Why Money Has Value and the National Debt

In my last blog post, which you can read here, I explained the difference between the federal budget deficit and the national debt and showed how they are related to each other.  I severely criticized the Republican party for the way its leaders used the issue of the national debt to try to humiliate President Obama throughout his presidency.  The Republicans claimed that a $14 trillion dollar debt and then a $16 trillion dollar debt etc. were grave threats to the national economy.  I showed that the national debt at these levels was in fact not a threat at all, and that the Republicans and some rogue economists either knew or should have known that this was the case.

Update: Now that the Republicans control both houses of Congress and the White House, they recently passed “tax reform” that will cause the debt to soar to well above $21 trillion.  This of course proves that Republican political leaders have simply been opportunists and hypocrites all along, confirming the charges I was making in the previous blog piece.  For the purposes of my point, the timing could not have been more ideal.

I ended the previous blog piece by asking the questions: If the national debt is not the problem that “deficit hawks” claim it is, then why should the federal government levy taxes at all?  Why not just borrow the money?

How the Modern Monetary System Works

Before I give you the answers to these questions, let me remind you that modern economies use as money what is called fiat currency.  This means that the currency is not backed by any physical commodity like gold or silver, it is only backed by government fiat – Latin for “let it be done.”  The American dollar, the Chinese yuan, the euro, the yen, the British pound, the Russian ruble are all fiat currencies.

Now we are ready to answer the questions about taxes and debt.  The answer to these questions is that taxation is what gives a currency its value.  If you ever thought much about it, you probably have considered the horrors of living in a barter economy – where you have to find somebody who has what you want and also happens to want what you have and then strike a deal.  So money, of course, ends this problem.  But money (read: currency) such as the US dollar must have a foundation in taxation in order to have intrinsic value so that people will accept it in lieu of a good or a service (barter).

The best explanation I have ever heard for this reality comes from Warren Mosler.  He was giving a seminar at the time and the story runs something like this.  Suppose someone is in a room giving a seminar and holds up his business card and asks who wants one.  Many in attendance will take a pass and turn down the offer.  After all, you can probably get the presenter’s contact information from the Internet, so the card has little to no value.  Now suppose the presenter says, “There is an armed man outside the door who is going to escort you to jail if you attempt to leave the room without handing him one of my cards.”  Suddenly everybody wants a card!  They simply must have it.  Now the presenter says that you must do something like tidy up the room a bit in order to acquire a card.  People went from being indifferent about having a card, to wanting one, to even being willing to work to obtain one.  That’s quite a turnaround.  And it happened because they were coerced by the threat of losing their freedom if they did not hand over the card upon leaving the room.

This is precisely why fiat money has value.  As Benjamin Franklin once said, “Nothing is certain except death and taxes.”  One way or another, you are going to have to pay your taxes, and since the issuer of a currency (in this case the United States government) only accepts payment for taxes in dollars, you must obtain dollars, just as the folks in the seminar must obtain the business cards.  And since everybody ultimately needs dollars to pay their taxes, there is simply no substitute for them.  You can talk about gold, silver or even bitcoin all you want, but in the final analysis, you must obtain money in the form of the currency with which you pay your taxes.

Pushing the analogy a little further, imagine what might happen if there are 50 people in the room but the presenter only brought 40 cards.  Everyone may be willing to work, but there are simply not enough cards to go around.  So some people are just not going to make it out of the room. These people are stuck.  In economic terms they are unemployed.  No matter how genuine their intentions, they are in dire straits – not because of anything they did wrong, but because of something the presenter did wrong – not bringing enough cards.  In other words, the root cause of unemployment is that the government has not produced enough currency.  It needs to issue and spend more in order to make it possible for everyone to get out of the room (read: to be employed).

Suppose the presenter brought 60 cards.  Some people might be willing to do some extra work to obtain extra cards and they may “employ” someone in the room to do a task for them to in order to obtain a card that they have earned.  So now cards are circulating among attendees, just as money circulates between consumers and businesses in the economy.  Some attendees may work to gain extra cards so that they will have them when they come to a future seminar. This is the equivalent of economic growth, and is of course desirable.  But at some point, if the presenter has brought and hands out an overabundance of cards, attendees who want others to do tasks for them are going to have to offer more cards per chore. The value of the cards will eventually decline in this circumstance. This is inflation, and it comes about when the government issues too much currency for the amount of economic activity people need or desire.

