Category Archives: Economy

Student Debt and the Decline of New Business Formation

by James A. Bacon

Many are the ways in which burgeoning student debt — $1.2 trillion and rising — cripple the economy. On this blog we’ve discussed how debt delays family formation, housing purchases and consumer spending. Recent research from the Philadelphia Federal Reserve Board also suggests that student debt dampens new business formation, an insight that ties into another line of inquiry on this blog: understanding the slow rate of job creation in the current economic cycle.

The engine of job creation in the U.S. economy is new business formation. The spawning of new businesses has experienced a long-term decline since 1978, but that decline has been particularly pronounced since 2005. In recent years more firms have exited the marketplace than have entered it, as seen in this Brookings Institution graph below, taken from “Declining Business Dynamism in the United States: A Look at States and Metros,” published in 2014. The numbers may have improved in the past two  years, but probably not enough to change the long-term picture.

firm_dynamism

I have argued on this blog that the massive wave of regulation enacted in the past six years has dampened the economic recovery by imposing large new costs on businesses. As the regulatory burden has increased, economies of scale have shifted in favor of larger firms which have the resources to deal with the regulations. Numerous industry sectors are consolidating: banking, hospitals and health insurance most visibly. Industry consolidation may be a factor in explaining the decline in overall net business formation but it only goes so far.

The Brookings data shows that the problem isn’t an accelerating death rate of businesses — the exit rate of firms from the economy has remained fairly stable since 1978 — it’s the dearth of business births. I would suggest that regulation has dampened new business formation by creating barriers to entry in many industries.

While I still hew to that view, I think there’s more to the story. There also is strong evidence that the surge in student debt — $1.2 trillion and rising — has depressed new business creation among young people.

Image source: Federal Reserve Bank of Philadephia

Image source: Federal Reserve Bank of Philadephia. (Click for larger image.)

The authors of the recently published Federal Reserve Bank of Philadelphia paper, “The Impact of Student Loan Debt on Small Business Formation,” has found a “significant and economically meaningful” negative correlation between geographic variation in student loan debt and net business formation for small firms of one to four employees. “Based on our model, an increase of one standard deviation in student debt reduced the number of businesses with one to four employees by 14% on average between 2000 and 2010.” (Please don’t ask me to define “standard deviation.” Here’s an an explanation.)

Image source: Federal Reserve Bank of Philadelphia. (Click for larger image.)

Image source: Federal Reserve Bank of Philadelphia. (Click for larger image.)

To launch a business, especially a small business, individuals need access to capital, the authors argue. Small businesses receive approximately 75% of this capital from banks in the form of loans, credit cards and lines of credit, which are contingent upon the borrower’s credit-worthiness. “Given the importance of an entrepreneur’s personal debt capacity in financing a startup business, personal debt that is incurred early in life and that restricts a person’s ability to take on future debt can have profound implications for growth in small businesses,” the study says.

The growth in student debt over the past decade has damaged the credit-worthiness of an entire demographic cohort: 17% of student loans are delinquent, and another 44% are not being repaid due to borrowers either still being in school or having received a repayment deferral or forbearance. Even students who are paying their debt on schedule find their credit worthiness downgraded.

As the Wall Street Journal noted in an editorial today, the Kauffman Foundation has found that new entrepreneurs ages 20 to 34 fell to 23% of self-starters in 2013, down from 35% in 1996.

The U.S. system of higher education may be creating the best educated generation in American history, but it may be the least entrepreneurial in decades.

As Virginians seek ways to reignite a state economy hobbled by the decline in federal spending and an eroding business climate, we need to give more attention to what it takes to stimulate new business formation. And that should entail taking a closer look at the link between higher ed and student debt, and the link between student debt and new business formation. All the state and federal “programs” designed to promote new business formation, I suspect, don’t amount to a hill of beans compared to the rise in student indebtedness. Tackling student indebtedness gets us into a thicket of very complex issues that aren’t easily solved but that’s no excuse for failing to focus on what really matters.

