Meltdown

[Coopmv]

This article brings very sobering thoughts to those who are fans of the Sun Belt.  No, thank you, yours truly love the Snow Belt with its four seaons.

Has twilight come to the Sun Belt?
After the crash, has the sun set on America's 'Sun Belt'?
Todd Lewan, AP National Writer

On Saturday May 30, 2009, 1:27 pm EDT

ORLANDO, Fla. (AP) -- We first heard the term decades ago: The "Sun Belt" was just starting a run of phenomenal growth -- and no wonder. It conjured a sunny state of mind as well as a balmy place on the map.

Everybody, it seemed, wanted a spot in the sun.

Industries such as aerospace, defense and oil set up shop across America's southernmost tier, capitalizing on the low involvement of labor unions and the proximity of military bases that paid handsomely, and reliably, for their products and services.

Later, San Jose, Calif., and Austin, Texas, developed into high-tech nerve centers; Houston grew into a hub for the oil industry; Nashville became a mecca for music recording and production; Charlotte, N.C., transformed itself into a center for low-cost banking and finance; and then there were the new Dixie Detroits, places like Canton, Miss., Georgetown, Ky., and Spartanburg, S.C., that began rolling out Titans, Camrys and BMWs.

Meanwhile, other warm-weather havens offered their own variants of the Sun Belt dream -- as Fountains of Youth for 60-and-up duffers, as Magic Kingdoms for fun-seekers, as Cape Canaverals for middle-aged northerners looking to launch their second acts.

Air conditioning, bug spray and drainage canals that transformed marshes into golf-course subdivisions -- these innovations, plus the availability of flat, low-taxed land attracted migrants from Brooklyn and Cleveland, Havana and Mexico City to locales once dismissed as too hot, too swampy, too dry, too backwater-ish.

"We Give Years to Your Life and Life to Your Years!" That was the sort of slogan you'd hear from developers pitching the promise that a new start in the Sun Belt might even, in the best of circumstances, extend one's time on Earth.

In this way, for a generation or more, the Sun Belt thrived like no other region in America -- a growth so steady it felt as though the boom would never end. But now it has, replaced by a bust that has left some swaths of the region suffering as severely as anywhere in the current recession.

What brought the dark clouds to the Sun Belt, and are they here to stay?

Interviews with economists and demographers across the region, and data from The Associated Press Economic Stress Index, a month-by-month analysis of foreclosure, bankruptcy and unemployment rates in more than 3,000 U.S. counties, suggest that the answers are not all encouraging.

Some cities -- Las Vegas, Phoenix, Fort Myers are good examples -- hitched their floats to housing bubbles and got caught up in development that depended largely on, well, development itself, rather than sustainable, scalable, productive industry, economic analysts say.

It's in these places where the economic meltdown "will likely find its fullest bloom," Richard Florida, the urbanist and author, wrote recently in an Atlantic Monthly article titled "How the Crash Will Reshape America."

AP Stress Index figures, which calculate the economic impact of the recession on a scale of 1 to 100, illustrate how the downturn has played out in some of these communities:

--In Maricopa County, home to Phoenix, the Stress Index more than doubled from 5.12 at the beginning of the recession in December 2007 to 12.67 in March 2009, worsened by a foreclosure rate that nearly tripled.

--Mounting foreclosures in Las Vegas' Clark County drove up its Stress Index score from 10.5 at the start of the recession to 19.3 in March 2009.

--In Lee County, home to Fort Myers, unemployment has doubled and foreclosures have soared 75 percent since the recession began, lifting its Stress Index from 10.5 to 19.98.

The boom in parts of the Sun Belt was, Florida wrote in the Atlantic, a "giant Ponzi scheme" -- a growth machine that banked on wishful thinking, on the hope that an unending stream of new arrivals would forever inject their money into construction and real estate.

But as often is the case with such schemes, there comes a day when the engine sputters, gasps, and conks out. A day when the faithful stop turning up.

In the Sun Belt's newer, shallow-rooted communities, the roadkill is most evident: Where once there were "boomburbs," there now stand "ghostdivisions." Where property-flipping was once almost a middle-class sport, joblessness and "For Sale by Owner" signs reign.

The fallout is traceable in other ways, too. Nevada -- the only state with a lower proportion of native residents than Florida -- has seen net migration plunge 61 percent in two years; Arizona, 55 percent.

Were it not for immigrants, many of them from Latin America, and for fertility, the Sunshine State would actually have lost population last year -- an "astounding development in the Florida experience," says Bill Frey, a senior fellow and demographer at the Brookings Institution in Washington, D.C.

