(Unedited) Podcast Transcript 439: In a Bad State

This week we’re joined by Yale Law professor David Schleicher to talk about his new book, In a Bad State: Responding to State and Local Budget Crises. We chat about how historic fiscal crisis shape similar responses today and how infrastructure funding plays out in the United States.

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Jeff Wood (1m 58s):
Well David Schleicher, welcome to the Talking Headways. Podcast.

David Schleicher (2m 31s):
Thank you so much for having me.

Jeff Wood (2m 33s):
Of course, thanks for being here. Before we get started, can you tell us a little bit about yourself?

David Schleicher (2m 37s):
Yeah, so I am a law professor. I teach at Yale and I’ve study land use, local development and in this case I’ve been working a lot on municipal finance, both local tax policy, federalism as it relates to this and you know the federal, the municipal bond market and things like that.

Jeff Wood (2m 54s):
And how did you get into cities initially? Like was it something that happened when you were a young kid or was it something that you learned about later on?

David Schleicher (3m 1s):
Yeah, so I grew up in Manhattan, Manhattan New York, not Manhattan, Kansas. I’m like the more famous Manhattan now I say my parents both worked for municipal unions in New York City and I kind of grew up in politics. I mean not, not like directly electoral politics but like involved in government. Somehow my family and I was really interested in questions like local politics and I’ve written a lot about local elections, which you may see in the last chapter of the book, which we’re gonna talk about in a minute. But a lot of my scholarships been about local elections. But I also got really interested in urban economics. You know, as New York was going through a big period of transition at that moment, you know, going from the 12 years old or between 12 and 14 during the height of the murder epidemic in New York, my high school years were the early beginning of the gentrification or kind of economic boom part of New York City’s history, a recent history.

David Schleicher (3m 53s):
And so the questions of urban economics kind of also always interested me from a young age. And after college I went to get a master’s degree in economics and I was all, I studied urban there and then by the time I got to law school I kind of combined these interests into studying local government law.

Jeff Wood (4m 8s):
Well that leads us to your book In a Bad State Responding to State and Local Budget Crises. What was kind of the impetus to write this book?

David Schleicher (4m 15s):
So it’s a great question. So I mean a couple things. One, I’d say that generally speaking the federal government, which people spend most of their energy if they think about politics thinking about doesn’t actually do very much. The old joke about the federal government is that it is an insurance company with a military that is to say it provides health insurance and old age insurance and form social security and has an army and then it provides money to state and local governments. But it doesn’t actually operate very much. And if you look at our most important government services, they’re either entirely funded or partially funded and almost entirely operated by state and local governments. And so whether it’s Medicaid, which is partial a mixed cooperative federalism program between states and other, whether it’s policing which is largely a local function schools which is almost entirely funded by state and local taxes and are operated obviously by local government from school districts.

David Schleicher (5m 4s):
So like studying local finance seemed really, really, really important and much understudied. And then secondarily the period in which I started getting interested, it was a period of real shock to state and local finances. So the period after the great recession is a period of extreme local retrenchment in number of people work for local governments, these huge cuts. You start seeing these, you start, you see these kind of well-known bankruptcies in Detroit and whatever you wanna call Puerto Rico quasi bankruptcy. And so that’s kind of where I started to get interested in it. And right now we’re at a really interesting period for state and local budget. Say the last number of years have been some of the best years in the history of state local budgets. So the, the late 2010s were economically growing period and state and local budgets are pro-cyclical.

David Schleicher (5m 49s):
That is to say they get more money when the economy is good and have to make cuts when the economy is bad. And that has some macroeconomic implications but it’s also just a fact. And so when the economy was growing really well, so were state and local budgets and then they faced a shock during covid but it was a smaller shock than people expected due to the way the economy happened and the federal government through I think what can only be described as boatloads of money at states and cities and other local governments. A result it’s been a real boom time for state and local budgets. But right now we’re starting to see the situation change state and local revenues are starting to fall and are projected to fall more particularly in places that are heavily income tax dependent like New York and California and Illinois.

David Schleicher (6m 31s):
And then relatedly, the federal money is stopping so we’re starting to see it run out. The money that was approved during Covid and a little bit of it was actually pulled back during the debt deal, the debt limit deal. And so we’re at a moment when state and local rather than being in a boom period, we’re gonna be in a period of of retrenchment for state and local budget. And then it’s worth a good time to start thinking about again about the problems of state and local budget Crises.

Jeff Wood (6m 57s):
You talk about the history, I mean these two time periods that we’re talking about the great recession and covid are kind of rare in history it seems like. And and something that you kind of call out in the book that I was really fascinated by was kind of the history of some other bankruptcies and debt Crises that happened that kind of led to where we are today and how people dealt with the great recession and Covid. And I’m wondering if you could gimme a kind of a sense of the process there from early on from Hamilton all the way to currently in a short form cuz obviously you go through it and deep in the book but I think it’s fascinating to think about all the steps that it took to get to where we are today.

David Schleicher (7m 29s):
So just start like the idea that some state local governments would face financial Crises or inability to pay their debt or have difficulty paying their debt is it should seem pretty inevitable. We have 50 states and thousands of local governments and the idea that some of them are gonna have Crises some of the time just seems pretty likely. And in fact the problem of state and local governments facing Crises and the cost that imposes not just on them but on other jurisdictions has been an ongoing part of American history. You noted from the first congress, Hamilton Hamilton’s plan to assume state debts. I’m not gonna wrap along with I promise, but that was a situation in which state and local governments had a lot of difficulty paying the Revolutionary War debt and the federal government bailed them out.

David Schleicher (8m 13s):
We saw in other periods the federal government decided not to do that. So in the 1840s people expected the federal government to bail them out and in fact their British and Dutch investors particularly expected it but they didn’t. And eight states in a territory defaulted and states have defaulted in the 1840s. In the 1870s Arkansas defaulted in the 1930. In fact Arkansas defaults in all three of those periods. I jokingly call it the American Argentina. And, and then if you want to go to local government, we’ve had lots and lots of periods of big local government default. So from during the 1860s and 18 through the 1890s there were hundreds and hundreds and hundreds of local defaults, many of which there the question of the enforcement of the bonds made the Supreme Court, the Supreme Court heard more cases about municipal bond defaults than it hurt on all any other topic.

David Schleicher (8m 58s):
And in other periods you have the famous New York City fiscal crisis in the 1970s. And so these issues have kind of spanned across American history because first of all we just have so many local governments and particularly cause we assigned to local governments a lot of responsibilities, particularly investing in infrastructure that rely on them barring.

Jeff Wood (9m 15s):
And that kind of goes into the idea of the trilemma, right? So thinking about the three major pegs on the stool as it were of things that can go wrong or right to a certain extent and why actually the federal government has an interest in actually maybe sometimes bailing out states and cities.