So there you have it.  Money has value, not because it is shiny or aesthetically pleasing.  It has value because government taxation gives it the traction it needs to have value.  And you and I reap the benefits of a stable currency within a stable economy.  The challenge is to manage the supply of currency in order to prevent unemployment and inflation.  Artificial restrictions on the federal government’s ability to manage the money supply (like a gold standard, fixed exchange rates, a debt ceiling or a balanced budget amendment) are counterproductive and must be avoided.  It took decades of the recurrence of devastating depressions, culminating in the catastrophe of the Great Depression of the 1930s before countries such as the USA learned that using a currency backed by metals such as gold was a recipe for continued needless hardship – hence the move toward fiat currencies.

Two Kinds of Entities in the World: (1) The One Who Issues a Currency and (2) Everybody Else

With its own fiat currency, concern about the federal government “running out of money” because of debt is unfounded because the federal government alone creates currency and therefore can never run out.  Note that this is NOT true however for state and local governments because they cannot create currency like the federal government can.  If they get into debt, it can mean very serious trouble.  That is why many states and municipalities have balanced budget requirements.

The same thing is true for a country that does not issue its own currency, like those in the eurozone, such as Greece, which has been facing a national debt crisis for nearly a decade now.  Read my blog on a comparison between the debts of a country with its own currency like the USA and one that does not have its own currency like Greece here.

So when the economy of a country that issues its own currency slows down, goes into recession, and unemployment rises, the government has a duty to respond by producing and spending more currency.  This will cause the deficit and the debt to rise.  Sayings such as, “businesses and families are tightening their belts, so the federal government must tighten its belt too” are erroneous because as we have seen, the entities are not comparable.  If the government fails to increase spending in such circumstances, more people will become unemployed and the recession will get worse, just as more people will be stuck in the room if the presenter failed to bring enough cards.

On the other hand, tax cuts when the economy is strong, as it is now, make no sense at all and will increase the debt for no reason other than to transfer wealth from the middle and working classes to the wealthiest, which has really been the Republican economic agenda all along.

A Government That Issues its Own Currency Does Not Need Tax Revenue to Fund its Operations, But it Does Need to Levy Taxes

Another point of the business card analogy is that the federal government does not tax anyone because it needs the money.  When you think about it, it would be absurd to imagine that the US government needs dollars from anyone, since it literally can create all the dollars it wants out of thin air.  In fact, every dollar you have in your possession or ever have had was literally created by the federal government and then spent.  Otherwise you simply would not have it.  On the other hand, when the federal government obtains the currency back, it just destroys it – literally, and then creates new currency in its place.  It doesn’t need your money any more than the person presenting the seminar needs the business cards collected by the man at the door.

Moreover, notice that taxes do not come first – federal government spending comes first.  If the presenter in the seminar analogy does not bring cards and spend them into circulation, then there would be no cards available for the man at the door to collect from the attendees.  Similarly, if the government does not spend first, there would be no dollars in circulation among businesses and consumers to collect in taxes.  Think about that the next time you hear a person complain about “tax and spend.”  They have it backwards – it is spend and tax – and without that, we simply could not have a modern economy at all.

I encourage you to watch the video where Warren Mosler gives the analogy to business cards and money in a debate he had with a “libertarian” economist. Including what I have discussed in the blog, Warren describes the differences between private and sovereign government debt, the benefits of a currency not backed by gold or other metals, and why US government spending, which is often vilified by right wing politicians and the media, is imperative to maintaining a sound economy.

Warren Mosler and Tom Blaine

Warren Mosler and Tom Blaine, 2015, Saint Croix

I had the opportunity to meet Warren personally in 2015 near his home in Saint Croix.  Here is a photo of the two of us talking economics on an 80 degree January day.  Not only is Warren a formidable thinker, he is a gracious host.

So of the two questions I posed near the beginning of the blog, we definitely have an answer to the first: why the federal government must levy taxes.  But now a question may have entered your mind that flips the second question (about borrowing) on its head: Why does the US government have to borrow money at all?  In other words, if the government can issue dollars out of thin air, why does it borrow money in the form of dollars (from, say China) to finance the debt?  We know it really does not need to levy taxes to obtain dollars, so why does it need to borrow to obtain them?

The US undertakes borrowing primarily by selling bonds to banks, pension funds, other governments, etc. with a promise to repay the money with interest by a certain date.  As we have seen, the value of the outstanding US federal debt is now approaching $21 trillion.  But if we go back to our analogy from Warren Mosler, that would be like the seminar presenter offering bonds to anyone who would lend him his own business cards with the promise that he would pay them back with interest in the future.  Why would he do that?  It doesn’t seem to make sense, does it?  Well it may not make sense, but it is the way the system works, and I will explain why in my next blog.

Tom Blaine is an Associate Professor, OSU Extension.

