive causes who lives in the Charlottesville area.

Margaret Gupta — $25,000. Gupta is married to Shashikant Gupta, CEO of Apex CoVantage, a Herndon technology firm. Co-founder of the Gupta Family Foundation, she says that Apex should be “an agent of positive social change.”

Timothy Chapman — $25,000. Chapman heads Reston-based Chapman Development LLC, a developer of affordable housing projects.

Dario O Marquez — $20,000. A former member of the Secret Service, Marquez is co-founder of MNM Inc., an Ashburn-based private security contractor.

Lilly Bechtel — $10,000. Charlottesville yoga instructor, writer and musician.

Kay Leigh Ferguson — $10,000. Ferguson is director of Charlottesville’s Madwoman Project, which produces avant garde theater performances.

Roberta B. Williamson — $10,000. Charlottesville resident. Major donor to Democratic Party candidates.

Stanislav Reisky de Dubnic — $10,000. Reisky de Dubnic is a principal in Charlottesville-based Apex Clean Energy.

Peter Devine — $10,000. ???

David J. Matthews — $10,000. Famed Charlottesville musician.

Jonathan T. Allan Soros — $10,000. Son of George Soros, CEO of New York-based JS Capital Management, and prominent donor to progressive causes.

Laura DeBonis — $10,000. ???

The picture that emerges here is a candidate whose financial support comes overwhelmingly from progressive communities in New York, Northern Virginia and above all Charlottesville. Among big-check donors, he appears to have zero support outside those areas. From his advocacy of a $15 minimum wage and free community college to his support of renewable energy and attacks on electric utilities, he is all on board with the green/social justice agenda. Virginia has never seen a serious statewide candidate like this before.

As Richmond Times-Dispatch reporter Jeff Schapiro observes, “Perriello’s candidacy, much like McAuliffe’s losing bid in 2009, is top-down. It is a lot of drama, magnified by millennial-specific social media and cable news breathlessness, intended to capture the votes of Virginians not necessarily active in Democratic politics but absolutely agitated by Donald Trump.”

Hypocrisy alert. Perriello has staked out a position as a pro-green, anti-Dominion candidate opposed to interstate pipelines transporting fracked gas through Virginia. Yet he has accepted $250,000 from George Soros, whose Soros Fund Management in 2016 had holdings in 11 oil and gas companies. Should he return Soros’ money? Should he insist that Soros divest himself of his oil and gas assets? Are his support of renewables and attacks on power companies sincere or opportunistic?

Creative (Class) Destruction

Richard Florida in Washington, D.C., last week. Photo credit: Washington Post.

In the inaugural edition of the Bacon’s Rebellion newsletter (back before there were blogs), I reviewed Richard Florida’s book, “The Rise of the Creative Class.” I was certain his work would spark a revolution in how Americans understood economic development in the Knowledge Economy, and I became an early follower.

The then-dominant paradigm of economic development focused on corporate recruitment, as epitomized here in the Old Dominion by the Virginia Economic Development Partnership. In that model of economic development, what corporations needed were utilities, Interstate access, low taxes, inexpensive real estate, and inexpensive, semi-skilled labor. But Florida documented that corporate investment was increasingly driven by a need to access human capital. Corporations, especially fast-growth technology companies, were expanding in locations where they could find skilled, educated, tech-savvy employees — an occupational cluster he dubbed the creative class.

In a break with the past, Florida observed, creatives weren’t attracted to regions with symphonies, operas, and ballets. They were moving to metros noted for openness to newcomers, social diversity, cultural tolerance, and a rich “street” culture. Instead of employees migrating to where the corporations were, corporations were migrating to where the employees were. To attract corporate investment, communities needed to attract the creatives.

Among other insights, Florida foresaw the decline of suburban office parks, which he disparagingly called “nerdistans,” which young people rejected in favor of the city experience of walkable neighborhoods and vibrant, participative cultural institutions. Through a series of books and publication of the “CityLab” blog, Florida transformed the nation’s thinking about economic development — especially in liberal, Democratic cities where talk of tolerance and openness came naturally.

I followed Florida for several years, but slowly lost interest as his shtick became increasingly political. Not only did liberal, Democratic cities embrace him, he embraced them in turn. The new Creative Class paradigm seemed to relegate smaller, less ethnically diverse, more culturally conservative cities to the dust heap of the economy, and Florida seemed to overlook obvious flaws in the Blue State model such as excessive regulation, high taxes and unfunded pension liabilities. To my mind, he had captured important truths but had shot way past the mark.

Well, it seems that Florida has written a new book, “The New Urban Crisis.” I have yet to read the book, but Florida appeared at a panel discussion at the Union Market in Washington, D.C., a week ago to discuss his latest thinking. From the Washington Post:

Somewhere along the way … Florida realized that the workers he so cajoled were eating their cities alive.

In places like New York, San Francisco, Seattle and arguably Washington, the mostly white, young and wealthy “creative class” has so fervently flocked to urban neighborhoods that they have effectively pushed out huge populations of mostly blue-collar and often poor or minority residents.

“I think, to be honest, I and others didn’t realize the contradictory effect,” Florida said Tuesday at a panel discussion. He said he realizes now that prompting creative types to cluster in small areas clearly drove living costs to such heights that low-income and oftentimes middle-income households have been forced elsewhere, creating a divide he did not anticipate.

“We are cramming ourselves into this limited amount of space. And at the same time that the super-affluent, the advantaged, the creative class — we could go on and on [with what to call them] — the techies, global super-rich, absentee investors, invest in these cities, they push others out … and it carves these divides,” he said. …

Although he still champions investments in urban areas, at the panel event Florida said the criticism had made a mark. “To be seen as the neoliberal devil, foisting gentrification on cities, is not a situation I like to be seen in,” he said.