He said the end of steady movement of people into the Sun Belt is part of a broader trend of curtailed migration during this downturn. "The merry-go-round has stopped, in terms of people moving from place to place."

Does this mean we've witnessed the Rise and Fall of the Sun Belt? Will those who swept into these Miracle-Gro states get swept out just as quickly, leaving behind a sprawl of hollow houses, cul-de-sac moonscapes and mosquito-infested pools -- the stucco ghettos of the 21st century?

Or will the latest downturn merely force the Sun Belt to reinvent itself again?

The housing bubble in many places revealed an obsolescent model of economic life, in which cheap real estate encouraged low-density sprawl and created a work force "stuck in place, anchored by houses that cannot be profitably sold," Florida wrote in his March article.

These places, he says, include older, factory towns across the northern Rust Belt but also countless communities in the Sun Belt whose prosperity was built on "fictitious wealth."

What to do? Scrap policies that encourage homebuying, he suggests, and give incentives to more mobile renters who can go where the jobs are.

In the digital age, he says, industries will likely cluster in "mega-regions" of multiple cities and their surrounding suburban rings (e.g., the Boston-New York-Washington corridor). These areas will surge, lifted by the brainpower of educated professionals and creative thinkers that turn out "products and services faster than talented people in other places can."

In short: Those that can draw talented, young people with high-quality, higher education will reap the spoils.

There is some evidence to suggest an imbalance in American educational achievement across regions. According to research by two Harvard economists, Edward Glaeser and Christopher Berry, educational attainment is no longer as evenly spread across America as it was in the '70s.

Places such as San Francisco, Boston and Seattle now turn out two to three times the college graduates of, say, Akron or Buffalo. When examining postgraduate achievement, the researchers found even greater disparities.

If locales that boast premium universities will be able to more quickly pick themselves off the mat, a question arises. In the Sun Belt's "sand cities," their expansion now halted, where will the tax money come from to pay for college upgrades?

Parts of Arizona, Nevada and the Los Angeles exurb of Riverside overbuilt and overstretched, said Anthony Sanders, a professor of finance and economics at Arizona State University.

Like Looney Toons characters who, suspended in mid-air, look down to behold they've run off a cliff, officials are scrambling to reverse course -- either by scrapping government services they'd promised or, at the very least, by hiking taxes to pay for services created in expectation of bigger suburbs, exurbs.

Phoenix is in this fix. Shocked by a 33 percent plunge in home values between October 2007 and October 2008 alone, the city is running a $200 million budget deficit, a shortfall that's only expected to grow. (It has petitioned the federal government for funds.)

California has an even wider hole in its battered canoe.

That state "went on a spending spree that was incredible," said Sanders. Now, at a time when many resident retirees are in no mood, or shape, for tax increases, "they're having to raise taxes or cut back services, both of which are making moving to California a lot less desirable than it has been in previous decades."

Other Sun Belt states are making similar "mistakes," Sanders said, adding: "Unless we lower the tax burden, making it simpler for businesses to do more operations, and freeing up the ability to attract workers, the economy here is not going to come back."

The challenges don't end there.

Even before the Crash of '08, the Sun Belt was being buffeted by outmigration of factory jobs abroad. In the Carolinas, for example, industries that linked up the economy, society and culture for more than a century -- furniture making, tobacco and textiles -- had been gutted by a decade of decline.

And although the overall expansion of the Sun Belt's economy has been dramatic, the distribution of the region's prosperity has been uneven; of the 25 metropolitan areas with the lowest per capita income in 1990, 23 were in the Sun Belt.

That has to change, said Warren Brown, a demographer at the University of Georgia, although he noted that the Sun Belt's unbridled growth in the '80s and '90s was "unsustainable, bound to cool off," and not just because of bursting housing or migration bubbles.

The limits of natural resources were poised to put the brakes on development in the Land of Sunny Dreams anyway, he said. Two biggies: oil and water.

"Long before we run out of land, we'll be running out of water," he said. "Water is a major issue right now."

Doomsaying pundits have played the Sun Belt dirge before.

In 1981, for example, Time magazine declared Florida, a "Paradise Lost." The state then embarked on an epic boom, in which the Miami-Fort Lauderdale-West Palm Beach corridor ballooned into the seventh-largest metro area in America.

Granted, today's news from the Sunshine State is hardly cheery: It ranks near the top in foreclosures and near the bottom in high-school graduation rates. There's a water crisis, an insurance crisis, a budget crisis.

So why do some experts caution that talk of Florida's demise -- and the Sun Belt's -- is exaggerated?