How Economic Developers Engage with Extension

Smith Lever Act of 1914

Credit: www.archivesfoundation.org

Extension has long been an economic development partner involved in a wide range of issues, from water quality and agricultural practices to retail and energy. Since passage of the Smith-Lever Act of 1914, Extension has provided outreach and non-formal education to strengthen lives and communities across the country.

Over the last century, Extension has continued its original mission to extend university resources while also adapting to changing times, to address a wide range of challenges and opportunities in both urban and rural areas. Extension can be found in all 50 states, with about 2,900 offices nationwide. In Ohio, over 700 Extension professionals staff offices within all 88 counties, in addition to numerous regional and state offices, that enable this outreach arm of Ohio State University to engage communities, businesses, and organizations of any size and location.

How do local economic development organizations (EDOs) find out about and engage with Extension? Typically, they hear about services and contact Extension directly, or Extension professionals reach out through workshops and forums about their programs and resources. Extension professionals are frequent speakers at a variety of conferences and meetings at the local, state, and national levels. EDOs are also often in contact with Extension professionals as co-members on boards of community and economic development organizations.

Extension has partnered with EDOs in pursuit of just about every imaginable economic development function. In Ohio, Extension was an early adopter of business retention and expansion practices, developing one of the first formal BR&E programs. Since 1986, Ohio State University Extension’s BR&E Program has developed capacity of community leaders via more than 140 programs in 77 Ohio counties, in both urban and suburban areas.

In terms of workforce development, OSU’s STEM Pathways program aims to increase youth curiosity, logical thinking, problem-solving skills, and team communication abilities, to ensure tomorrow’s workforce is highly skilled and globally competitive. Extension professionals teach the STEM program curriculum directly to students and in a train-the-trainer format for the teachers who will then deliver the program.

Energy development, including renewables and shale gas, is a focus area for Extension. New programs have been developed to help businesses and communities assess the costs and benefits of energy development. The commissioners of Wyandot County recently enlisted Extension to conduct a survey of residents and land owners on their feelings toward wind farm development. Survey findings enabled the county commissioners to decide whether wind development was a good fit for the county.

Most of Extension’s work is research-based, involving collecting, compiling, and analyzing original data through surveys, focus groups, and other outreach techniques. For instance, Extension professionals implement a variety of qualitative and quantitative tools to help communities better understand trends and conditions of their local and regional economies.

The Economic Impact Analysis (EIA) and Retail Market Analysis (RMA) programs are good examples of applied research in action. Both programs help communities measure change in their local economies to guide local decision-making. Extension professionals recently completed an EIA project to estimate the impact of tourism generated by the Lakeside Chautauqua in Ottawa County. RMA projects are frequently implemented, usually on the county level, to help inform EDOs about which retail sectors are growing and to identify gaps in the retail market.

Extension professionals and resources are also widely available online. Economic developers can find out more about Extension services on university websites, many of which have extensive links to fact sheets, blogs and social media sites. A somewhat new initiative, “eXtension,” is an internet-based portal with access to specialized information and research on a wide range of topics from land-grant universities across the country.

The pursuit of meaningful and productive partnerships is a core principle of Extension. Extension professionals seek out opportunities to collaborate on mutually beneficial projects and welcome new project ideas from economic developers and others. Economic developers can partner with Extension to leverage a wide range of useful university resources.

Nancy Bowen is an Associate Professor & Extension Field Specialist, Community Economics.

The US budget deficit, the national debt and the value of money

When someone decides whether to read something or not, including a blog post, they look at the title and determine whether it seems of interest. National income accounting (taxes, spending, the deficit, etc.) is not the most glamorous title in the world BUT maybe the part about money grabbed your attention. Conventional wisdom is that money is the root of all evil, but Mark Twain said it best when he wrote, “Money is not the root of all evil; the LACK OF MONEY is the root of all evil.” And besides, people perk up when the subject turns to money.

Humor aside for a moment, the topic of the deficit and the debt is extremely important. Remember back in 2011 and 2013 when the Congress of the United States seriously threatened to refuse to raise the debt ceiling? Remember the “fiscal cliff” of late 2012? These events caused shock waves to drive through the entire world and almost led to a catastrophe that would have severely damaged the world economy and cost hundreds of millions of people their jobs. And I am not talking about people in the financial sector. I am talking about people in all lines of work – people in communities throughout the United States. You want to talk about community development? Extension does a great job in this effort, but national recessions always rob communities of resources they need in order to thrive, despite the best efforts of elected officials, business people, or outreach educators. That is one of the reasons why I, as a faculty member in Extension Community Development, often teach and write about the national economy and government policies that can damage it or help it.