David Schleicher (9m 32s):
Yeah. So the central analytical point of the book is that when faced with a state or local budget crisis, the federal government has three things it would like to achieve, but it can’t achieve all three, it can only achieve two of those three things. And so what are the three things it wants to achieve? It wants to avoid kind of really sharp budget cuts or austerity because that state and local fiscal crisis generally happen during recessions and budget cuts during recessions are beed. Secondly, it wants to avoid moral hazard. That is say if it bails the government out then the government may grow to expect it and that will lead to greater budget problems in the future. And then third thing is it wants to avoid harm to the municipal bond market. Why would anyone care about that? Well, state and local governments, we rely on them to build almost all infrastructure in America.

David Schleicher (10m 15s):
And in order to do so, they need to be able to borrow. And so if a jurisdiction defaults, people will lend that jurisdiction less money and all other jurisdictions less money, they’ll become more skeptical of jurisdiction. And so the federal government wants to avoid that problem because it’s relies so much on state and local governments to invest in infrastructure. And as a result the federal government has a couple of policy tools but it can’t achieve all three of these ends. So if it does, a bailout creates moral hazard. If it makes jurisdictions pay their debts and doesn’t do a bailout, that means austerity, that means vast, vast budget cuts. And then alternatively, if it encourages default, which it can do in a, in a variety of ways, it avoids moral hazard and avoids the worst of austerity but at the same time harms the mutual bond market or harms the future ability of that jurisdiction and other jurisdictions to borrow, to build infrastructure.

David Schleicher (11m 2s):
So it’s got three choices, none of them are that good. And it kind of over time we’ve kind of moved between each of these policies.

Jeff Wood (11m 8s):
And that’s an interesting part of the book too is talking about the moving between and how the Supreme Court changed their mind at some point about what was important and and why. And so, you know, we were talking about things like infrastructure, which is something that obviously the senator are interested in and thinking about things like the Erie Canal and why that was a kind of an important benchmark. And so that’s interesting the ebb and flow over time of what was important to say the Supreme Court which actually acted as a policy armed to a certain extent for a very long time.

David Schleicher (11m 36s):
Yeah, not only different times but about different jurisdictions. So one of my favorite juxtapositions in the book is during the 1870s there were two separate debt Crises, the 1870s and 1880s. One is about local governments and local governments had invested a huge amount in building railroads, basically subsidizing railroads. And it created that a lot of them defaulted the railroad companies coming to these different towns trying to convince them to invest in their railroads to get their railroad through comedown. I know the book actually had a lot in common with the famous monorail episode of The Simpsons. They’re going around convincing them all that. But this led to a lot of defaults and the Supreme Court was faced with the question like, how hard should it push to force governments to pay back these debts? And it pushed really hard.

David Schleicher (12m 16s):
They meet up all sorts of laws, it would allow other federal courts to send marshals to kind of make jurisdictions raise taxes in order, even if kind of in violation of their own charters to pay back their debts. And this was really costly. So like on one hand they’re unfortunately that’s they’re creating austerity. The austerity created real economic harms on the other hand cause it preserved the bond market for cities, particularly northern and eastern cities. It allowed those jurisdictions to borrow going forward. And we have this grand period of infrastructural development in the 1880s, 1890s where American cities end up having much better infrastructure than any cities else around the world. Like Buffalo had better water mains and better streetcar than London did.

David Schleicher (12m 58s):
It was, you know, on the other hand, after the end of reconstruction, almost all southern states defaulted on their debt. And the Supreme Court made up law in a different direction kind of creating our modern sovereign immunity law in order to allow those jurisdictions not to pay their debts. The debts were incurred largely by mixed race reconstruction era governments and the newly empowered all white governments decided they didn’t want to pay those debts. And the Supreme Court said sure thing, allowing them to avoid those debts and that allowed them to avoid short-term economic harm. On the other hand, it meant they couldn’t borrow going forwards. And so if you wonder why infrastructure in the south really, really isn’t as developed as it is, Northwell, there are a couple of reasons for that.

David Schleicher (13m 38s):
But one of the reasons is that during the kind of key period of American infrastructure development, they were largely barred from bond markets and that much like really limited their ability to, to invest and grow.

Jeff Wood (13m 49s):
One of the notes I have here is overbuilding rail lines causes a lot of defaults and pain but also strengthen the municipal bond market. Yay capitalism.

David Schleicher (13m 56s):
It’s a great question but I mean railroads are, I mean first of all like capitalism here is a very complicated concept cause it’s capitalism with a huge amount of government subsidies, right? But railroads as a business are particularly prone to boom and bust because they have high fixed costs. Like you have to build a railroad, but then they have low operating costs. And so the result can be if you develop a bunch of kind of railroad lines along the same lines like near one another, the costs will go down and they’ll be too low to cover your fixed costs. And so railroads everywhere are subject to these huge boom and busts absent regulations. So the thing we developed later was a system of price regulation for railroad that has consisted and kind of gotten very complicated over time.

David Schleicher (14m 39s):
But yay cap, I mean the one thing I’ll say about this is that the yay I, it’s again, capitalism is, yeah, complicated, but the idea that governments would invest a huge amount in infrastructure, huge amounts infrastructure is a compared to including subsidizing private development of infrastructure. But if you look back at say the last 20 years, you can look back and say where are infrastructural Marvels the period after the great recession should have been this period where we built a ton of infrastructure, right? Interest rates are low, unemployment is high, where are high speed rail? Where is now? Where is, if you look back a hundred years before, we had quite a lot of it.

Jeff Wood (15m 13s):
Yeah, it’s a really interesting kind of time period. And just I guess from that idea, there’s like the this big debt collection circus too that was happening at the time I feel like from all the bonds that were were created.

David Schleicher (15m 23s):
Oh, the stories are hilarious. I mean some of them are amazing. So it’s like, one thing is that when towns in Iowa refused to pay their debts, president Grant, this is 1870, president Grant, general Grant, you know threatens to send the Union Army, you know, five years after the end of Civil War to the staunch union state of Iowa in order to enforce municipal bonds. That’s how serious the class. But the, that’s not the funny part. The funny things are the things that jurisdictions used tried to do to get out of paying their debts. I’ll tell two stories. One is that the Supreme Court made this extremely strange distinction, which is they said that federal courts couldn’t order jurisdictions to raise taxes but they could order officials to raise taxes. So what jurisdictions started doing was holding their public meetings in secret so that Marshalls couldn’t find them to make them pay taxes to which Marshalls then responded by hiding.