Among other things, Frey, the Brookings demographer, notes that outmigration from metro Miami actually fell last year, and in years to come "we're going to have large numbers of immigrants in the United States who are going to help us in all kinds of ways," he says.

Stan Smith, a professor of economics and director of the Bureau of Economic and Business Research at the University of Florida, says tourism, the "momentum" of decades of population growth, and already extensive networks of personal connections will again draw more migrants to Florida.

Frozen credit won't last, he says. Real estate price declines -- as much as 70 percent in some Sun Belt counties -- will encourage buyers. And with home heating costs in the "Frost Belt" only expected to rise, Smith says, the attraction of warm weather to retiring Baby Boomers can't be overestimated.

Florida is one of only nine states without an income tax. Couple that with the fact that its taxes on corporations and financial transactions have many exemptions, he says, and "the effects of the positive factors will continue to outweigh the negative."

Recovery will take time, though, and few economists see any significant growth in the Sun Belt before 2010. Steve Malanga, a senior fellow at the Manhattan Institute in New York City, agrees that states that have piled up surplus housing "are not going to solve it in this budget cycle or the next budget cycle. It's going to be with them for five, six, seven years, no doubt about it."

And yet, to say all areas across the Sun Belt are in for long-term decline is simplistic, he says. Scanning the most recent employment maps put out by the Bureau of Labor Statistics reveals "a 'belt' in the middle of the country -- Texas is part of it -- that is doing quite well." (The AP Stress Map backs up that finding, revealing a swath of comparatively unscathed counties starting in North Dakota, stretching through South Dakota, Nebraska and Kansas and ending in Oklahoma and Texas.)

Out of the nation's 100 fastest-growing counties, the majority were in Texas (19), Georgia (14), North Carolina (11) or Utah (nine), according to U.S. Census figures last year. Raleigh-Cary, N.C., and Austin-Round Rock, Texas, were the nation's fastest-growing metro areas, registering growth rates of 4.3 percent and 3.8 percent, respectively. Both high-tech centers, the two metros are also sites of major college campuses that helped cushion them.

Dallas-Fort Worth and Houston registered the biggest numerical gains, the census figures show. Phoenix and Atlanta ranked third and fourth in growth, respectively, followed by Los Angeles, despite the housing slump.

"Obviously, the best situation is a state that hasn't had a residential meltdown, still has a low-cost advantage, and has a weather advantage," Malanga says. High-tax states, such as California, are going to take longer to rebound.

And yet, Sun Belt states will have to offer more than tax incentives to reel in companies in the new, global economy, says Keith Schwer, executive director of the Center for Business and Economic Research at the University of Nevada.

Quality health care, quality recreation, quality education -- companies and individuals consider the caliber of amenities before relocating. Cosmetic fixes don't help, he says. "You can't hide your warts."

Does all of this mean the Sun Belt will have to reinvent itself to grow again?

Rethink may be a better term.

As an example, Caron St. John, director of the Spiro Institute for Entrepreneurship at Clemson University in South Carolina, says Sun Belt states now rationing funds ought to consider returning to "First Principles" -- that is, channeling what little money they have toward elementary and high schools rather than higher education.

"Elementary and high school children -- we can't scar their lives because of a budget crisis. That has to be the first priority."

The question is whether the Sun Belt will show the rest of the nation how to retool schools, save water and energy, and better plan its suburbs and exurbs in an era of less.

"By necessity, we're already being forced to address these issues," says Schwer, of the University of Nevada. "This crisis is an opportunity, more than anything else, to reset things, to put some balance back into our lives."

[BachQ]

US national debt soared to $546,668 per household in 2008, a 12% spike in just one year. The US govt assumed $6.8 trillion in new debt last year, pushing its total debt to a record $63.8 trillion.

USA Today link

One wonders how much this will increase under Obama ... $750,000/household by 2011?  When will the American government or the American people open their eyes to this?

[BachQ]

Mike P. McKeever asserts that balanced trade is better than free trade.  The argument really makes a lot of sense ...

read link

Coop, good summary.  By forbidding an excess of imports, the home nation ensures that productive capital and jobs will be preserved and bolstered within the home country, thereby encouraging the development of internal productive capacities, manufacturing, R & D, employment, agriculture, etc.

One of the key elements of any new paradigm must be to demonstrate how the consumer benefits:

... Balanced trade requires that a country import as much as it exports; it allows for and encourages the maximum amount of international trade and so it benefits both consumers and multinational companies. Consumers benefit from trade and from an increase of  domestic jobs, if the economy was in a trade deficit before reducing imports. Consumers benefit even though they may pay higher prices than world pries for any particular good, their incomes are higher as a result of the higher level of economic activity - high enough to offset slightly higher prices. Consumers in countries with a surplus of exports benefit from the increased imports available to buy.