A Tax Structure Finely Tuned for… a 20th Century Economy

virginia_business_tax_burden

Virginia business tax rates. Image credit: Tax Foundation, KPMG

A new study by the Tax Foundation and KPMG of state business taxes differs from previous studies, which look at average levels of taxation, by examining how state tax structures affect different types of business. The big conclusion from “Location Matters: The State Tax Costs of Doing Business“: Firms experience dramatically different tax rates because their exposure varies to different state and local taxes.

The study’s analysis of Virginia’s tax structure suggests that established companies experience much lower overall tax burdens than new companies. The Old Dominion ranks second best in the country for mature, labor-intensive manufacturing operations but only 35th for R&D facilities.

Bacon’s bottom line: I have frequently decried the lack of entrepreneurial dynamism in Virginia as a root cause for our sluggish economic performance. There may be many reasons for Virginia’s mediocre growth record in recent years but, based upon the data shown in the chart above, one of them is certainly the structure of business taxes.

In every category analyzed, new firms experience higher effective tax rates than mature firms. Just as important, look at the comparative ratings. Virginia ranks No. 2 in the country for mature, labor-intensive manufacturing companies — neither a growth sector, nor a particularly high-paying sector — but only 35th for R&D, the kind of economic activity every state covets. If we wanted to design an economy for the 20th century, not the 21st, we’ve done a pretty good job.

(Hat tip: Larry Gross)

Want Social Justice? Create Jobs.

Photo credit: Buz and Ned's

Photo credit: Buz and Ned’s

by James A. Bacon

I’m all in favor of people earning higher wages. I want to live in a society in which people make enough from their labors to live on without government assistance. I just don’t think that mandating a minimum wage is the way to go about it, for all the reasons that foes of the minimum wage usually cite that don’t bear repeating here. A better way to increase wages is to (a) increase the number of jobs in the economy, which would (b) give employees more options, which would (c) prompt employers to offer better wages, benefits and working conditions in order to hang onto their workforce. Crank up the jobs machine, and the wages, benefits and working conditions will follow.

This forehead-smackingly obvious formula can be seen at work in Richmond’s restaurant community. After years of sub-par economic growth following the Great Recession, competition for skilled restaurant employees in the Richmond region is finally heating up. And guess what’s happening — restaurateurs are raising wages.

Thus, we read in the Richmond Times-Dispatch today that Buz Grossberg, owner of Buz and Ned’s Real Barbecue restaurants, is bumping the starting pay to $12.50 per hour for regular employees and to $8 per hour for servers working for tips. That’s up from $8 and $6 an hour respectively.

Grossberg acted for reasons both idealistic and pragmatic. “This has been on my mind a long time, even before it became current politics,” he said. “It’s just gotten worse and worse. It’s gotten hard for people to repay their bills and see their family without working multiple jobs. … How do you attract people and keep people who can’t afford to feed their family? Pay them a living wage.”

But why did he act on his conscience now? Turns out that it’s getting harder finding and retaining talent, particularly kitchen workers, in Richmond’s increasingly competitive and crowded restaurant scene, according to other restaurateurs quoted in the article. Said Grossberg: “The people who would typically work [in the restaurant industry] are going other places.” Paying higher wages will bring them back in.

Bacon’s bottom line: It’s basic supply-and-demand economics. If the economy creates jobs at a faster rate, wages will rise faster. And how do we create more jobs? Once place to start would be to re-think some of the job-killing policies we’ve enacted over the past 15 years, starting with Sarbanes-Oxley, Dodd-Frank, the Affordable Care Act, EPA regulatory overreach, higher taxes, regulation of the Internet and dozens of other initiatives that collectively have gummed up the economy and slowed growth to a crawl.

Defenders of the current regulatory regime tend to blame mysterious “economic forces” beyond their control. I’m old enough to remember those who claimed the “stagflation” of the 1970s likewise was due to some mysterious change in the nature of the economy rather than the policies of Richard “We’re All Keynesians Now” Nixon and Jimmy “Gas Rationing” Carter. Then along came policies that killed inflation, deregulated major industry sectors, cut taxes and enacted and real government spending cuts, precipitating nearly two decades of job creation. The surge in jobs in the 1980s and 1990s made the minimum wage irrelevant in many parts of the country because businesses were so desperate for labor that they were paying more than the minimum already.