David Schleicher (16m 10s):
And so one would hide as the town drunk and go to towns and pretend to be the town drunk and then serve papers and say you have to raise taxes right Now. The other really funny story is that a couple of states started doing something called corporate suicide. And that doesn’t sound funny, but it is a little funny I’d say, and this comes in front of the Supreme Court in a case involving mobile, Alabama mobile couldn’t pay its debts. And so the state created a new city called Port of Mobile, new local government and we assigned the power to tax property in mobile from the city of mobile to this new city port of mobile. And then port of mobile bought the city of mobile’s assets and then creditors were left suing the old city of mobile, which had no assets and no taxing power.

David Schleicher (16m 51s):
The Supreme Court declared that that was unconstitutional, but doesn’t actually explain why just like that j, that that can’t be this corporate suicide thing can’t be de ma. That story is that a variety of types of tools that modern financiers have created for cities and states kind of draw on a similar idea. And so this started in New York City but kind of maybe more and more notably recently it happened in Puerto Rico where jurisdictions take their sales tax revenues and give it to a different set of bundles. And they said they’re, they’re heavily indebted, they say new bond holders, if you give us money you can have all of our sales tax revenue and in theory this assignment would wean in a bankruptcy and the old bond holders are left saying what the heck right?

David Schleicher (17m 31s):
We expected our investment to be backed not just by income taxes but also by sales taxes. And the question of whether those types of assignments, which in Puerto Rico go under the title of cofina but New York City went under the idea of Big Mac bonds is legal as a direct descendant of that question from port of mobile,

Jeff Wood (17m 48s):
How many times did you think you would write haircut in a book?

David Schleicher (17m 53s):
You know, I wrote haircut in a book a lot, how many times I thought I don’t know. But haircut is the term that kind of somewhat not technical term for the amount a creditor takes off when a jurisdiction faces bankruptcy or default or whatever. And the idea is that you’re owed a hundred dollars, you take a haircut of $5 to pay if you get 95 cents on the dollar. And so in say the Detroit bankruptcy bond holders took a variety of types of haircuts from you know, none at all to 70% and pension holders pensioners took haircuts below that. So how many times I think I’d write it, I don’t know. I do like getting haircuts so maybe more times than I needed to.

Jeff Wood (18m 31s):
Haircuts for hair but not haircuts for your bonds. Yes. Okay. I’m gonna ask a question and I’m not sure if it’s a good one or a bad one and you can tell me whether this makes sense or not. Okay, so I was reading this and I was thinking about the transfer of wealth and transportation and you mentioned how expensive transportation costs were in the light late 19th century, which made firms more likely to agglomerate to get lower costs. And then at the time personal transportation costs were kind of a low percentage of income somewhere around something like 2% I think is what Scott Bernstein says. But after the interstate were built, that flipped on its head and so shipping costs are low, but personal transportation costs are incredibly high, just below 20% of personal income. So I’m wondering if there’s a connection between the allowance of local infrastructure investment through these bond decisions and the shifting of who pays most for transportation costs?

David Schleicher (19m 15s):
That’s a, that’s a great question. So it’s actually even bigger than you say because the cost of personal transportation is not just like the cost of your car but it’s the cost of your time, right? So the fact that you’re sitting in your community means you’re not working. This is like one of the reasons why people like working from home is they have more hours to work. And so did the investment in infrastructure lead to people spending more time traveling? So the answer is probably yes, almost certainly. Yes. That is say that quickly the building of the interstate highways and the building of of roads allowed people to spread out further, which meant they were less concentrated and they’d spend more time traveling. And so the answer is yes, although they got something in return, which is that they were able to, first of all like basically without that infrastructure advancement we don’t have the development of the suburbs which you can bemoan but also like a lot of people seem to like and resulted in both it being possible for people to move from the farms to somewhere else and then particularly and allowed for people to have more property in which they could live.

David Schleicher (20m 19s):
And so it is the case that modern infrastructure, brickley road infrastructure allowed for the spreading out of cities which had some good and some bad effects.

Jeff Wood (20m 28s):
I’m just thinking about like you know the C N T kind of model of housing plus transportation costs and and how kind of those flip on their heads and if you think about how much you know time and and how much mortgages, you know, you get to your 30% mortgage or less and so you have to drive further drive to qualify I guess is the yeah, the the way to say it. And so I’m just thinking about those kind of connections and how cities grew.

David Schleicher (20m 47s):
Yeah, I mean there are a lot of other things happening in that story too, right? So limits on urban building through land use controls. Yeah, play a pretty substantial role. But I mean I think it’s that like the reason people drive into Lake qualify is that they want more property space, right? And more space and they also want to live in many people, we’re both city people so it’s slightly different story but wanna live in jurisdictions that will exclude other people, right? So they want to have, be able to control to keep their public schools exclusive and allow for racial segregation. So there are a lot of pieces to that story but I don’t know that I would say that infrastructure investment is bad because it leads to people being able to spread out.

David Schleicher (21m 28s):
That type of logic would equally apply to commuter train lines which also allowed people, right? And so it’s one of these things like it allows for, it creates benefits and costs but I’d say in general I think that we kind of looking at modern America, we view our infrastructure as insufficiently invested in and also too expensive to build separately. But some of the downsides you’re noting I think could be pretty easily mitigated or not easily but could be mitigated through other policy changes.

Jeff Wood (21m 52s):
It was just something I thought about when I was reading the book cause I was like oh these things kind of connect a little bit. Oh

David Schleicher (21m 56s):
It’s a great point. I mean it’s only other thing is that like, I mean if you think more broadly about canals and other, or explain why cities are where they are, almost all American cities are built along ports, along rivers and along railroad connections and that’s because they were places where you know, when shipping costs were high firms wanted to locate right next to places where they could ship final goods. And so like why is Chicago a city? Well Chicago is a city because it was at a key node of connecting the Mississippi River to the Great Lakes, which then connected to New York and those things through the Erie Canal. And like that explains why Chicago is a thing. And so in order to understand the history of location in America but everywhere in the world, you also have to understand the history of infrastructural development.

Jeff Wood (22m 43s):
Do you think that the president and Congress acted differently from the Great Recession to the pandemic cuz of lessons learned from the trilemma impacts?

David Schleicher (22m 52s):
A hundred percent. How did they act differently? So after the Great Recession, if you remember the Obama stimulus bill was real and it provided some money to states. But it provided after a while it ran out particularly after Republicans took over Congress. And the effect of that was that it stimulated the economy less, but particularly the way it st, one of the big ways it stimulated the economy less was by not giving a lot of money to state and local governments and state and local governments reduced their employment. So we don’t see a meeting the 2008 level of public employment until 2019. It’s a huge period of decline in state and local employment. And this is one of the reasons the Great recession was great, that private employment comes back to pre-recession era between pre 2008 periods in 2012.