However, implementing this policy for the US would be a daunting (impossible) task.  Americans have grown too accustomed to purchasing the bulk of their goods from Asia (China, Japan, India ...), and the productive capacities and technologies for manufacturing these goods have shifted from the US to Asia.  When is the last time the US has manufactured a TV or DVD player?   Moreover, because the US imports 25% of the world's oil, when the price of oil again spikes, the US trade imbalance will once again swell.  So somehow the US must wean itself of its dependence upon foreign oil.

Nevertheless, even if the US cannot adopt balanced trade wholesale, it can take incremental steps toward ultimately reaching that goal.  And I think it should ... and fast.  US unemployment will likely exceed 9% in May, and this will begin to have serious social consequences that will erode the very fabric of society.  Moreover, since many Asian countries have mercantilist economies (rather than free trade economies), the US will disproportionately reward these non-free trade economies by blindly following unrestrained free trade.

How bad will things need to get in the US (and Europe) before the wisdom of balanced trade becomes obvious and inevitable?

[BachQ]

NYT: -- Distressed bank loans soar to a record high of 7.75% (up from 4.1% a year earlier). "The quality of loans is deteriorating at the fastest pace ever ... [and] the percentage that are at least 90 days overdue, or on which the bank has stopped accruing interest or written off, is also higher than at any time [on record]."

[BachQ]

Diminishing oil field discoveries: 





... I don't see a problem ...

[Coopmv]

One of the key elements of any new paradigm must be to demonstrate how the consumer benefits:

However, implementing this policy for the US would be a daunting (impossible) task.  Americans have grown too accustomed to purchasing the bulk of their goods from Asia (China, Japan, India ...), and the productive capacities and technologies for manufacturing these goods have shifted from the US to Asia.  When is the last time the US has manufactured a TV or DVD player?   Moreover, because the US imports 25% of the world's oil, when the price of oil again spikes, the US trade imbalance will once again swell.  So somehow the US must wean itself of its dependence upon foreign oil.

Nevertheless, even if the US cannot adopt balanced trade wholesale, it can take incremental steps toward ultimately reaching that goal.  And I think it should ... and fast.  US unemployment will likely exceed 9% in May, and this will begin to have serious social consequences that will erode the very fabric of society.  Moreover, since many Asian countries have mercantilist economies (rather than free trade economies), the US will disproportionately reward these non-free trade economies by blindly following unrestrained free trade.

How bad will things need to get in the US (and Europe) before the wisdom of balanced trade becomes obvious and inevitable?

The problem is the Anglo-Saxons business model is broken - the US and UK companies have taken the lead to outsource jobs to countries such as China and India with the implicit blessings of their governments.  Lo and behold, their Japanese and continental European competitors have no choice but to follow, which has led to an avalanche of job losses in the western industrialized world.  Nothing is off limits to this outsourcing wave.  At some point, even the US Army joined the outsourcing parade by ordering berets from China until the US Congress found out and shot the deal down.  Some sensitive ballistic missile technologies have in fact been transferred to China as the Clinton Administration allowed some subsidiary of GM that made those products to be taken over by some Chinese company (probably a front for the People's Liberation Army) and China now has ICBM that can reach the US west coast and probably further.  The French, as usual have marched to their own drumbeat and that is, no sensitive or core technologies can be outsourced.  The French policies for outsourcing are definitely a lot smarter.  The decision makers in the US bought the argument that manufacturing does not matter as service jobs pay better.  The argument is bunk since the US itself got to where it is through manufacturing.  Moreover, only some service jobs pay well.  That is if one is a physician or lawyer or a stock broker or an investment banker.  But then 12MM jobs in the fast food industry are service jobs too and are those jobs well-paid?  It makes my blood boil to see how foolish and myopic these policy makers have been.  It will take a catastrophe for them to change their way ...

[Coopmv]

NYT: -- Distressed bank loans soar to a record high of 7.75% (up from 4.1% a year earlier). "The quality of loans is deteriorating at the fastest pace ever ... [and] the percentage that are at least 90 days overdue, or on which the bank has stopped accruing interest or written off, is also higher than at any time [on record]."

Yeah, now the commericial real estate and credit card meltdowns are happening due to the recession.  There should be no bailout for the commercial real estate developers such as Trump.  Let them auction off those skyscrapers and luxury condo buildings for $100 a piece ...