I do feel badly for anyone trying to make a living on the minimum wage. But the answer isn’t more of the same “social justice” economics that have created our moribund economy and depressed wages. The best social justice program in the world is a strong job-creating economy.

Market Failure and Government Failure

ethics_and_economicsby James A. Bacon

Jon Wight, a business school professor at the University of Richmond, is a huge fan of Adam Smith, best known for his classic economic treatise, “The Wealth of Nations.” Wight thinks Smith is one of the greatest economists who ever lived, not as much on the grounds that he championed “free markets,” as many conservatives might think, as on the way he built his economic theories upon a platform of morals and ethics, as articulated in his earlier, lesser known work, “The Theory of Moral Sentiments.” Not surprisingly, Wight makes frequent references to Smith in his own, recently published book, “Ethics in Economics: an Introduction to Moral Frameworks,” in which he outlines a moral framework for understanding markets.

Wight, a friend of mine, argues that is impossible to disassociate markets from the cultural and moral context in which they are embedded. In one chapter, “Moral Limits to Markets,” he argues that not all human relationships can, nor should be, market relationships. Relationships between husband, wife and children, for instance, are not, and should not be, conducted in accordance with market rules. Similarly, he argues against price gouging in times of crisis, discrimination on the basis of race and the commercial transaction of human body parts (made all the more timely by the recent revelation of Planned Parenthood’s commerce in fetal tissue). At bottom, his book is an argument for social justice and a retort to the “modern welfare theory” school of economics that argues that voluntary transactions between willing buyers and sellers maximizes consumer preferences and economic welfare.

The book is an easy read, spiced with lots of contemporary allusions, of an incredibly abstract subject, and I urge Bacon’s Rebellion readers of a philosophical bent to buy it. The book advanced my thinking about the moral context of economics immeasurably. If you’re too cheap to buy the book, at least check out Wight’s “Economics and Ethics” blog here. He doesn’t always reach the same conclusions I do… well, let’s say he often reaches entirely different conclusions… but I like the way he thinks. He acknowledges the complexity and nuances of issues. He takes the trouble to understand the arguments of others even if, in the final analysis, he doesn’t agree with them.

To my mind, if there was one philosophical flaw to Wight’s book, it is this: While Wight does a masterful job of dissecting “market failures” — they are many, and they are real — and while he does acknowledge parenthetically that many government fixes to market failures do themselves have flaws, he doesn’t give the same level of attention to the “government failure” as he does to “market failure.”

That is a very lengthy and roundabout way to get to the subject of today’s post. A new Cato Institute paper by Chris Edwards, “Why the Federal Government Fails,” struck a chord precisely because Wight’s book had sensitized me to the issue of market failure and I had begun thinking that someone needs to categorize government failure in the systematic way. Just as Wight provides a taxonomy of market failure, Edwards provides a taxonomy of government failure.

I cannot say it better than Edwards himself in his executive summary:

Most Americans think that the federal government is incompetent and wasteful. Their negative view is not surprising given the steady stream of scandals emanating from Washington. Scholarly studies support the idea that many federal activities are misguided and harmful. A recent book on federal performance by Yale University law professor Peter Schuck concluded that failure is “endemic.”

What causes all the failures?

First, federal policies rely on top-down planning and coercion. That tends to create winners and losers, which is unlike the mutually beneficial relationships of markets. It also means that federal policies are based on guesswork because there is no price system to guide decisionmaking. A further problem is that failed policies are not weeded out because they are funded by taxes, which are compulsory and not contingent on performance.

Second, the government lacks knowledge about our complex society. That ignorance is behind many unintended and harmful side effects of federal policies. While markets gather knowledge from the bottom up and are rooted in individual preferences, the government’s actions destroy knowledge and squelch diversity.

Third, legislators often act counter to the general public interest. They use debt, an opaque tax system, and other techniques to hide the full costs of programs. Furthermore, they use logrolling to pass harmful policies that do not have broad public support. Continue reading

Something to Think About

Last week I was reading in the New York Times an article on Jeb Bush’s plans for the economy. One of his talking points was to reduce the federal workforce by 10%. For a state as dependent on the Feds as Virginia, this could have serious financial implications. Already, in the CNBC rankings as the best state for doing business, Virginia has dropped from at or near the top to 12th in the most recent poll.  One of the reasons given was the decrease in federal spending. We can debate whether the government spends,  but such a cut in Northern Virginia and the Norfolk area could have significant impact.