The difference between the budget deficit and the national debt

Each year the US government collects taxes from the public and spends money on everything from national defense to education. When the government spends more money than it takes in by way of taxes, it runs an annual deficit. If tax revenues exceed spending, we have a budget surplus. Budget deficits are the norm in the USA. Over the past 50 years, we only have had five years of surpluses, one under President Johnson and four from 1998-2001 under President Clinton. As deficits accumulate from one year to the next, the total amount the government owes is called the national debt. The government finances its debt by selling treasury bonds. We hear a lot of hype about who owns these bonds and what happens if they quit buying them. But the truth is that most treasury bonds are held in one form or another by the American public. Pension funds for example, put an enormous amount of the contributions they collect from workers into these bonds because they are such a safe investment. Commercial banks do the same.

Since the US almost always runs an annual deficit, it is obvious that the national debt increases over time. To many people, when they see these numbers, they become alarmed. The national debt first reached $1 trillion about the time Ronald Reagan took office in 1981. President Reagan created all kinds of useless descriptions about the magnitude of this debt – for example stating how high a stack of 1 trillion dollars would be if you piled them all up. This is not a very constructive way to describe any kind of economic phenomenon, but it does often succeed in scaring or angering voters.

The 2011 Debt Ceiling Crisis

As I explained before, the US government acquires a debt by running annual deficits over time. Those deficits are the result of the policies in taxing and spending (called fiscal policies) passed by the Congress and signed by the President. But the Congress also passes laws that limit the amount of national debt the US can acquire. This limit is called the “debt ceiling.” A debt ceiling may seem strange to you, and it really does not make economic sense, but that is what they do. It does not make sense because the debt the US acquires is just a result of the fiscal policy the Congress itself has set. It would be like a family acquiring debt by financing a house, car, etc., based on a household budget it has developed, but then setting some arbitrary debt number that it cannot exceed. Over the years however, raising the ceiling had just been a formality. After all, the Congress had raised the ceiling an average of about 5 times each under President Reagan, Bush 41, Clinton, and Bush 43. But that would all change under President Obama.

In 2010 the Congress set the debt ceiling at about $14.4 trillion. It soon became clear that the US would hit the ceiling by August 2, 2011. Once the ceiling would be reached, the US government would face the likelihood of default on its debt, and would have to take drastic measures, like refusing to pay bond holders, shutting down entire programs, refraining from paying government obligations like money to defense contractors, laying off government workers, etc. More importantly, it would almost certainly cause a US recession and a worldwide economic crisis like we had in 2008.

The Republican leadership of the Congress informed President Obama that they would only raise the debt ceiling under certain circumstances. Many insisted that the President agree to a dollar for dollar cut in government spending (one dollar cut for each dollar increase in the ceiling). Realizing the urgency of the situation, the President agreed to large budget cuts, but only those that would take place in the distant future. As a result, an agreement was reached and the ceiling was raised to $16.4 trillion, which would put off any further crisis until after the 2012 election. Essentially, the parties agreed to “kick the can down the road.”

Junk Economic Science Meets Junk Politics

One question you might be asking is why would the Republican leaders of Congress risk pushing the economy to the brink of a crisis like this? Well that is a great question. Some people really do become alarmed when they see very large numbers, say in the trillions, especially when they are tied to debt. Unfortunately, very few people and as we shall see, including economists, understand the role that national debt plays in an economy of a country that issues its own currency (see my previous blog “Could America Become like Greece?”).

It turns out that a year before the 2011 ceiling crisis, a pair of very well-known economists (Carmen Reinhart and Kenneth Rogoff  – hereafter R&R) published an article in the American Economic Review that purported to show that countries with high debt levels experience low rates of economic growth.

Now, if this notion were true, it would provide quite a bit of rationale for “deficit hawks” and others who wish to maintain a debt ceiling or impose a balanced budget requirement on the US government. But some enterprising and skeptical economists soon got hold of the data that R&R used. Thomas Herndon, Michael Ash and Robert Pollin – (hereafter HAP) showed that R&R had omitted a great deal of the data and had coding errors in other parts. These are egregious mistakes, and when HAP corrected them, they showed that the conclusions R&R had made were completely false. R&R acknowledged some of the mistakes fairly quickly, but they denied others, and have since doubled down on the basic claim that high national debt is associated with low growth, even though scholars like HAP have shown that this is simply not the case. Unfortunately, the erroneous view provided by R&R continues to provide cover for politicians who want to maintain the national debt as an issue over which to fight.