Bacon’s bottom line: Members of the creative class may be tolerant, open, hip and edgy, but they, like everyone else, are NIMBYs. Once they move into a neighborhood, they like things the way they are, and they don’t want greedy developers building new projects that block their views, generate traffic, alter the architectural character of the neighborhood or otherwise inconvenience them. In Creative Class enclaves, NIMBYism restricts residential development, which aggravates housing scarcity, which drives up prices, which displaces the poor, the working class, and increasingly the middle class.

Members of the Creative Class happily wield government power to mold a world to their liking. They have no compunction about enacting laws and regulations that encumber economic activity — usually the economic activity of others — as long as it furthers their own goals. Thus has California transformed the coastal ribbon into an environmental paradise attractive to the Creative Class while devastating the farming and manufacturing economies of inland cities. Gross inequality is not the inevitable result of wealth creation, it is the inevitable result of wealth creation in a liberal Democratic political/cultural setting.

That’s the way I see it. I doubt Florida will see it the same. But I have enough respect for his thinking that I will read his latest work, and I reserve the right to change my mind.

Plumbing the Depths of Economic-Development Stupidity

Rendering of Main Street Station train shed.

Rendering of Main Street Station train shed.

Sometimes I wonder if anyone in Richmond city government ever learns anything about anything. The city has experienced a string of failures over the decades, starting with the grandiose Sixth Street Marketplace that was supposed to revitalize downtown retail in the mid-1980s and came to an end in 2007 when most of the structure was unceremoniously torn down. Undeterred by what should have been a searing memory, the city has squandered millions on several other high-profile revitalization projects of dubious value, the most notorious of which has been the Washington Redskins training camp.

The most recent folly is the $45 million renovation of the Main Street Station train shed, part of a larger, $90 million renovation of iconic station in downtown Richmond. The end result, though visually splendid, fulfills no clearly demonstrated need. The bottom floor will be dedicated to retail space, of which there is no shortage in the Richmond region, and the top floor to meeting space, of which there is an outright abundance.

“Free” federal and state money is covering for most of the up-front cost of the project, but the train shed facility will require $1.7 million in operating subsidies in just the first year. The city already subsidizes the Coliseum to the tune of $1.7 million a year and the Convention Center by $8 million a year, as the Richmond Times-Dispatch reports. In other words, the city will spend millions of dollars to support an event facility that will to some degree compete with, and cannibalize, other event facilities that it is subsidizing.

That’s about as stupid as it gets. Kudos to City Council members Parker Agelasto and Chris Hilbert for asking questions.

Stephen Moret: Aiming to Restore Virginia as Jobs Leader

Stephen Moret, CEO of the Virginia Economic Development Partnership

Stephen Moret, CEO of the Virginia Economic Development Partnership. Photo credit: Washington Business Journal.

Stephen Moret, the new director of the Virginia Economic Development Partnership (VEDP) has been on the job long enough to tour the state, meet business leaders and regional economic development officials, and summarize impressions of his first 100 days. In a letter he broadcast widely through the economic development community, he articulated five aspirational goals and enumerated eleven projects he hopes to see accomplished by the end of 2017.

The five broad goals include:

  • Position Virginia to achieve an employment growth rate among the top three Southern states (and top five in the United States). This will require creating 20,000 jobs per year over and above existing forecasts.
  • Ensure that every region of Virginia participates in that growth. Over the past five years, nearly half of Virginia’s counties and cities have lost population. “While we can’t ensure that every county will grow, we can ensure that every region will grow.”
  • Restore Virginia’s standing to the top rankings (average in the top three) of the best states for business.
  • Re-establish VEDP as “America’s premier state economic development organization.” Other states have stepped up their game. “We are going to clearly describe where we are behind and articulate what it will take to get back on top.”
  • Emphasize the “P” in VEDP — develop strong relations with local and regional economic developers, the Port of Virginia, GO Virginia, the Tobacco Region Revitalization Commission, the Virginia Chamber of Commerce, railroads, utilities, and the State Council of Higher Education for Virginia.

This year, Moret said he will focus upon implementing Joint Legislative Audit and Review Commission (JLARC) recommendations for the administrative reform of VEDP as well as the following:

  • Develop a target-industry economic development strategy and action plan for the state and each of its regions.
  • Create a marketing/branding, site-consultant cultivation, and lead-generation program, and introduce a legislative proposal to fund it.
  • Launch a “world-class, turnkey, customized workforce recruitment and training program modeled after such programs in Georgia and Louisiana.”
  • Launch a targeted business retention and expansion program.
  • Develop a comprehensive strategy to position rural Virginia for growth.

“I’ve been amazed by the physical beauty of Virginia; the incredible human capital, higher education, infrastructure, and geographic assets here; the high-quality companies making world-class products and/or delivering world-class services; and the professionalism and passion of Virginia economic development practitioners,” wrote Moret, who ran Louisiana’s economic development program before moving to Virginia. “Based on what I’ve seen so far at VEDP and across the Commonwealth, I’m even more enthusiastic about the opportunities facing us than I was when my appointment was first announced.”

Bacon’s bottom line: Stephen Moret is bringing new energy and a fresh eye to an economic development apparatus that grew complacent from previous successes. As VEDP chief, however, his job is bringing outside capital investment and jobs to Virginia, which is only one leg of a diversified economic development strategy. Most jobs will be created by existing Virginia businesses and new start-up businesses, which are outside of Moret’s portfolio. But I think Virginians can feel reassured that the corporate-recruitment function is in good hands.