— Les Schreiber

Alpha Natural Resources: Running Wrong

Alpha miners in Southwest Virginia (Photo by Scott Elmquist)

Alpha miners in Southwest Virginia
(Photo by Scott Elmquist)

 By Peter Galuszka

Four years ago, coal titan Alpha Natural Resources, one of Virginia’s biggest political donors, was riding high.

It was spending $7.1 billion to buy Massey Energy, a renegade coal firm based in Richmond that had compiled an extraordinary record for safety and environmental violations and fines. Its management practices culminated in a huge mine blast on April 5, 2010 that killed 29 miners in West Virginia, according to three investigations.

Bristol-based Alpha, founded in 2002, had coveted Massey’s rich troves of metallurgical and steam coal as the industry was undergoing a boom phase. It would get about 1,400 Massey workers to add to its workforce of 6,600 but would have to retrain them in safety procedures through Alpha’s “Running Right” program.

Now, four years later, Alpha is in a fight for its life. Its stock – trading at a paltry 55 cents per share — has been delisted by the New York Stock Exchange. After months of layoffs, the firm is preparing for a bankruptcy filing. It is negotiating with its loan holders and senior bondholders to help restructure its debt.

Alpha is the victim of a severe downturn in the coal industry as cheap natural gas from hydraulic fracturing drilling has flooded the market and become a favorite of electric utilities. Alpha had banked on Masset’s huge reserves of met coal to sustain it, but global economic strife, especially in China, has dramatically cut demand for steel. Some claim there is a “War on Coal” in the form of tough new regulations, although others claim the real reason is that coal can’t face competition from other fuel sources.

Alpha’s big fall has big implications for Virginia in several arenas:

(1) Alpha is one of the largest political donors in the state, favoring Republicans. In recent years, it has spent $2,256,617 on GOP politicians and PACS, notably on such influential politicians and Jerry Kilgore and Tommy Norment, according to the Virginia Public Access Project. It also has spent $626,558 on Democrats.

In 2014-2015, it was the ninth largest donor in the state. Dominion was ahead among corporations, but Alpha beat out such top drawer bankrollers as Altria, Comcast and Verizon. The question now is whether a bankruptcy trustee will allow Alpha to continue its funding efforts.

(2) How will Alpha handle its pension and other benefits for its workers? If it goes bankrupt, it will be in the same company as Patriot Coal which is in bankruptcy for the second time in the past several years. Patriot was spun off by Peabody, the nation’s largest coal producer, which wanted to get out of the troubled Central Appalachian market to concentrate on more profitable coalfields in Wyoming’s Powder River Basin and the Midwest.

Critics say that Patriot was a shell firm set up by Peabody so it could skip out of paying health, pension and other benefits to the retired workers it used to employ. The United Mine Workers of America has criticized a Patriot plan to pay its top five executives $6.4 million as it reorganizes its finances.

(3) Coal firms that have large surface mines, as Alpha does, may not be able to meet the financial requirements to clean up the pits as required by law. Alpha has used mountaintop removal practices in the Appalachians in which hundreds of feet of mountains are ripped apart by explosives and huge drag lines to get at coal. They also have mines in Wyoming that also involve removing millions of tons of overburden.

Like many coal firms, Alpha has used “self-bonding” practices to guarantee mine reclamation. In this, the companies use their finances as insurance that they will clean up. If not, they must post cash. Wyoming has given Alpha until Aug. 24 to prove it has $411 million for reclamation.

(4) The health problems of coalfield residents continue unabated. According to a Newsweek report, Kentucky has more cancer rates than any other state. Tobacco smoking as a lot to do with it, but so does exposure to carcinogenic compounds that are released into the environment by mountaintop removal. This also affects people living in Virginia and West Virginia. In 2014, Alpha was fined $27.5 million by federal regulators for illegal discharges of toxic materials into hundreds of streams. It also must pay $200 million to clean up the streams.