David Schleicher (23m 40s):
But you don’t see public employment and then overall total employment come back until much later than that. And that is a huge reason why the Great Recession was a great recession and not just a pretty bad recession, but over the course of covid the federal government gave a huge amount of stimulus and particularly the last bit, the A R P under Biden was explicitly thought of as a way of avoiding the pullback that we saw in 2008. That’s say where you provide stimulus but then you didn’t keep providing stimulus to the economy was wrong. The stimulus provided in the A R P, a lot of it went directly as to state local government. So some of the earlier things in CARES Act did as well as did some of the other bills as well, but gave a lot of money to state and local governments.

David Schleicher (24m 22s):
So much so that most economists agree that the amounts were so big that it contributed to inflation. So the stimulus was so effective it contributed to inflation. The other thing that is notable about the way the A R P money, the CARE Act money, although not notably the Municipal liquidity facility created by the Federal Reserve, was it went to all states. And why would you give money to all states? One of the reasons you would do so is to avoid moral hazard. That to say if you’re gonna give money to everyone, that still creates some moral hazard. But the particular penalty problem of moral hazards that like you’ve got incentive to run your your state budget into the ground because you know you’re gonna get bailed out by the federal government and if you’re giving money to everybody then that concern is diminished pretty substantially.

David Schleicher (25m 3s):
And so I would say the concerns along the Tri Lama really dramatically affected the shape of the federal government’s post covid response.

Jeff Wood (25m 11s):
Do you think it was helpful to, you know, cuz we did see that the economy came back to a certain extent because of the individual stimulus checks and P P P and all those other things. Do you think it was necessary to give money to states and and local governments?

David Schleicher (25m 24s):
Yeah, so giving money seasons is one of the most potent forms of stimulus you have because state and governments spend all the money they account. And so in that way, state and local governments are like poor individuals. They’re not saving, I mean some of they save a little bit, they should save more. So it’s a very potent form of stimulus and it keeps people employed a lot like the P P P program did. And so I think giving money states and cities was probably a good idea, probably should have been a little less, but it was a good idea. But I think they should have taken steps to reduce some of the harms that it created. Specifically I think they should have attached to the stimulus money, greater conditions to encourage states and cities to budget more responsibly going forward. It was a moment of great leverage over states and cities and they should have included with the money, some conditions to encourage greater budget responsibility going forward.

David Schleicher (26m 11s):
And I think that that kind of pairing would’ve understood the problems of their approached by the trail lama better.

Jeff Wood (26m 17s):
Here’s another crazy connection that I made in my head. I did this a lot in your book, which I, I’m really happy about cause it made me think at the same time over the, you know, right before the pandemic over the pandemic HQ two was a big deal. And so stimulus from government to private actors is a big topic of discussion, especially in the work from home era. So we have this, you know, do we subsidize companies or do we subsidize individuals? And so a lot of cities actually like Tulsa and and others are trying to subsidize individuals and I wonder if there’s a connection between the two.

David Schleicher (26m 45s):
Yeah, I mean subsidies I think are a really interesting subject. They’re a pretty small percentage of overall local governmental spending or state governmental spending. I mean they’re a big deal at the level of the individual company, right? They’re also, you know, like this is the kind of thing you could have imagined creating conditions on, which is something to, I mean it would be a little more complex, but to limit this type of intergovernmental competition for if we’re gonna give you money, don’t spend it on attracting, I don’t know, the Oakland A to leave for Las Vegas, just for example. So figuring out how to deal with that problem of inter jurisdictional competition is really a hard problem to solve in a world where states and cities are fiscally independent. And there’s some interesting ideas out there and you could have imagined the federal government doing something on that score.

David Schleicher (27m 28s):
Now one last thing, like the Tulsa subsidizing individuals, it’s just, it’s just mostly silly. It’s a, I mean the interesting thing, there are very few good arguments for subsidizing firms to move to town. It’s definitely bad globally and it’s usually even bad locally. It doesn’t, doesn’t work out. One of the arguments is that well if we get this firm there, it will produce more in taxes over time. The logic of that would be not subsidizing normal people, but would be getting super, super rich people to move to town. So the thing that is like getting HQ two down would be like giving Taylor Swift a bunch of money to move to town. Now jurisdictions don’t do that. At least they don’t say they do that because it would be super gross. Yeah.

David Schleicher (28m 8s):
And people would be angry. But the idea that giving someone $10,000 once and then they’re gonna move and then they’re gonna stay there forever. I mean if they’re gonna respond to the money, maybe they’ll leave again in a year. I mean, who knows? It’s, the evidence for these things is not great. I mean, you know, you never know. And one of the great things about having so many local governments is you get to see some experimentation but it’s pretty, pretty dumb and bad.

Jeff Wood (28m 29s):
Let’s talk a bit about chapter nine bankruptcy. There’s some that argue that it should be extended to states. Chapter nine is the process for which cities can do bankruptcy in the United States and we’re seeing these transit agencies and the fiscal cliffs that they’re coming about. I’m wondering if that’s a solution for some of them as well. If something happens where they can drop off the cliff and are insolvent.

David Schleicher (28m 49s):
Well, transit agents can already, if a state gives this transit agency the right to file, so for governments to file for bankruptcy, local governments, they have to get direct seat authorization. And the court determines this insolvent, a trans agency can, alre federal law already allows for trans agencies to file for insolvency for under chapter nine. And it’s completely plausibly a response to some trans agency Crises. It would be illegal transit agencies are facing, as you noted, extreme fiscal pressure. The fair box recovery ratios are way, way, way down just cuz fewer people are riding, but yet the cost of operating the trains is continual and they have a lot of legacy costs and particularly pensions for public workers.

David Schleicher (29m 29s):
And so it is a plausible place for having bankruptcy for bankruptcy. I mean, I’m not like saying, yes, Bart is gonna file for bankruptcy tomorrow. Yeah. But like it’s not crazy to think that that would happen. Notably, new York’s Metropolitan Transit Authority got a, a special loan from the, from the federal, from the Federal Reserve during the crisis, which highlights that it was one of the most hard struck jurisdictions during covid. So yes, I, I’m a big fan of bankruptcy as a tool. I think it should be extended to states. But in addition to that, the merits of it are conditional on situation. But trends agencies are in many ways a good, it would allow them to break their collective bargaining agreements.

David Schleicher (30m 11s):
One of the problems we see with trend agencies is not necessarily that they can’t operate a good service for the amount of state money, but just that they were built for an era in which ridership was higher than it is right now. As you saw in California, this is gonna entail much more state spending to keep them afloat and seats may be able to do that. And I, I hope they can. I I very much like trends agencies and I like Ken, but you know, in a world in which fewer people are riding it because fewer people are commuting to downtowns and these train systems are generally built in order to get people from the suburbs to downtowns, it’s completely possible that that won’t happen. And that bankruptcy might be a good tool for allowing some, rather than having all of the harms be borne by reduced service, by allowing some of the harms to be borne by bond holders and pensioners.