[Coopmv]

There are supposed to be some 3000+ spies from China scattered across the US in various government and private-sector labs, which also include many universities, ready and willing to pilfer all kinds of technologies, from DNA research to new supercomputer designs.  The US has been blind to this for the last twenty years ...


First economic espionage trial set in Calif.

First economic espionage trial set in California for Chinese-born engineer Dongfan Chung

Gillian Flaccus, Associated Press Writer

On Sunday May 31, 2009, 1:24 pm EDT
     
SANTA ANA, Calif. (AP) -- Dongfan "Greg" Chung developed a reputation as an innovator during his three decades as an engineer for Boeing Co. and Rockwell International.

Federal prosecutors say he was also a hardworking spy.

On Tuesday, Chung is scheduled to become the first person to stand trial under the Economic Espionage Act, which was passed more than a decade ago.

Prosecutors say the Chinese-born Chung, 73, stole hundreds of thousands of pages of highly sensitive documents on the U.S. space shuttle, Delta IV rockets and the C-17 military troop transport, then relayed the secrets to contacts in China.

He is free on $250,000 bail after pleading not guilty to eight counts of economic espionage, three counts of lying to a federal agent and one count each of conspiracy, acting as a foreign agent and obstruction of justice.

Prosecutors filed a motion late last week asking the judge to drop two economic espionage charges related to the C-17 transport plane and two counts of lying to a federal agent.

U.S. District Judge Cormac J. Carney, who will hear the case in a non-jury trial, has yet to rule on the request.

Prosecutors declined to comment about the upcoming trial. Chung's defense lawyers did not return calls or e-mails seeking comment.

Experts in trade secrets litigation and U.S.-China relations who have followed the case say the scope of the alleged spy work since the late 1970s likely led the government to prosecute Chung under the tougher statute to send a message to other spies and to China.

Richard Fisher, a senior fellow with the Virginia-based nonpartisan International Assessment and Strategy Center, said Chung's expertise and long tenure at Boeing would make him particularly dangerous.

"This man had a deep breadth of experience in some of the most classified, high-tech, cutting-edge American aerospace programs you can imagine," Fisher said.

Six other cases have been charged under the Economic Espionage Act since it passed in 1996, and all have settled before trial. Another case, involving the alleged export of sensitive computer chips to China, is scheduled for trial June 17 in U.S. District Court in San Jose.

The legislation was crafted to address what law enforcement believed were an increasing number of foreign countries trying to steal U.S. intellectual property, both military and commercial.

Edward J. Appel, a former FBI agent and former director of counterintelligence programs for the National Security Council, said the alleged activities by Chung could be terribly damaging for the U.S. and for Boeing.

"Since about 1990, we've been engaged in a huge economic war (with China). We've gotten hurt, we've really gotten beat up," said Appel, now chief executive of a private intelligence company called iNameCheck LLC.

"Not all countries play this intellectual economic game the same way ... and it's very easy to steal information from a company if you are a trusted insider," he added.

Appel worked to pass the counterespionage legislation in the 1990s.

Boeing spokesman Daniel Beck declined to comment on the case, except to say the company had cooperated with the investigation.

Court papers filed by Chung's defense lawyers suggest they might seek to prove the information he is accused of taking did not qualify as trade secrets or that he did not know it was secret.

The papers also indicate his attorneys might argue that Boeing did not do enough to protect the information.

Chung worked for Rockwell International until it was bought by Boeing in 1996 and remained with the aerospace giant until he was laid off in 2002. He was brought back as a consultant on stress analysis after the Columbia space shuttle disaster in 2003 and was fired when the FBI began its probe in 2006.

The government believes Chung began spying for the Chinese in the late 1970s, just a few years after he became a U.S. citizen and was hired by Rockwell.

In a letter cited in court documents, Chung allegedly explains to a Chinese contact that he sent three sets of volumes dealing with flight stress analysis to China via sea freight and discusses what prosecutors say is his motive.

"Having been a Chinese compatriot for over thirty years and being proud of the achievements by the people's efforts for the motherland, I am regretful for not contributing anything," according to the letter to the contact at the Harbin Institute of Technology in northern China. "I would like to make an effort to contribute to the Four Modernizations of China."

Prosecutors say they discovered Chung's activities while investigating the case of another suspected Chinese spy, Chi Mak. Searches of Mak's house turned up an address book and a letter containing Chung's name, authorities say.

Mak was convicted in 2007 of conspiracy to export U.S. defense technology to China and sentenced to more than 24 years in prison.

When agents searched Chung's house in the fall of 2006, they discovered more than 225,000 pages of documents on Boeing-developed aerospace and defense technologies, according to trial briefs.

