I was browsing through my LinkedIn Pulse email blast the other day and I came across this post by
Paul Patrone, "Why Is Nashville Booming While Memphis Busts?" As a musician I was drawn to read it because of the importance of both cities to American music. I half expected the article to be a conservative free market propaganda piece and was pleasantly surprised to find in it a fairly progressive and hopeful message.
Via Interstate 40 Nashville and Memphis are about 210 miles apart and Patrone points out that their demographics are similar. Both have populations somewhat over 600,000. Both are historic hotbeds of Country Music. Both are cities in a land locked state with the sixth lowest tax burden in the U.S. Both have been run by Democratic mayors in the last 15 years, and in 2000 at least, both had very similar economies. Patrone examines why it is then, that in 2014, Nashville booms while Memphis busts, and comes to some important conclusions.
Some national context.
Since the country has emerged from the Great Recession, the extent of recovery of certain regions and states has been attracting attention, especially in states that have been controlled entirely by one party or the other. For example since 2010 Democrats, led by Governor Jerry Brown in California, and Republicans, led by Governor Sam Brownback in Kansas, have provided a clear contrast in partisan policy and economic results. Both states had been hit hard by the recession and employed very different strategies to stimulate their economies. As is becoming exceedingly clear, the two strategies have produced quite opposite trajectories. California is now helping to lead the nation’s economic recovery. While raising taxes on the wealthy and increasing the minimum wage, both considered by Republicans to be job killers, the state has accounted for 16 percent of U.S. job growth over the past year, well above its 12 percent share of the population. Over the last year, California has added jobs at one of the fastest rates in the nation, and the state unemployment rate, which peaked at 12.4% in 2010, has declined faster than the national average, down to 7.3% and according to the UCLA Anderson Forecast, is expected to reach 5.3% in 2016.
California will end its current fiscal year with almost $3 billion, the second period that the most-populous U.S. state will have a positive balance, as revenue and transfers outpace expenses.
The state also is projected to end fiscal 2015 with $2.1 billion in reserves, while bond spending is forecasted to decline 53 percent, Legislative Analyst Mac Taylor said today in a report.
“Similar to the 2013-14 budget, the 2014-15 spending plan makes targeted augmentations in a few areas while paying down several billion dollars in key liabilities,” Taylor said in the report from the nonpartisan office.
California Governor Jerry Brown, a 76-year-old Democrat running [reelected] for a fourth term, signed a record $156.3 billion spending plan in June. A surge in revenue, mostly from capital gains and temporary income- and sales-tax increases, has taken the state from a $25 billion deficit three years ago to its record surplus.
The state’s credit rating was raised in June to the highest level since 2001 by Moody’s Investors Service. Moody’s upgrade to Aa3 from A1 puts California two steps higher than Standard & Poor’s and Fitch Ratings, which last year upgraded California to A, sixth-highest. http://www.bloomberg.com/...
On the other hand, during the same period, Kansas has enacted severe austerity legislation and cut taxes under the assumption that the economy would thrive, jobs would flee neighboring Missouri in the Kansas City area and the states coffers would be replenished in the resulting broad based recovery. "Brownback called the tax cuts an experiment that would result in economic growth and a population surge." Also going so far as to call them "a shot of adrenaline to the heart of this economy."
In 2012, the legislature cut top income-tax rates by 26 percent, eliminated levies on about 191,000 small-business owners and increased standard deductions for married and single head-of-household filers. Revenue drops were assured; the decline was $335 million more than state budget analysts forecast at the end of June. http://www.bloomberg.com/...
Last spring Wall Street signaled that Kansas was headed for a financial mess unless the budget was cut to account for deep income tax cuts engineered over the last two years by Republican Gov. Sam Brownback.
http://www.kansascity.com/...
Now Brownback says he must take “corrective action” to close a projected $280 million budget hole created by his income-tax cuts and plans to reduce spending on pensions and highways.
Brownback said in a budget memo this week that revenue is “likely to be insufficient to cover appropriations” in the last six months of the current fiscal year, which ends in June.
The budget moves, which include diverting almost $100 million from highway funds and cutting the contribution to the public employees’ retirement system by $41 million, followed claims of the governor’s opponents that tax cuts approved in 2012 would result in deep spending reductions. http://www.bloomberg.com/...
