The blue social model is collapsing. So proclaims Walter Russell Mead, one of the most thoughtful observers of the contemporary scene (and, I should add, a co-founder with Sherle Schwenninger, Ted Halstead and me of the New America Foundation). In a series of posts at his blog, Via Meadia, he argues that the blue social model of liberal cities like New York and San Francisco is doomed. That model depended on taxing a small number of super-rich rentiers in the FIRE (Finance, Insurance, Real Estate) sector to fund generous public services for the urban poor. Economic development policy focused on amenities for affluent professionals, who flocked to trendy neighborhoods in big blue cities even as rising real estate prices drove productive businesses and the middle and working classes out to the suburbs or the South and West.
Now, according to Mead and the economic geographer Joel Kotkin, the blue model is in crisis. The revenues of blue states and cities have cratered along with the portfolio of many (but not all) hedge fund managers and Silicon Valley tycoons. Raising taxes on the undertaxed rich is a good idea, but it is no substitute for economic diversification and productive industry.