The trials of coal companies mean bad news for Virginia and its sister states whose residents living near shut-down mines will still be at risk from them. As more go bust or bankrupt, the bill for their destructive practices will have to borne by someone else.

After digging out the Appalachians for about 150 years, the coal firms have never left coalfield residents well off. Despite its coal riches, Kentucky ranks 45th in the country for wealth. King Coal could have helped alleviate that earlier, but is in a much more difficult position to do much now. Everyday folks with be the ones paying for their legacy.

Heh, Heh. Virginia Electricity Less Carbon-Intensive than Its Neighbors’ — without RPS

by James A. Bacon

The Gooze, known in more polite company as Peter G. , is a big fan of solar power and wind power and thinks we ought to have more of both in Virginia. In his most recent post, he seems particularly impressed by the activities of Amazon Web Services, which has announced plans to build the largest solar facility east of the Mississippi in Accomack County and has joined in a large wind project in North Carolina. What Virginia needs to do, he suggests, is enact a mandatory Renewable Portfolio Standard (RPS) requiring Virginia electric utilities, like those in neighboring North Carolina and Maryland, to utilize more renewables such as solar, wind and biomass regardless of how much more expensive they may be than conventional power sources.

It’s helpful to remind ourselves exactly where Virginia stands nationally in the emission of Carbon dioxide (CO2), the gas that is both essential to life and implicated in global warming. The following data comes from “Benchmarking Air Emissions of the Largest 100 Electric Power Producers in the United States,” published by M.J. Bradley Associates, which bills itself as a strategic environmental consulting firm. No, the report was not funded by the Koch Brothers. It was prepared in consultation with Bank of America, several electric utilities and the Natural Resources Defense Council.

The report looks at two broad measures of carbon intensity: Total CO2 emissions for each state, and the CO2 emissions rate — emissions per megawatt hour of electricity generated. First total CO2 emissions:

total_emissions

Texas is by far the biggest CO2 emitter in the country. That reflects the fact that (1) Texas has a large gross domestic product (GDP) and (2) a fossil fuel-heavy electric generation mix. Note that although Virginia has the 11th largest state economy in the country, it ranks 26th by total CO2 emissions. In other words, Virginia is far more CO2-efficient than the national average.

(This measure is, admittedly, a rough one and overlooks important nuances. For example, Virginia has built one of the nation’s largest clusters of data centers, which consume a tremendous amount of electricity but replace electricity that would have been consumed in other states had businesses not outsourced their computing and data storage to the cloud. On the other hand, Virginia is a net importer of electricity from other states, meaning that some of the CO2 emissions attributed to its economy is allocated to other states.)

emission_rateHere are the numbers for the CO2 emissions rate, which reflects fuel mix. Virginia’s fuel mix includes a lot of zero-CO2 nuclear power as well as natural gas, which, though a fossil fuel, releases less CO2 per kilowatt hour than coal or oil. By this measure, Virginia ranks 38th on the list — lower than the two states with renewable portfolio standards that Peter admires so much, Maryland and North Carolina.

Not only does Virginia emit less CO2 per megawatt hour than its two neighbors, its average electricity costs are lower. According to the U.S. Energy Information Administration (not funded by the Koch Brothers, by the way), here’s how electric rates compare based on 2013 data:

Virginia — 9.07 cents per kilowatt hour.

North Carolina — 9.15 cents per kilowatt hour.

Maryland — 11.3 cents per kilowatt hour.

And for purposes of comparison, California, the state that has gone “all in” with renewable energy — 13.5 cents per kilowatt hour.

My point is not that renewable energy is bad. Eventually, the cost of renewables will be competitive with other fuels, and then we should embrace them. My point is that there are trade-offs entailed with imposing renewable energy before it’s ready for prime time. One of those trade-offs is price. Once upon a time, progressives like Peter deemed it outrageous for power utilities to raise their rates on the grounds that a high cost of electricity punished the poor. No longer. Fear of global warming trumps social justice. The irony here is that Virginia’s electric power fleet outperforms North Carolina and Maryland in carbon intensity and price — all without mandated renewables. How about that?