Jeff Wood (31m 0s):
Yeah, I think they’ll be back at some point. I think they just need to buy more time. I think that’s the, the key at the moment. But who knows if it’s

David Schleicher (31m 8s):
Gonna end up in bankruptcy. This is the thing is like, like I hope so, right? Yeah. But that requires some sets of beliefs. One is about what’s gonna happen with work from home and like, I don’t know, people have lots of predictions but they’re, what they are is predictions they’re not. Yeah, right. Dunno. And the second thing is it depends a little bit on whether they have to make cuts now that make the service less attractive in the future, right? So that if your response to this is what people call the doom loop, sometimes we talk about the doom loop for San Francisco, but we also talk about the doom loop for trans agencies. If you cut services in order because your budget’s down, then people find your services less attractive and they get cars and they, whatever, you know? And so, I mean I I don’t think you can avoid there being real risks.

David Schleicher (31m 49s):
I mean I, I’m hopeful, you know, always I’m a regular New York City subway rider. You have to be hopeful. But it’s, it’s certainly there are a lot of risks out there for transit agencies.

Jeff Wood (31m 58s):
What kind of ticking time bomb are these underfunded pensions that you mentioned?

David Schleicher (32m 2s):
Yeah, so underfunded pensions are, I think a widely misunderstood part of local finances. Anyone thinks about it all. They’re misunderstood too. People generally think of underfunded pensions as a problem created by expensive pensions. That is to say the reason we have underfunded pensions is that public workers are living high on the hog with big pensions. You can have any belief you want about the size of pensions in the side of deferred competition relative to present compensation for public workers. But that’s not why we’ve underfunded pensions. Plenty of jurisdictions have very expensive pensions but also have, are full, are relatively fully funded. So New York state for instance, has some of the most expensive public pensions in America, but also has very well-funded pensions.

David Schleicher (32m 43s):
So what are underfunded pensions instead? They’re just debt. That is to say jurisdictions instead of balancing their budgets. And one part of balancing your budget is paying your workers their salaries right now and their, what the amount of money it takes to pay for a police officer or teacher is not only the present compensation but the amount of money you’re putting away for their retirement. What underfunded pension is basically the debt that’s caused by running a deficit that is say not paying a worker. And that the reason they are in pension funds rather than is that it’s a good place to hide them. If two benefits for a government that wants to hide a deficit, generally they have legal obligations to keep a balanced budget and to have limits on how much debt they can issue.

David Schleicher (33m 24s):
One is that you can just lie pretty easily. You can say we expect to get a 9%, 8% return on investments. And the second thing is that for the most part, for balanced budget amendments and for legal debt limits, pensions don’t count. They’re kept outside of that and that is a legal decision, but it’s, it’s one that treats two different types of obligations. You absolutely have to pay very differently. And so in the post great recession period, a lot of borrowing went in the form of underfunding pensions. And so as opposed to, you know, cutting budgets even further at that period when it would’ve been really, really, really painful to do so. But one of the effects of that is that a lot of the borrowing capacity of jurisdictions is in these underfunded pensions as opposed to being in invested in new infrastructure.

David Schleicher (34m 11s):
And that’s, that’s costly and be it. So how big a ticking time bomb? Well it’s just debt. And so it depends on the jurisdiction of how big their overall debt loads are, including public pensions but also including bonded debt and other healthcare obligations.

Jeff Wood (34m 26s):
I find that really interesting because you don’t really hear people, I mean you hear it to, people talk about pensions and you know, the underfunding part and how are you gonna pay for this and all that stuff. But basically it’s, it’s your own lending machine to a certain extent and you can fund it to the extent that you wish to and use it in your budgeting. And that I think that’s really interesting kind of way to think about it. Yeah,

David Schleicher (34m 44s):
It is. On the other hand, it’s not like you can avoid paying. Yeah. You have a legal obligation under the state constitution to pay your pensions and so you can borrow from it the way you could also borrow from the market. Now we frequently, when a government seeks to borrow, we frequently make them ask the voters to do so. Right. So you’ve have you voted in a bond election before? Of

Jeff Wood (35m 3s):
Course. Yeah.

David Schleicher (35m 4s):
Right. Yeah. Right. And so like that’s a normal part. Oh again, you’re in California, you vote for everything.

Jeff Wood (35m 10s):
Yes we do too much.

David Schleicher (35m 11s):
You vote for the size of chicken coops, you vote for everything out there. But bond elections are a way of restricting government borrowing, right? So the idea is the government can’t just borrow what it wants. It has to ask the voters if it wants to borrow. But when they wanna borrow basically from the future in the same way that borrow that debt bonded debt is if they do it through the penance funds, we don’t make them. And so when politicians are faced with the choice of should I go to the voters and ask for debt or should I not go to the voters and just lie and say I’m gonna get a 9% return?

Jeff Wood (35m 40s):
Yeah. And it was interesting recently in Texas where, you know, basically their light rail line, they had an election and they voted to say yes to this big expansion, but then the funding mechanism was them creating a special entity. And then the currently impeached Ken Paxton came out right before he was impeached actually saying like, oh well this isn’t legal under state law. You can’t just transfer money that you use for bonds into the light rail. This this company that you created for light rail. And so there’s all these sticky questions about how you fund infrastructure in different ways in trying to kind of, you know, not cook the books but like rearrange and pull things around and things like that.

David Schleicher (36m 19s):
Oh AB almost all American public, like we, we mostly fund mass transit through public authorities. We fund a lot of things through public authorities and while why would we create a public authority that’s like, like New York’s MTA A to run our infrastructure? Well one, there are a couple of reasons why you’d wanna do it. One is maybe you don’t think the voters should be voting directly on this kind of thing. I disagree with that. But some people both think, you know, on the other hand, one of the reasons is it allows you to get past your debt limits. One of the reasons we have authorities is they are remote from debt limits. That is to say they’re a different government. And so debt limits that would apply to a city or county wouldn’t apply if the state legisla legisla just creates a new government called the public authority.

David Schleicher (36m 59s):
And public authorities are generally doubly remote because they generally rely on revenue bonds rather than is to say bonds backed by particular revenue sources like fares or tolls. And so the history of authorities and the history of mass transit is very much one that’s all about debt limits and things like revenue bonds. And so people who are interested in mass transit or in infrastructure more broadly, that is to say, listeners, this wonderful podcast like really should spend a lot more time thinking about these tools of public finance because they’re part of the story.

Jeff Wood (37m 28s):
It reminds me of the story you told about Detroit too, where some of the folks had to take a haircut but then the school system got bailed out and the separation of government.