The technologies dealt with a phased-array antenna being developed for radar and communications on the U.S. space shuttle and a $16 million fueling mechanism for the Delta IV booster rocket, used to launch manned space vehicles.

Agents also found documents on the C-17 Globemaster troop transport used by the U.S. Air Force as well as militaries in Britain, Australia and Canada, the documents state.

[BachQ]

GM files for bankruptcy

[BachQ]

Coop, as the article mentions, the housing bubble in the Sun Belt (esp. Florida, Arizona, Nevada, and Southern California) was a giant Ponzi scheme.

In the Sun Belt's newer, shallow-rooted communities, the roadkill is most evident: Where once there were "boomburbs," there now stand "ghostdivisions." Where property-flipping was once almost a middle-class sport, joblessness and "For Sale by Owner" signs reign.

The fallout is traceable in other ways, too. Nevada -- the only state with a lower proportion of native residents than Florida -- has seen net migration plunge 61 percent in two years; Arizona, 55 percent.

Were it not for immigrants, many of them from Latin America, and for fertility, the Sunshine State would actually have lost population last year -- an "astounding development in the Florida experience," says Bill Frey, a senior fellow and demographer at the Brookings Institution in Washington, D.C.

He said the end of steady movement of people into the Sun Belt is part of a broader trend of curtailed migration during this downturn. "The merry-go-round has stopped, in terms of people moving from place to place."

Does this mean we've witnessed the Rise and Fall of the Sun Belt? Will those who swept into these Miracle-Gro states get swept out just as quickly, leaving behind a sprawl of hollow houses, cul-de-sac moonscapes and mosquito-infested pools -- the stucco ghettos of the 21st century?

Or will the latest downturn merely force the Sun Belt to reinvent itself again?

The housing bubble in many places revealed an obsolescent model of economic life, in which cheap real estate encouraged low-density sprawl and created a work force "stuck in place, anchored by houses that cannot be profitably sold," Florida wrote in his March article.

These places, he says, include older, factory towns across the northern Rust Belt but also countless communities in the Sun Belt whose prosperity was built on "fictitious wealth."

What to do? Scrap policies that encourage homebuying, he suggests, and give incentives to more mobile renters who can go where the jobs are.

In the digital age, he says, industries will likely cluster in "mega-regions" of multiple cities and their surrounding suburban rings (e.g., the Boston-New York-Washington corridor). These areas will surge, lifted by the brainpower of educated professionals and creative thinkers that turn out "products and services faster than talented people in other places can."

In short: Those that can draw talented, young people with high-quality, higher education will reap the spoils.

There is some evidence to suggest an imbalance in American educational achievement across regions. According to research by two Harvard economists, Edward Glaeser and Christopher Berry, educational attainment is no longer as evenly spread across America as it was in the '70s.

Places such as San Francisco, Boston and Seattle now turn out two to three times the college graduates of, say, Akron or Buffalo. When examining postgraduate achievement, the researchers found even greater disparities.

If locales that boast premium universities will be able to more quickly pick themselves off the mat, a question arises. In the Sun Belt's "sand cities," their expansion now halted, where will the tax money come from to pay for college upgrades?

Parts of Arizona, Nevada and the Los Angeles exurb of Riverside overbuilt and overstretched, said Anthony Sanders, a professor of finance and economics at Arizona State University.

Like Looney Toons characters who, suspended in mid-air, look down to behold they've run off a cliff, officials are scrambling to reverse course -- either by scrapping government services they'd promised or, at the very least, by hiking taxes to pay for services created in expectation of bigger suburbs, exurbs.

Phoenix is in this fix. Shocked by a 33 percent plunge in home values between October 2007 and October 2008 alone, the city is running a $200 million budget deficit, a shortfall that's only expected to grow. (It has petitioned the federal government for funds.)

California has an even wider hole in its battered canoe.

That state "went on a spending spree that was incredible," said Sanders. Now, at a time when many resident retirees are in no mood, or shape, for tax increases, "they're having to raise taxes or cut back services, both of which are making moving to California a lot less desirable than it has been in previous decades."

Other Sun Belt states are making similar "mistakes," Sanders said, adding: "Unless we lower the tax burden, making it simpler for businesses to do more operations, and freeing up the ability to attract workers, the economy here is not going to come back."

The challenges don't end there.

Even before the Crash of '08, the Sun Belt was being buffeted by outmigration of factory jobs abroad. In the Carolinas, for example, industries that linked up the economy, society and culture for more than a century -- furniture making, tobacco and textiles -- had been gutted by a decade of decline.