The 2013 Debt Ceiling Crisis

At the end of 2012, just after the re-election of President Obama, the US was about to reach the new debt ceiling of $16.4 trillion it had set in 2011, along with a related threat called the “fiscal cliff.” The Congress and the President agreed on a set of continuing resolutions that kept the government funded until October 1, 2013. On this date, the government began a partial shutdown by laying off slightly more than three quarters of a million workers. The Treasury Department warned that even with the layoffs, the government would default by October 17th. On October 16th, the Congress passed a resolution that suspended the debt ceiling. All federal employees went back to work and received full payment for the time they had been laid off. The crisis was over. Seeing the public opinion numbers, Senator Mitch McConnell (R-Ky) vowed that the Congress would not force a ceiling crisis or a government shutdown again. A dreary and completely unnecessary saga in the history of American political economy had finally ended.

Aftermath and Outlook

And the national debt? Well it has risen from $16.7 trillion in October 2013 to $19.8 trillion in July 2017, and is currently rising at $602 billion per year. So, why don’t we hear much about it anymore? I mean, if the debt was a problem at $14 trillion in 2011, and worth a partial government shutdown at $16 trillion in 2013, surely it is a tremendous threat at nearly $20 trillion now – right? It stands to reason, doesn’t it? No, the truth is, it doesn’t, because the national debt was never a problem to begin with. And the alarmists who said it was, whether they were economists who were incompetent or worse, or whether they were politicians who had an axe to grind with a President they wanted to humiliate, dragged the country through years of uncertainty and alarm over nothing.

So you might be wondering – if the government can just run up debt to pay for what it wants, why have taxes? Just borrow the money, right? The answers to those questions lie in the final part of the title to this blog – the part about the value of money. Taxes are used in part to pay for government expenses – that is true. But taxes are what provide the foundation for the value of money. That’s right, the reason that those paper bills and coins you carry around, or those digits on your computer screen when you check your bank account balance or make an online purchase have value at all is because of taxes, as we will see in detail in my next blog.

References

Herndon, T., Ash, M., & Pollin, R. (2014). Does high public debt consistently stifle economic growth? A critique of Reinhart and Rogoff. Cambridge Journal of Economics, 38(2), 257-279.

Reinhart, C. & Rogoff, K. 2010. Growth in a time of debt, American Economic Review, 100 (2), 573-578.

Tom Blaine is an Associate Professor, OSU Extension.

Great Lakes Sea Grant Network Set to Rock in Cleveland this Summer

University faculty, educators and staff involved in the Sea Grant College program throughout the Great Lakes region will converge in downtown Cleveland for the Great Lakes Sea Grant Network meeting hosted this year by Ohio Sea Grant from June 5-8.

GLSGN Meeting Logo

Credit: Ohio Sea Grant

Why is this important? For 50+ years, the National Sea Grant College program has worked to create and maintain a healthy coastal environment and economy. The Sea Grant network includes 33 programs based at top universities in every coastal and Great Lakes state, Puerto Rico, and Guam. The programs of the Sea Grant network work together to help citizens understand, conserve and better utilize America’s coastal, ocean and Great Lakes resources.

A partnership between universities and the federal government’s National Oceanic and Atmospheric Administration (NOAA), Sea Grant directs federal resources to pressing problems in local communities. By drawing on the experience of more than 3,000 scientists, engineers, public outreach experts, educators and students from more than 300 institutions, Sea Grant is able to make an impact at local and state levels, and serve as a powerful national force for change.

Sea Grant invests in high-priority research, addressing issues such as population growth and development in coastal communities; preparation and response to hurricanes, coastal storms and tsunamis; understanding our interactions with the marine environment; fish and shellfish farming; seafood safety; and fisheries management. The results of this research are shared with the public through Sea Grant’s integrated outreach program which brings together the collective expertise of on-the-ground extension agents, educators and communications specialists. The goal is to ensure that vital research results are shared with those who need it most and in ways that are timely, relevant and meaningful. For more information, please visit the Ohio Sea Grant website above or the National Sea Grant College program website.

Joe Lucente is an Associate Professor and Extension Educator for the Ohio Sea Grant College Program.

Working Together to Strengthen Ohio’s Economy

How does Extension better address vacant storefronts, underemployment issues, and help inform local economic development strategies? It engages local Extension professionals in a day-long in-service focused on building their familiarity with ‘Community Economics’ programs. A few weeks ago CD professionals learned more about economic development tools they can use to better impact communities throughout Ohio. The workshop featured familiar – and not so familiar – programs being conducted throughout the state to address the on-going economic concerns many Ohio communities are facing.

BR&E Training

David Civittolo explaining BR&E Program assumptions.