David Schleicher (37m 36s):
Yeah, yeah. That’s a, a crazy story and something, one of the reforms I suggest in the book, but it’s, so Detroit school district is co-terminus with the city of Detroit, let’s say it’s the same area but it’s a separate government and that’s a very frequent, you know, you see that sometimes in big cities. And so when Detroit goes bankrupt, Detroit school district just gets a lot of money from the state. And so teachers get a hundred cents of their pension, a hundred cents of their dollar. They, they have full pensions but police officers didn’t. And people who lent money to the people of Detroit through their school district got a hundred cents of the dollars. But people who lent money to the people of Detroit through the city government got much less than that. I think that’s a bad result for a couple of reasons. But one of them is that like there’s a declining, marginal harms to any cuts, right?

David Schleicher (38m 17s):
So if you’re gonna cut something, like the first thing you cut from your budget is not perfectly essential, but the 900th thing you cut is gonna be really, really, really painful. And so one of the things we’ve done in the way we deal with bankruptcy and deal with is that we often locate it all in one government even though they’re overlapping governments that then are able to survive. And so the result is that they don’t make the somewhat easier cuts. I don’t want to diminish the harms felt by the Detroit school district, but the declining marginal harms here would suggests, and I think it’s pretty strong argument that it would be better if all the overlapping governments were treated the same that say plunge into bankruptcy at the same time if one of them was gonna go into bankruptcy.

Jeff Wood (38m 58s):
I just found that really fascinating. Let’s talk about climate change, shall we?

David Schleicher (39m 3s):
We’re already in light topics. I mean it the fun stuff.

Jeff Wood (39m 8s):
Well I think one of the ways that your book might be used unfortunately in the future is because of insurance. And let me explain. State Farm just left Florida and California and the reason why is because of hazards from climate change, whether that’s fires, hurricanes, flooding, those types of things. And I read a piece the other day and I can’t remember the name of the blog unfortunately it’ll be in the show notes I’m sure. But basically they were saying like the same things that you were, we’re talking about the trilemma and the real estate values of these places are very high and people want to have them insured. And so the state eventually, because all these in these insurance companies are pulling out, the state is likely to have to backfill that.

Jeff Wood (39m 48s):
And then after one or two disasters, the state is going to enter the bankruptcy or the hurt locker to a certain extent. I was thinking about that when I was reading your book and thinking this book is likely to be used at some point maybe because of climate change and hazards. Not moral hazards, yes. Necessarily. Oh, amoral hazard. But also natural hazards.

David Schleicher (40m 7s):
Yeah, no, I mean, so the thing that causes economic shocks changes over time. So one of the reasons Detroit has a financial crisis is because it suffered a longer run economic decline. Why does it suffer a long run economic decline? Well there are a number of reasons, but there are things like firms moving to the south to get better labor law for their car factories or kind of increased trade competition from Japan for cars or whatever else. And so there are shocks, again, the economy has all sorts of shifts and that’s true for natural disasters too, right? So when we face an acute natural disaster, the federal government usually just gives people a boatload of money. And that in the case of climate creates real crisis. So we frequently rebuild areas that suffer floods even though we ought didn’t because the federal government responds to floods by giving places a bunch of money even though they’re on places that are very, very likely to suffer floods in the future.

David Schleicher (40m 56s):
Now the story about property insurance in California particularly and Florida, they’re slightly different story. One of the reasons firms are bowling out of California is not just that they’re likely to be shocks, but that the cost of building things in California is so high. So if a house gets knocked down, the cost of rebuilding it is not just that it will be knocked down again due to further climate change related natural disasters. But also that the cost of building it is so high. And so California one, I mean you’re gonna be negative is one of the things that I would hope to see is that California respond to the fact that it’s acting as an insurer or increasingly acting as an insurer or helping the reinsurance market work by making policy changes that would make it cheaper to rebuild housing.

David Schleicher (41m 37s):
Because it will acknowledge that one of the reasons it’s so expensive to insure property is that you have to pay for the cost of rebuilding and if rebuilding it is so expensive. And so there are a whole variety of policy changes you can imagine there. Now one last thing like this is obvi. The, the effects of climate change with the insurance property insurance market is only one of a variety of, you know, like some of the times it’s much more direct. They literally flood, right? Or they burn or you can’t breathe. Yeah. This is gonna have pretty dramatic effects on lots of jurisdiction when these economic shocks hit places, the federal government will face this, this difficult choice. If those jurisdictions have fiscal crisis, it’s definitely a real possibility.

Jeff Wood (42m 11s):
Yeah, I think that’s connected. I think the people are gonna be, have to have to read your book because of it.

David Schleicher (42m 16s):
I encourage them to read the book. Whatever reason it is that they,

Jeff Wood (42m 18s):
I do too. I think it’s really fascinating. First

David Schleicher (42m 20s):
Of all, I encourage them to buy the book whether they read it, I hope they read it too. But first you gotta buy it.

Jeff Wood (42m 25s):
You want them to be the people that buy the books at the bookstore and then they sit on their shelves forever. No, we want them to read it.

David Schleicher (42m 31s):
I mean I want them to read it too. But buying it is also really important. I just wanna say it’s both. It’s read it and buy it. Buy it and read it.

Jeff Wood (42m 38s):
This would kind of like the last theme here is the press and you mentioned the impact of shrinking press on partisan voting trends. And that parties often act as a proxy for a lot of issues. And that gets really messy locally and especially here in, in California. I saw an article the other day, I was talking about the the uni party of California and I was like, if you were here you would realize that it might be blue in a presidential election, but there’s people all over the map on that blue side coming from different angles. And so I was really thinking about how that does impact how state and local governments are run. And we do have to fix overall state and local politics, like you say in the book. But how do we fix this? Like how do we fix the attention paid to state and local politics as opposed to just this overall national discussion that we constantly have and wait for every four year presidential elections and you know, do we have education campaigns?

Jeff Wood (43m 28s):
Do we have every election in November, which we just changed in San Francisco, we’re gonna have November elections for the mayor. And also another thing that I, I know you have some answers to is, you know, how do we bring down transit construction costs by fixing all these local and state problems.

David Schleicher (43m 41s):
Yeah, I’ll get to the construction. Great question. I don’t know, have you had Alan on the pod or Eric you might have. I don’t know.

Jeff Wood (43m 48s):
I had Alan on a long time ago. Yeah, but we also had the folks from from Eno too on the show to talk about stuff.