And although the overall expansion of the Sun Belt's economy has been dramatic, the distribution of the region's prosperity has been uneven; of the 25 metropolitan areas with the lowest per capita income in 1990, 23 were in the Sun Belt.

That has to change, said Warren Brown, a demographer at the University of Georgia, although he noted that the Sun Belt's unbridled growth in the '80s and '90s was "unsustainable, bound to cool off," and not just because of bursting housing or migration bubbles.

The limits of natural resources were poised to put the brakes on development in the Land of Sunny Dreams anyway, he said. Two biggies: oil and water.

"Long before we run out of land, we'll be running out of water," he said. "Water is a major issue right now."

Doomsaying pundits have played the Sun Belt dirge before.

In 1981, for example, Time magazine declared Florida, a "Paradise Lost." The state then embarked on an epic boom, in which the Miami-Fort Lauderdale-West Palm Beach corridor ballooned into the seventh-largest metro area in America.

Granted, today's news from the Sunshine State is hardly cheery: It ranks near the top in foreclosures and near the bottom in high-school graduation rates. There's a water crisis, an insurance crisis, a budget crisis.

So why do some experts caution that talk of Florida's demise -- and the Sun Belt's -- is exaggerated?

Among other things, Frey, the Brookings demographer, notes that outmigration from metro Miami actually fell last year, and in years to come "we're going to have large numbers of immigrants in the United States who are going to help us in all kinds of ways," he says.

Stan Smith, a professor of economics and director of the Bureau of Economic and Business Research at the University of Florida, says tourism, the "momentum" of decades of population growth, and already extensive networks of personal connections will again draw more migrants to Florida.

Frozen credit won't last, he says. Real estate price declines -- as much as 70 percent in some Sun Belt counties -- will encourage buyers. And with home heating costs in the "Frost Belt" only expected to rise, Smith says, the attraction of warm weather to retiring Baby Boomers can't be overestimated.

Florida is one of only nine states without an income tax. Couple that with the fact that its taxes on corporations and financial transactions have many exemptions, he says, and "the effects of the positive factors will continue to outweigh the negative."

Recovery will take time, though, and few economists see any significant growth in the Sun Belt before 2010. Steve Malanga, a senior fellow at the Manhattan Institute in New York City, agrees that states that have piled up surplus housing "are not going to solve it in this budget cycle or the next budget cycle. It's going to be with them for five, six, seven years, no doubt about it."

And yet, to say all areas across the Sun Belt are in for long-term decline is simplistic, he says. Scanning the most recent employment maps put out by the Bureau of Labor Statistics reveals "a 'belt' in the middle of the country -- Texas is part of it -- that is doing quite well." (The AP Stress Map backs up that finding, revealing a swath of comparatively unscathed counties starting in North Dakota, stretching through South Dakota, Nebraska and Kansas and ending in Oklahoma and Texas.)

Out of the nation's 100 fastest-growing counties, the majority were in Texas (19), Georgia (14), North Carolina (11) or Utah (nine), according to U.S. Census figures last year. Raleigh-Cary, N.C., and Austin-Round Rock, Texas, were the nation's fastest-growing metro areas, registering growth rates of 4.3 percent and 3.8 percent, respectively. Both high-tech centers, the two metros are also sites of major college campuses that helped cushion them.

Dallas-Fort Worth and Houston registered the biggest numerical gains, the census figures show. Phoenix and Atlanta ranked third and fourth in growth, respectively, followed by Los Angeles, despite the housing slump.

"Obviously, the best situation is a state that hasn't had a residential meltdown, still has a low-cost advantage, and has a weather advantage," Malanga says. High-tax states, such as California, are going to take longer to rebound.

And yet, Sun Belt states will have to offer more than tax incentives to reel in companies in the new, global economy, says Keith Schwer, executive director of the Center for Business and Economic Research at the University of Nevada.

Quality health care, quality recreation, quality education -- companies and individuals consider the caliber of amenities before relocating. Cosmetic fixes don't help, he says. "You can't hide your warts."

Does all of this mean the Sun Belt will have to reinvent itself to grow again?

Rethink may be a better term.

As an example, Caron St. John, director of the Spiro Institute for Entrepreneurship at Clemson University in South Carolina, says Sun Belt states now rationing funds ought to consider returning to "First Principles" -- that is, channeling what little money they have toward elementary and high schools rather than higher education.

"Elementary and high school children -- we can't scar their lives because of a budget crisis. That has to be the first priority."