Renewable Energy: A Tale of Two Virginias

Apologies to Mr. Dickens

Apologies to Mr. Dickens

By Peter Galuszka

Call it a tale of two Virginias – at least when it comes to renewable energy.

One is the state’s traditional political and business elite, including Dominion Resources and large manufacturers, the State Corporation Commission and others.

They insist that the state must stick with big, base-loaded electricity generating plants like nuclear and natural gas – not so much solar and wind –to ensure that prices for business are kept low. Without this, recruiting firms may be difficult.

The other is a collection of huge, Web-based firms that state recruiters would give an eyetooth to snag. They include Amazon, Google, Facebook and others that tend to have roots on the West Coast where thinking about energy is a bit different.

Besides the Internet, what they have in common is that they all vow to use 100 per cent of their electricity from renewable sources. What’s more, to achieve this goal, all are investing millions in their own renewable power plants. They are bypassing traditional utilities like Dominion which have been sluggish in moving to wind and solar.

So, you have a strange dichotomy. Older business groups are saying that the proposed federal Clean Power Plan should be throttled because it would rely on expensive renewables that would drive away new business. Meanwhile, the most successful and younger Web-based firms obviously aren’t buying that argument.

I have a story about this in this week’s Style Weekly.

In Virginia, the trend is evidenced by Amazon Web Services, which sells time on its cloud-computing network to other firms. It is joining a Spanish company, Iberdola Renewables LLC, in building a 208-megawatt wind farm on 22,000 acres in northeastern North Carolina, just as few miles from the Virginia border. Three weeks earlier, on June 18, Amazon announced it plans a 170-megawatt solar farm in Accomack County on the Eastern Shore.

Dominion, which has renewable projects in California, Utah and Indiana and the beginnings of some small ones in Virginia, says it is not part of the projects. It could possibly get electricity indirectly from them. Amazon’s power will be sold on regional power grids to business and utilities.

When they complete such sales, the Net-focused firms will get renewable energy certificates that can be used to show that they have put as much renewable energy into the electricity grid as they have used, says Glen Besa, director of the Virginia chapter of the Sierra Club.

This will be especially important in Northern Virginia where there are masses of computer server farms used by Amazon and others. These centers used 500 megawatts of power in 2012 and demand is expected to double by 2017. Also, for years, the region has hosted such a large Internet infrastructure that at least half, perhaps 70 percent, of the Net’s traffic goes through there.

Part of the back story of this remarkable and utility-free push for renewables is that environmental groups are shaming modern, forward-looking firms like Amazon to do it.

Amazon Web Services was the target of criticism last year when Greenpeace surveyed how firms were embracing renewable energy. The report stated that the firm “provides the infrastructure for much of the Internet” but “remains among the dirtiest and least transparent companies” that is “far behind its major competitors.”

Dominion also got bashed in the report. Greenpeace says, “Unfortunately, Dominion’s generation mix is composed of almost entirely dirty energy sources.” Coal, nuclear and natural gas make up the vast majority of its power sources.

Its efforts to move to renewable sources have been modest at best. In regulatory filings, Dominion officials have complained that renewable energy, especially wind, is costly and unreliable although they include it in their long-term planning.

Dominion has plans for 20-megawatt solar farm near Remington in Fauquier County and is working on a wind farm on 2,600 acres the utility owns in southwestern Virginia. It has renewable projects out-of-state in California, Utah and Indiana. The output is a fraction of what Amazon plans in the region.

In a pilot offshore wind project, Dominion had planned on building two wind turbines capable of producing 12 megawatts of power in the waters of Virginia Beach. It later shut down the project, saying new studies revealed it would cost too much. It says it might continue with a scaled down project if it got extra funding, such as federal subsidies.

The utility says it must build more natural gas plants and perhaps build a third nuclear unit at its North Anna power plant to make sure that affordable electricity is always available for its customers.

As Amazon announced its new renewal projects, Greenpeace has changed its attitude about the company. Now it praises Amazon for its initiatives in Virginia and North Carolina. “I would like to think we have pushed Amazon in the right direction,” says David Pomerantz, a Greenpeace spokesman and analyst. He adds that Amazon has some work to do in making its energy policies “more transparent.”