David Schleicher (43m 54s):
Yeah, they’re great too. Anyway, I’ll leave that to them. I mean I have some thoughts too. I’ve written about it. So starting on the question of the nationalization of policy, I just wanna start by establishing some of the facts. So the basic story is that the correlation between state legislative voting, and this is true for local voting where it’s partisan as well and presidential voting is now is increased very substantially over the last 40 years to the point where it’s in the high 90%. That is to say if you vote for Joe Biden, you’re gonna vote for a democratic state legislator and if you vote for Donald Trump for Republican, and the result of this is that it almost doesn’t matter what actually happens in state legislature for general election outcomes. That is to say the state legislatures could, I mean it’s not entirely true, but they could run around naked all the time and it wouldn’t matter which party wins the elections.

David Schleicher (44m 36s):
I hope they don’t. I’ve seen them. But while there are a lot of differences inside parties ideological, especially in places as big as California, what this means is that voters don’t get the tool or don’t rely on a tool That is where you have parties that are aligned along national issues or kind of presenting things along national, along RA around state issues to help people vote in state elections. And so if all the competition is happening in primaries or in California and the weirdo right Jungle primary system that you, not my term, that is the technical term I believe it’s probably shouldn’t be. But the information that’s available for voters on the issues that divide Californians is just not that high.

David Schleicher (45m 17s):
And the people who are have access to information are pretty different from your average person. That is to say, if you know the differences between two state legislative candidates voting in California, both of whom are Democrats, you’re probably a weirdo, right? Like you’re not like another, you’re paying really close attention. Yeah, right, exactly. You might be a member of a homeowners group in local elections or you might be someone who’s particularly allied with one interest group or another. Basically the effectiveness is to reduce the influence of what I call mass politics. That is to say the ability of ordinary people to lend their voice in state and local politics. Why we’ve seen this increase in nationalization is a couple factors, but one of them is definitely the decline of local newspapers.

David Schleicher (45m 58s):
We are local newspapers close, we see a a sharp decline in split ticket voting. It’s pretty clear. We also see, by the way, another museum fact that’s related to this borrowing costs for local government go way up. So if your local newspaper goes out, you then go out for a loan from the bond market, your borrowing costs go way up because the bond holders know that no one is watching these politicians anymore, right? So what they can do, whatever. And so what could we do to make this better? I’ve got a couple of ideas that I mentioned in other work. One is we could subsidize local newspapers and I think we should do that. Local newspapers are, it would pay for itself and reduce borrowing costs among other things, but also would be good for democracy. Another one is we could create tools to make it easier for people to know things in local elections.

David Schleicher (46m 41s):
Chris Elmendorf and I, who’s out in San Francisco, I’ve written a couple of things that are California specific, some of them about this. But one of the ideas you could have the mayor, local elections, have the mayor make endorsements for city council. So the idea would be, that would be very clear to voters who know who the mayor is. Mayors are often you have out party elected mayors and mayors are generally held accountable for outcomes. You would make it clear whether a supervisor in your case in San Francisco are allied with the mayor against the mayor. And that would make it easier for voters to know who know who London Breed is, but don’t know who I don’t know. Dean Preston is to figure out whether Preston is opposed to the mayor as he is or with the mayor.

David Schleicher (47m 21s):
And so that would help another one that’s a little more radical if you’re interested in some crazy ideas. Almanor and I offer some crazy ones too, which is you could allow interest groups a variety of types to make endorsements on the ballot. So that is to say voters come in to vote for, you know, primary, I have no idea who anyone is, but if you saw on the ballot, Sierra Club, gibe, whatever, allied with people and you would have qualification efforts for doing so that that would allow voters to triangulate a little more and be able to learn more about local politics through on ballot endorsements. Of course, groups can make ballot endorsements off ballot, but nobody really knows. I mean some people do, but you have to again, be a weirdo in order to

Jeff Wood (47m 58s):
We do. We get a big booklet with stuff in it from in California. I, I do, yeah. Yeah,

David Schleicher (48m 3s):
I know. Well you’re a weirdo. Exactly. They have, but like it’s just not the case that most people have the time or effort, even people who can come out to vote, which again is itself not the entire population or even the entire voting age population within the registered population. And then in California, of course to vote you have to figure out, you say it’s a big booklet cuz again you have to vote on It’s huge.

Jeff Wood (48m 22s):
Yeah,

David Schleicher (48m 22s):
You have to vote on

Jeff Wood (48m 23s):
Prop A, BBC d, eef G. Yeah, yeah.

David Schleicher (48m 25s):
Information costs for people are just extraordinarily high. I will say that the moving of the elections to November in even number of years and presidential are just like a huge, huge gain. There’s a a lot of evidence, for instance, in school district elections that holding elections off cycle leads to higher teacher salaries. So fascinating finding, but the basic idea is the teachers’ unions are more effective in elections when their turnout is lower. So Sarah, n z at Berkeley has shown that this effect is pretty robust and holding elections on cycle, you can think what you want about higher teacher salaries, but it in Zia is finding a suggestive that where more people vote, you get substantively different outcomes. You also get different outcomes by kind of money devoted to different neighborhoods. That is to say you get more minority turnout in general elections than you do in off cycle elections.

David Schleicher (49m 8s):
And the effect of that is that more money goes to, or more equal amounts of money go to areas that have minority populations.

Jeff Wood (49m 15s):
Was there something in the research for the book that made you rethink prior assumptions about budgets, about states, about cities?

David Schleicher (49m 22s):
You know, I mean one of the things about writing a book is that you, what’s prior to the writing the book is not clear. I mean I’ve been writing this book for and give or take and working on things for eight years. So I mean I’ve been doing other things in that time too. But you know, I will say one thing that became really apparent to me, and I think it’s one of the things the book does, the prior books don’t, is something you mentioned, which is treating courts as policy makers in this area. So the idea of courts, and this is something that’s like lawyers would spend a little more time thinking about, but it became really apparent that in a number of these periods, courts are worrying about the trilemma very directly. And sometimes that’s through kind of common law decision making that the Supreme Court was doing in the kind of, in the 1870s and 1880s.

David Schleicher (50m 3s):
But also sometimes we just assign it to courts. So in our bankruptcy process, one way to think about what municipal bankruptcy is in a lot of ways is saying we’re gonna give some man or woman in a robe the power to decide whether jurisdiction is insolvent. Which is a really complicated question. But one way to think about what they’re doing is deciding has jurisdiction cut enough that we’re gonna make, allow it to make creditors take haircuts. Your favorite word there. And so one question to ask about like why give courts this role? It’s kind of weird. Judges aren’t trained financial policymakers. They’re not depending on where they’re, they’re not democratically responsive. And I think a lot of it is that people, despite everything, all evidence, the contrary and there’s a lot of evidence, the contrary give courts a great deal of social respect to deal with these situations.

David Schleicher (50m 48s):
And so I think the role of quartz is one situation in which my thinking definitely evolved over the course of writing the book.

Jeff Wood (50m 54s):
Is there a question that you wish you were asked more?