Discussed were tried and true programs such as Business Retention & Expansion (BR&E), first delivered by OSU Extension in 1986, as well as the popular First Impressions program which has been used by Extension systems throughout the country as a way to gain authentic visitor insight about ways to improve communities. The more recent (and technical) Economic Impact Analysis (EIA) and Retail Market Analysis (RMA) programs were also shared. With a little training, both can provide a wealth of information about how local economies work, informing strategies for use by local development officials.

Nancy Bowen

Nancy Bowen discussing various outcomes of BR&E.

Senior Extension staff members David Civittolo, Myra Moss, Eric Romich and Nancy Bowen convened participants and led discussion focused on how the various programs can be applied locally, including, for example:

  • “Estimating the economic impact of a ‘typical’ farmer’s market”
  • “Learning more about residents’ perceptions of community services”
  • “Identifying development opportunities in a central business district”

Participants left equipped with a better understanding of some of Extension’s economic development tools and how to apply them in their own communities.  After the one-day workshop, participant Trevor Corboy indicated that he felt ready to put these tools into action in a number of Clermont County communities.

Find out more about these and other community economics programs and how they can be put to work in your community by contacting any one of the presenters above. For basic information, visit our Economic Development program page.

Every one of us lives in a community. Let’s work together to make them better!

Nancy Bowen is an Associate Professor and Extension Field Specialist, Community Economics.

Time to Hit the Road: Business Retention and Expansion Heads South

What do Macedonia and the Ukraine have in common and how are these countries similar to Indiana, New York, South Dakota and Florida? For good measure, let’s add Guam too (the tiny U.S. island territory in Micronesia in the Western Pacific).

Still not sure?

Answer: Ohio State University Extension Community Development professionals have delivered, shared and taught Ohio’s Business Retention and Expansion program curriculum in all of them!

As recently as two weeks ago, Extension CD professionals David Civittolo and Joe Lucente visited with colleagues at the University of Florida to deliver a three-day train the trainer program. Twelve University of Florida Extension agents learned the nuts and bolts of the traditional BR&E program and were also introduced to a newly-revised curriculum module: BR&E for Agri-business.

Since the 12 attendees were mostly Agriculture agents, the curriculum enabled them to better understand how to conduct a BR&E program focusing exclusively on agri-business clusters.

A highlight of the program was that the agents conducted actual business visits using an agribusiness questionnaire that they helped create. After the business interviews, the agents presented the information that would be most useful to the local stakeholders and the business community they surveyed.

For example, one business indicated during an interview that they needed assistance purchasing more locally grown vegetables for their high-end restaurant. As a result of the interview, Florida Extension agents were able to put the owner in touch with a local greenhouse that is in a position to provide more locally grown vegetables.

Since 1986, OSU Extension has partnered with local officials and residents in 155 communities located in 80 of Ohio’s 88 counties to better inform community decisions and help existing businesses grow and expand. To learn more about the program, the BR&E materials and how we can help your community contact David Civittolo or go.osu.edu/BRnE.

David Civittolo is an Associate Professor and Field Specialist, Community Economics. He co-leads OSU Extension’s Community Economics Team.

Transforming a School; Transforming a Neighborhood

How do you help support an organization which aims to transform lives through education, job training, and local job growth through entrepreneurship development? If it is the Reeb Avenue Center in the south side of Columbus, you meet up with a colleague for lunch in their South Side Roots Café and Market.

The Center was once the Reeb Elementary School (circa 1904). The school served the South Side neighborhood comprised of immigrants from central and Eastern Europe, Africa, and Appalachia, many of whom worked in the area’s steel and glass industries. After experiencing the post-war boom period in the 1950s-60s, the neighborhood began a slow and steady economic decline.

Over the past year, the Rereeb-avenue-centereb Elementary School has been transformed into the Reeb Avenue Center; a hub for new investments in social, cultural, human, and built capital. Today, the school houses offices for over a dozen different non-profit agencies such as Boys & Girls Clubs of Columbus, Godman Guild, and Mid-Ohio Foodbank. One of the building’s former classrooms serves as  a satellite location for the Franklin County Extension team as well. Together, these Reeb Center partners having been working to build a prosperous and sustainable south side community.

Part of the center also serves as a gathering place for community members to join others in a meal and purchase fresh produce. The South Side Roots Café (run by the Mid-Ohio Foodbank) is located on the ground level in the area that formerly housed the school kitchen and cafeteria. Combined with a variety of seating options, reading materials, and local art, it makes an ideal venue for building community with others as a patron or volunteer. In addition to daily lunches, a weekly meal is offered every Tuesday evening that accepts a variety of payment options (full price, full price and ‘pay it forward’, and volunteered time in place of payment). A Kids Café is also available for participants of the Girls & Boys Clubs programming.