One unresolved issue is that two neighboring states, North Carolina and Maryland, have “renewable portfolio standards” that require that set percentages of power produced there come from renewables. West Virginia had such a standard but has dropped it. In Virginia, the standard is voluntary, meaning that Dominion is under no legal obligation to move to solar or wind. It also gives the SCC, the power rate regulator, authority to nix new power proposals because they might cost consumers too much, providing Dominion with a handy excuse to move slowly on renewables.

Another matter, says Pomerantz, is whether Virginia’s legislators will enact “renewable energy friendly policies” or watch hundreds of millions of dollars in renewable project investments go to other states, such as North Carolina.

So, you have a separate reality. Traditionalists are saying that expensive renewables are driving away new business, while the most attractive new businesses are so unimpressed with traditionalist thinking that they are making big investments to promote renewable energy independently.

It isn’t the first like this has happened.

The Ironies of Virginia’s Growing Diversity

Midlothian’s New Grand Mart taps state’s growing diversity

 By Peter Galuszka

Suddenly immigration is popping up as a major issue in Virginia and the nation.

Virginia Beach has been dubbed a “sanctuary city” for undocumented aliens by Fox News and conservative Websites. GOP presidential hopeful Donald Trump is scarfing up poll number hikes by calling Mexicans trying to enter the U.S. illegally “rapists” and proposing an expensive new wall project to block off the southern border. Pro-Confederate flag advocates are pushing back against anti-flag moves, but they can’t escape the reality they are conjuring up  old visions of white supremacy, not their version of respectable Southern “heritage.”

So, if you’d like to look at it, here’s a piece I wrote for The Washington Post in today’s newspaper. When I visited a new, international food store called New Grand Mart in Midlothian near Richmond, I was impressed by how large it was and how many people from diverse backgrounds were there.

Looking further, I found one study noting that Virginia is drawing new groups of higher-income residents of Asian and Hispanic descent. In the suburbs, African-Americans are doing well, too.

The Center for Opportunity Urbanism ranked 52 cities as offering the best opportunities for diverse groups. One might assume D.C. and Northern Virginia would rank well, and they do. More surprising was that Richmond and Virginia Beach rank in the top 10 in such areas as income and home ownership. True, mostly black inner city Richmond has a 26 percent poverty rate but it seems to be a different story elsewhere.

Stephen Farnsworth of the University of Mary Washington says that economic prosperity and jobs that had been concentrated in the D.C. area, much of it federal, has been spread elsewhere throughout the state. It may not be a coincidence that New Grand Mart was started in Northern Virginia by Korean-Americans who undertook research. It revealed that the Richmond area was a rich diversity market waiting to be tapped. They were impressed and expanded there.

Other areas that do well in the study are Atlanta, Raleigh, N.C. and ones in Texas, which show a trend of job creation in the South and Southwest outpacing economic centers in the Northeast, Midwest and in parts of the West. Another story in today’s Post shows that there are more mostly-black classrooms in Northern cities than in the South. The piece balances out the intense reevaluation of Southern history now underway. A lot of the bad stuff seems to have ended long ago, but somehow similar attitudes remain in cities like Detroit and New York.

This progress is indeed interesting since old-fashioned American xenophobia is rearing itself again.

In Virginia, the long-term political impact will be profound as newer groups prosper. They may not be as inclined as whites to embrace Virginia’s peculiar brand of exceptionalism, such as their emotional mythology of Robert E. Lee and Thomas Jefferson. Their interest in them might be more dispassionately historical.

And, as the numbers of wealthier people from diverse backgrounds grow, they may be less willing to keep their heads down when faced with immigrant bashing. That’s what people of Hispanic descent did in 2007 and 2008 when Prince Williams County went through an ugly phase of crackdowns on supposed illegals. They could strike back with their own political campaigns.

Whether they will be blue or red remains to be seen. It’s not a given that they’d be Democratic-leaning. Farnsworth notes, however, that as more diverse people move to metropolitan suburbs, whites in more rural, lower-income places may become more reactionary out of fear. Hard-working and better-educated newcomers might be out-classing them in job hunts, so they might vote for politicians warning of a yellow or brown peril.