The question is whether the Sun Belt will show the rest of the nation how to retool schools, save water and energy, and better plan its suburbs and exurbs in an era of less.

"By necessity, we're already being forced to address these issues," says Schwer, of the University of Nevada. "This crisis is an opportunity, more than anything else, to reset things, to put some balance back into our lives."

Lost Vegas (youtube video):

http://www.youtube.com/v/rFTZ3flsipE

Las Vegas Constable: "We used to have people move here by the thousands per month; now, they're moving away by the thousands"

WSJ: Up To 75% Of Modified Mortgages To Re-Default -Fitch

"The Worst Is Yet to Come": If You're Not Petrified, You're Not Paying Attention

[Lethevich]

GM files for bankruptcy

Man, I read that as GMG for a second

[Dr. Dread]

I remember when Dm discussed music. That's how long I've been here.

[BachQ]

Man, I read that as GMG for a second

Actually, Lethe, with all of the salaries, perks, and bonuses being funneled to GMG's moderators, Rob might need a bailout soon ... 

I remember when Dm discussed music. That's how long I've been here.

FYI, among the pieces on today's playlist:

Vaughan Williams: "Doom" from Scott of the Antarctic
Berlioz:  "Ride to the Abyss"
Bruckner: "Apocalyptic" Symphony
Messiaen: "Quartet for the End of Time"
Weigl: Symphony no. 5 "Apocalyptic", 4th mvt ("The Four Horsemen")
Lyadov: "From the Apocalypse"

Feel free to suggest additional entries. 

[BachQ]

Jeff Rubin (former chief economist of CIBC World Markets): "... Between 2005 and 2007, soaring oil prices transferred roughly a trillion dollars from consumers' wallets throughout the OECD to OPEC producers. ... The subprime mortgage crisis wasn't the cause of the today's economic crisis. Instead it was a symptom of a much bigger crisis - an energy crisis. If indeed oil, and not subprime mortgages, lies at the heart of our current economic malaise, we may be sicker than we know. ... If the recession is really about triple-digit oil prices, then the recovery is going to be a lot more challenging. No magic tandem of fiscal and monetary policy can boost world oil production, or for that matter alter our seemingly insatiable appetite for the stuff. ..."

[Florestan]

Feel free to suggest additional entries.  

Some Boccherini and a bottle of red wine... otherwise you'll soon be given Prozac and Xanax.  

[Coopmv]

Jeff Rubin (former chief economist of CIBC World Markets): "... Between 2005 and 2007, soaring oil prices transferred roughly a trillion dollars from consumers' wallets throughout the OECD to OPEC producers. ... The subprime mortgage crisis wasn't the cause of the today's economic crisis. Instead it was a symptom of a much bigger crisis - an energy crisis. If indeed oil, and not subprime mortgages, lies at the heart of our current economic malaise, we may be sicker than we know. ... If the recession is really about triple-digit oil prices, then the recovery is going to be a lot more challenging. No magic tandem of fiscal and monetary policy can boost world oil production, or for that matter alter our seemingly insatiable appetite for the stuff. ..."

World consumers will get no break.  Oil may head back toward $200 once the global recession ends.  Pick your poison ...   

[SonicMan46]

I remember when Dm discussed music. That's how long I've been here.

Dave - LOL!    Those were the days, but Dm came back w/ a 'blow by blow' listening schedule, so still in the game!    Dave

[Coopmv]

Dave - LOL!    Those were the days, but Dm came back w/ a 'blow by blow' listening schedule, so still in the game!    Dave

I have yet to see any CD reviews by DM since I joined GMG ...   

[Lilas Pastia]

Jeff Rubin has long been a fixture of the canadian economic scene. A brilliant mind, he's been right on target a couple of times, way off at others. He was forced to leave CIBC World Markets, as the firm didn't want to be associated with his views as he outlines them in his latest book. Since this article aims at expounding on his book's conclusions, I think associating him with CIBC is dishonest. Think of him as a freelance author and economist. Like thousands of others.

[BachQ]

Yeah, now the commericial real estate and credit card meltdowns are happening due to the recession.  There should be no bailout for the commercial real estate developers such as Trump.  Let them auction off those skyscrapers and luxury condo buildings for $100 a piece ...

According to Mike Shedlock (Mish), the bottom of the housing bubble "is still years away although the rate of decline is slowing. ... The effect of household deleveraging on housing, consumption and the stock market is going to be far greater than most realize. This bubble will not be reblown, just as the Nasdaq bubble was not reblown after the tech crash. ... It took a decade to blow the bubble. It is going to take more than a few years to clear it. ..."

Mish also has some scary charts on his website.