David Schleicher (50m 57s):
That’s a great, I wish I was asked that question, Martin. Now you know, I would say that one of the like challenges this book is that it doesn’t provide a clear roadmap what to do in every crisis. And so I’m gonna ask what question I was asked less rather than what I was asked more. Maybe I’ll start to, well I think about the answer to your much better question. One of the things that people ask is like, well, so if Chicago is banged, what should we do? And I have some like second order things, which is like, if we’re gonna do bailout then we should do these following. But I don’t have a fundamental answer to that question of bailout, austerity, or default in all situations. And that’s because the world changes over time. Like it depends on situation quite a lot. And so one of the things the book is isn’t a cookbook, it’s a set of options.

David Schleicher (51m 39s):
Sometimes people ask like, what should we do ultimately, you know, is the MTA A gonna go bankrupt tomorrow? And I’m, I frequently have to, I disassemble and go blah blah blah, blah. When people ask those types of questions. Now a question I wish I always asked more is a question that a bunch of people have raised with me recently. But I found really generative, which is what of the underlying premises of the book is that state and local government have to borrow money. We rely on state local governments to borrow money. And why do we do that? Well, I argue following some work in the political science literature that it’s because congress can’t do infrastructure investment that basically from the first Congress congresses have had a lot of trouble targeting infrastructure investment to real problems. They spread the money out in a pork barrel sort of way.

David Schleicher (52m 21s):
Every district gets a little and as a result they recognizing that they’re gonna do this and that. It’s hard to know from Washington what Walla Walla Washington needs. They just give money to state governments through block grants or through the interest deduction, interest exemption on municipal debt. And then let state local governments do the infrastructure investment. And a lot of people have pushed me recently saying, well wouldn’t it be better if the federal government just did a lot more? There are a lot of problems created by state and local investment. A couple of things that are created is that among other things you noted the transit cost problem. Well one plausible reason why we have it’s so expensive to build transit in America tunnels rail in America relative to France, is that it’s done through this kind of rude Goldberg system of a lot of governments involved.

David Schleicher (53m 4s):
No one knows who to hold accountable. Wouldn’t it be better if the federal government either did more, did less? That is to say maybe they shouldn’t be involved at all. We shouldn’t have transit grants. We, you know, and should stay out of it. Maybe take over Medicaid and another version of reason maybe for targeted important national infrastructure projects, we should have the Army Corps of Engineers do it. And this is a really challenging question because there would be a lot of of benefits to national taking over of certain infra. But there also be a lot of costs, particularly that again, like the informational problem is a real one. Like it really would be hard for a bunch of bureaucrats in Washington to know like what local roads to build. And also there’s a lot of evidence that infrastructure investment, particularly if you look at the infrastructure investment of say the turn of the last century, why was the US so much better than other countries?

David Schleicher (53m 48s):
Well in other countries you kind of had to ask London or ask Berlin if you wanted to build something in Birmingham or in Bon or whatever. Whereas in Buffalo or St. Louis, you didn’t have to ask anybody, you just didn’t. And were able to rely on this kind of rich resource of municipal bond market to fund you. And I think that that’s like pretty attractive still. But I do wish, like the way I’d square the circle a little bit is I wish the federal government would do a lot more research into how to make infrastructure investment better. So we mentioned a briefly talking about the investment into me, the kind of research that’s been done into transit costs, but we really just don’t know a lot about why it’s so expensive to build transit in New York. We know some facts about it, but we don’t know a lot and we don’t really know why.

David Schleicher (54m 30s):
There’s some great research by Zach Skow and Leah Brooks and why the cost of building highways has increased so much in recent years. But the federal government should do a lot more to like help us learn something about infrastructure. And I think that that would be an attractive solution.

Jeff Wood (54m 43s):
We talked about this on a previous show and I can’t remember who was on, but you know, basically there’s so many things that you could possibly do and maybe it was Yona Freemark. But one of the things I think that the highway departments around in states have over transit authorities is that they have so much more history of doing this stuff and they get so much more money for research from the National Academies to do all these N H C R P reports and all those things. And so there’s a kind of a rich history of research about how to do this road, this mix of concrete is best for this type of drainage system, et cetera, et cetera. But we really don’t have that for transit, for building subways, which if you had that expertise because of that research, it would be a lot better. It

David Schleicher (55m 18s):
Would be a lot better. I agree. But I mean, the funny thing about this, even with all the money we spent on research on highways, it’s still going up. It was only a couple of years ago that people discovered things like interstate highways have gotten a lot squiggly over time. It used to be that they’d run straight between cities and now they do a weird funny pattern in order it seems to avoid lawsuits by angry residents who don’t want the highway to run through their area. The state of research on infrastructure really broadly is just really lousy. I mean, not to say there aren’t great people doing it, there are, some of them are my closest friends, but there ought to be a lot more. And I also think like with the highway stuff, a lot of the findings are, let’s just say more ideologically inflected by the belief that the goal should be worth throughput of cars.

David Schleicher (56m 1s):
And that’s the one thing you should be studying than other thing. And if you don’t buy that, then a lot of the research is, you know, worth the paper it’s written on. I mean it’s, it is the most professor thing to say in the entire world, the solution to our social problems is giving more grants to professors. So, you know, I apologize for that.

Jeff Wood (56m 19s):
No worries, no worries. We had Greg Shell and Jonathan Levina talk about that recently too. So

David Schleicher (56m 24s):
To be fair, I also called for more subsidies for local media, which I would extend to a podcast and email newsletters. So there you go.

Jeff Wood (56m 32s):
I’d appreciate that. I would totally appreciate that. That’s what I’m trying to do is try to share information with people so they have more to make decisions on

David Schleicher (56m 38s):
A, as you know, I am such a fan of your daily email dumps. I effectively assign it to all of my students. I say that any student who’s interested in this needs to become a subscriber immediately. I don’t know what the uptake has been. Maybe I’m less influential with my students than I would like, but it, I do always encourage it. Cause it’s such a great resource for people to learn things about transportation and land use and a variety about what’s happening. Thanks

Jeff Wood (56m 59s):
So much. So where can folks find the book if they want a copy In? a Bad. State Responding to State and Local Budget Crises.

David Schleicher (57m 5s):
It’s at bookstores everywhere. And by bookstores I mostly mean Amazon, but it’s it, it’s in some bookstores too.

Jeff Wood (57m 11s):
You can order it from your local bookstore is what we always say. So you can

David Schleicher (57m 14s):
Order it from your local bookstore, you can order it from Oxford University Press, you can order it from Amazon, just order it.

Jeff Wood (57m 19s):
Awesome. Well David, thanks for joining us. We really appreciate your time.

David Schleicher (57m 22s):
Thank you so much for having me. This is a blast.

J