In any case, New Grand Mart presages a very crucial and positive trend in Virginia. It shows the irony of the hard right echo chamber peddling stories designed to inflame hatred and racism, such as the one about Virginia Beach being a “sanctuary” for illegals. In fact, the city is attracting exactly the  well-educated and hard-working newcomers of diverse backgrounds upon whom it can rest its future.

But we’re in an age of bloated billionaires with helmet hairdos and no military experience claiming that former Republican presidential candidate John McCain, a shot-down Navy pilot who spent five years in a brutal North Vietnamese prison, is not a hero. If Virginia can ignore such time-wasters and embrace diversity, it will be a better place.

Why Can’t Dominion Do Big Wind Projects?

A wind farm in Texas

A wind farm in Texas

 By Peter Galuszka

Down in the swamplands and farmlands of northeastern North Carolina, construction has begun on a huge new wind farm that will be the largest so far in the southeastern U.S.

Iberdrola Renewables LLC, a Spanish firm, has begun construction on the long-awaited $600 million project with financial help from Amazon, which also plans a solar farm on Virginia’s Eastern Shore. The Tar Heel project will stretch on 22,000 acres and could generate about 204 megawatts of power.

The curious part of this is that the farm is only about 12 miles of the Virginia line northwest of Elizabeth City, N.C.

That’s not far at all from the Old Dominion. But Dominion Resources, Virginia’s leading utility, has been sluggish in pushing ahead with wind, citing concerns about cost. It pulled the plug on an offshore pilot project involving only two wind turbines that would have a relatively tiny power output off of Virginia Beach.

So why were renewable energy firm executives and public officials celebrating yesterday in North Carolina and not Virginia?

That’s an easy one. North Carolina has a renewable portfolio standard that requires utilities to produce at least 12.5 percent of their power from renewables. Virginia has a similar plan, but being a “pro-business” state, Virginia has made it voluntary. So, Dominion doesn’t really have to do anything at the moment to push to wind, solar or other renewable.

It might have more incentive to do so when the U.S. Environmental Protection Agency finalizes rules on its Clean Power Plan later this year, but no one really knows what the final form will be.

Nonetheless, Dominion has marshaled its money and its lobbyists to change how regulators over see it in this regard. The General Assembly, some of whose members get huge contributions from Dominion, hurriedly passed a bill this session changing the rules in ways that Dominion wants.

To be sure, Dominion has some wind farms in other states. But here in Virginia, it is pitching the old saw that wind power is too expensive and unreliable and so on.

It may have been at one time. When Iberdrola pitched the plan to put 102 wind turbines on 22,000 acres in N .C., the common wisdom was that the southeast just doesn’t have the natural wind power. The winds are too light, usually.

But this changed when new technology allowed wind turbines to go from about 260 feet into the air to more than 460 feet or almost as much as the Washington Monument. Once that happened, the Carolina wind farm became a go. Of course, critics say that wind turbines have negatives such as their capacity to slice apart birds and be an eyesore.

What’s better for humanity, however? Coal or even natural gas plants or ones that have no pollution, especially carbon, footprint?

Another interesting aspect of this story is how Amazon is getting involved. The retailing giant is becoming an electric renewable utility in its own right. It wants to have renewable power run the massive servers that it relies upon to do business. But instead of screwing around with hidebound, traditional utilities like Dominion that are often reluctant to warmly embrace renewable energy, Amazon is doing it itself.

Amazon is also putting in a 170 megawatt solar farm in Virginia’s Accomack County which has terrain similar that of Perquimans and Pasquotank Counties in North Carolina that will host the wind farm.

To be fair to Dominion, the utility has a legal responsibility to supply its customers with electricity on a 24/7 basis. It needs a diverse energy mix to be able to do that.

But one wonders why Dominion keeps pushing this bugaboo about wind. Its sister utilities have raised the same cry. That could be why wind represents only 5 per cent of the electrical mix in the U.S., even though there are wind farms in 36 states.

It’s different in other countries. Denmark gets 28 percent of its power from wind. Spain, Portugal and Ireland each get 16 percent from wind.

Isn’t it time for Dominion to get off the dime and do more with wind, rather than using its deep pockets to get paid-for Virginia politicians to do its bidding and change regulatory rules at its whim?