To learn more about the Reeb Avenue Center or the South Side Roots Cafe, take a closer look at their webpages or plan your own visit when you are in the neighborhood at 208 Reeb Avenue, Columbus.

Greg Davis is the Assistant Director for OSU Extension, Community Development.

BR&E Program Focuses on Lake County Agri-business Industry

Ohio’s ag industry as a key driver of continued economic growth in Ohio and across the region? Representative John Patterson (99th Ohio House District) thinks so. He recently shared his enthusiasm for Ohio’s agricultural industry as a key growth sector for the Ohio economy. Others in the northeastern part of the state have a similar enthusiasm as well.

lake-county-bre-report-draftRecognizing the importance of the agri-business industry, the Ohio Sea Grant College Program and Ohio State University Extension partnered with Lake County organizations to carry out a Business Retention and Expansion (BR&E) Program. Local partners included: the Lake County Soil and Water Conservation District, Lake County Development Council and Ohio Farm Bureau. As a result of this local applied research effort, the local partners and other community leaders are better able to assist ag-focused businesses in the area to achieve their growth objectives and to improve the overall business environment for Lake County’s agri-business industry.

As a result of the BR&E program, Lake County partners have learned that:

  • Twenty-three businesses plan to expand, modernize or renovate their businesses; six of them plan to hire additional employees within twelve months. These firms will add between 53-150 new full-time equivalent jobs.
  • 150 additional new jobs in Lake County could generate an estimated $155,551 in additional income tax revenue and could contribute an additional estimated $1,137,700 in personal income to the Lake County economy.

While attraction of new businesses is a highly visible activity in most community and economic development programs, research has shown that a community’s existing businesses account for up to 70% of all net change in local employment (and up to 86% in rural areas). The BR&E Program conducted in Lake County aims to:

  • Identify and address concerns and issues of existing businesses by creating a value-chain of partners, including local and state government as well as private organizations and enterprises
  • Identify opportunities to stimulate local job growth, and
  • Establish and maintain long-term relationships among public and private entities associated in some way with Lake County’s agri-business industry.

Click here to read more about the Lake County program or to view the final report. Click here to learn more about the Ohio BR&E Program.

Joe Lucente is an Associate Professor and Extension Educator for the Ohio Sea Grant College Program and Ohio State University Extension.

BRE: 30 Years of Community Economic Impact

This year marked the 30-year anniversary of an Extension program that’s been delivered in nearly every county of Ohio. After 30 years, do you believe the program could still be relevant?

In just the past three weeks, two requests and a highly anticipated software announcement underscore the innovation and ongoing importance of the Business Retention & Expansion (BRE) program first conceived by OSU’s Leroy Hushak and George Morse in 1986. First, the two requests: 1) a WVU Extension Educator recently called to ask if the BRE program could serve as an effective response mechanism for a number of West Virginia counties that experienced significant flooding this summer, and 2) a new OSU Educator recently inquired about whether BRE could be used to address business gaps within a neighborhood or village setting. The answer (of course):  Yes, and yes!! 

mobile-app-2016-09-15Next, an announcement was made last week regarding a new BRE-customized mobile application that is now ready for commercial release. The mobile application is a highly anticipated outcome of a North Central Regional Center for Rural Development (NCRCRD) multi-state collaborative grant project to elevate and expand the BRE program in the region and throughout the U.S. The team of Ohio, Indiana and Iowa researchers identified the application as a way to revolutionize how data is collected for BRE tracking and reporting. A demonstration and presentation of the mobile application will take place at the International Economic Development Council (IEDC) annual conference September 25 in Cleveland (see program description and speakers below).

BRE began as a comprehensive and innovative program that brought structure to what had been informal efforts focused on improving communications between communities and companies. Since then, the formalized program has been implemented in communities of all sizes and has become a staple for many local, regional and state economic development programs throughout the world. It continues today as a dynamic program to promote business growth, job creation, and healthier economies.

A 2009 national survey found that 62% of cities and counties were doing BRE surveys with their businesses and 82% were partnering with chambers of commerce or others in BRE efforts. Despite widespread use of the program, there has been little research into best practices and how to measure the impact of ongoing BRE programs.

OSU Extension has collaborated with the IEDC to plan and organize a workshop that will explore the impact of BRE at the upcoming IEDC conference at the Huntington Convention Center of Cleveland. It will highlight case studies presented by program representatives, demonstrate new innovations to operate or evaluate BRE programs, and offer an interactive roundtable discussion of current BRE best practices.