Brownback's Kansas has had its credit rating lowered twice just this year alone.
Meanwhile, back in Tennessee.
An advantage studying Memphis and Nashville is that the comparison in many ways eliminates the problem of adjusting for regional and partisan variables inherent in the Kansas/California example. Both have been subject to the same state regulations, tax rates and again both have been governed by Democratic mayors. This might be as close to an "apples to apples" comparison as is possible.
Last year Forbes named Nashville the number two big city in the U.S. for jobs, behind San Francisco, with an unemployment rate of about 5%. But three hours away, Memphis has an unemployment rate just short of 8%, is one of the slowest recovering cities in the nation and "was described by Forbes as being the third-most miserable city in the United States and the second-most dangerous city in the United States." A couple other indicators of metropolitan vitality and future success are population growth and the percentage of change in young, college graduates choosing to move to a particular city. Both are trending overwhelmingly in favor of Nashville with population growth of +24.5% and percentage change in college grads at +48% since 2000, compared to a more anemic 10.3% and 10% respectively for Memphis.
Simply put, the former – Nashville – has thrived over the past decade while the latter – Memphis – has floundered. This, despite them being a three hour drive from each other, sharing the same state government and featuring many of the same attractions (i.e. country music).
Why? Well, there are a lot of reasons, but they come down to one thing: leadership.
Patrone describes the very different strategies Nashville and Memphis took in building their cities since 2000, Nashville investing in large public works projects, whereas Memphis was offering businesses tax incentives.
Specifically, Memphis granted 415 tax freezes between 2001 and 2011 to businesses that would relocate or expand within the city, according to Smart City Memphis. Nashville, meanwhile, only granted five tax freezes over that same period.
Nashville instead invested in projects that benefitted the public as a whole, like the construction of a $600 million convention center called “Music City Center” that looks like a giant guitar and opened in 2013.
The Memphis “tax freezes” often were fraught with allegations of corruption, and they tended to help the business more that they did the city. They have not fostered growth and encouraged tourism the way the convention center has.
The self critical comparison of the two cities, published last week in Smart City Memphis is refreshingly honest in its analysis, providing the following facts:
Today, the 2009 population of Nashville MSA is 50% larger than Memphis – 1,582,264 to 1,018,512.
Nashville has 746,700 jobs, compared to 521,000 in Memphis.
The 2009 gross product of Memphis is $51 billion. Nashville’s is $69.5 billion.
The number of civilians employed in science and engineering in Nashville are 26,453, compared to Memphis’ 14,316.
The value of exports in Memphis is $4 billion and in Nashville, the exports are valued at $6.5 billion.
While Memphis was losing 1.9% of its gross domestic product during the recession, Nashville’s gross domestic product increased 1.5%.
They close with five lessons Memphis can learn from Nashville which begin with not selling "your city at a discount" and offering "a workforce prepared to compete in the global economy." Lesson two emphasizes Nashville's support of sustained leadership that would work closely with business toward a vision for the future and put "their money where their mouths were."
Lesson number 3 points out that rather than dwell in the past and blame others, Nashville figured out what was "broken and put together impressive coalitions to fix it, all the while keeping one eye on what makes it authentic. . . finding the positive on which people can join hands."
Lesson 4 suggests that civic conversation should be honest but not self-destructive, and that through a "strong sense of civic commitment" Nashville raised the bar for the whole city: "higher ambition drives higher actions." Finally they acknowledge the reality of political influence and that building powerful coalitions of government, business and citizens demands attention and produces results.
While I agree with Smart City Memphis and Patrone when they credit leadership for the success of Nashville and the continued struggle of Memphis, I would emphasize that there is more to it than just leadership. As we can see from the debacle in Kansas, a governor and state legislature can lead their citizens over the cliff with their experiments in emaciated government. It is the policies of leaders and the recognition that government has an important role to play in creating and maintaining a society worth living in, and advocate for all its citizens by guiding business leaders down the path of civic responsibility over and above profit. The tale of these two historic American cities, Nashville and Memphis, shows us that it is not only about the party affiliation of our leaders but the progressive vision of a society where we work together to craft and implement policy for the good of all rather than bending over backwards to appease the wealthy few in hopes they will throw the rest of us loyal dogs a bone or two.