It is our goal that attendees will learn:

  • How BRE is used as a central component of economic development strategies
  • New methods to measure the impact of BRE
  • Best practices focused on data collection, analysis and reporting techniques

The workshop will involve the following speakers, several of whom work in Extension:

Moderator: Gwen Eberly, Economic Development Manager, Montgomery County/Community & Economic Development, Dayton, OH

Speakers:

  • Rick Berthiaume, Manager Economic Development, Ministry of Agriculture, Food & Rural Affairs, Guelph, ON, Canada
  • Nancy Bowen-Ellzey, CEcD, Associate Professor and Field Specialist, Community Economics, Ohio State University Extension, Lima, OH
  • David Civittolo, Associate Professor and Field Specialist, Community Economics Ohio State University, Wooster, OH
  • Michael Darger, EDFP, Community Economics Specialist, University of Minnesota Extension, St. Paul, MN
  • Greg Davis, Assistant Director, Ohio State University Extension, Community Development, Columbus, OH
  • David J. Myers, CEcD, Executive Director, Ponca City Development Authority, Ponca City, OK
  • Brent Painter, Director of Economic Development, City of Strongsville, Strongsville, OH
  • Will Warren, CEcD, Consultant, Solutions Delivery, JumpStart Inc., Cleveland, OH

For more IEDC program information or to register, go to http://www.iedcevents.org/AnnualConference/Program.html.

 Nancy Bowen-Ellzey is an Associate Professor and Extension Field Specialist focused on Community Economics.

Improving Storm Hazards Resilience in Coastal Communities

Boasting beautiful beaches for sunbathing and swimming, healthy populations of walleye and perch for sport fishing, and plenty of open water for boating, Lake Erie brings both economic gain to coastal communities and enjoyment to recreation seekers. But, despite all of the fun being had in the sun, did you know that coastal storms that blow across the Lake before touching land on Ohio’s north coast bring their fair share of problems, too?

coastal-storms-2-2016-09-08Coastal storms and resulting flood events have historically been the most destructive natural hazards in northern Ohio. In fact, Ohio’s Hazards Mitigation Plan names flooding and coastal flooding as the top two most important hazards impacting the entire state. In Cuyahoga County alone, storms and heavy rains are responsible for over $650 million in damages since 1950. Making matters worse, the impacts of coastal storms are not limited to just flooding. Other hazards caused by storms can include erosion of river banks and coastline, damage to transportation routes and public utilities, combined sewer overflows, dangerous currents in the Lake, and runoff that can contribute to the formation of harmful algal blooms.

To prepare for coastal storms, it is important to understand who is most vulnerable. That is, who has the greatest potential for loss of property, infrastructure, or even human life. Some of the factors that influence a person or community’s potential for loss from natural hazards like coastal storms include: frailty and physical limitations; lack of access to resources (information, knowledge, technology); limited political power and representation; eroded social networks and connections; dilapidated building stock; and poorly maintained infrastructure (Cutter et al., 2003).

Identifying populations that are most vulnerable can help local decision makers create plans for building resilience to storm hazards. More importantly, valuable resources for hazards mitigation can be targeted at the populations that are the most in need.

This has become a priority in the Great Lakes region in recent years with the support of the National Oceanic and Atmospheric Administration (NOAA) Coastal Storms Program (CSP). The CSP seeks to make communities safer by reducing the loss of life and negative impacts of coastal storms via collaboration with academic institutions like The Ohio State University, government agencies, and even nongovernmental organizations to address regional priorities.

Another source of support for coastal storms research and outreach comes from the NOAA Office for Coastal Management. Specifically, their Digital Coast website provides users data, tools, and training needed to increase resiliency to severe storms and other issues facing coastal communities.

If you are interested in knowing more about how to make our north coast safer and more ecologically and economically sustainable for local populations and tourists alike, check out these additional efforts to better understand and prepare for coastal storms in the Great Lakes.

Scott Hardy is an Extension Educator with the Ohio Sea Grant College Program.


Cutter, S., Boruff, B., and Shirley, W. 2003. “Social Vulnerability to Environmental Hazards.” Social Science Quarterly: 84 (2) 242-261.

Cuyahoga County Office of Emergency Management. 2011. “Countywide All Natural Hazards Mitigation Plan.” Web reference accessed 8.16.2016. < ja.cuyahogacounty.us>

Ohio Department of Public Safety. 2011. “State of Ohio Hazard Mitigation Plan.” Web reference accessed 7.25.2016. <ema.ohio.gov/Mitigation_OhioPlan.aspx>.