I know Megan isn’t just trying to goad me, but it kind of feels like Megan is trying to goad me:

There’s a lot of angst out there over whether products like Starbucks that seem somehow emblematic of an era of wasteful spending will outlast the current downturn.  The other day it occurred to me to wonder if the same isn’t true of US cities.  The first model for an urban renaissance was, after all, New York.  But while New York’s renaissance was certainly a product of a lot of factors, all of the institutional improvements were funded by the post-1982 financial services boom.  New York City is projecting its 2010 revenue will be down 30% from FY2008.  That’s three years after the recession started.

Those tax revenues supported New York’s extraordinarily odd income structure.  New York has extraordinarily generous poverty benefits, made possible because so many of its residents make so much money that they don’t really miss the extra taxes.  A city with a more normal income distribution couldn’t support that level of spending.  So if the financial industry really is permanently smaller and less lucrative, what happens to the 650,000 New Yorkers in public housing, the one in three New Yorkers on Medicaid, the 50,000 or so on TANF, and so forth?

Presumably they get fewer services, and get angrier, and commit more crimes, which don’t get solved as rapidly by the smaller police force.  And the families with children start moving back out.  And presumably this problem is replicated in cities like San Francisco and Seattle which depend, indirectly, on revenue generated by the financial markets.  (That is, after all, what a stock option amounts to.)

Several points. First, the urban renaissance was not about the financial market boom. The events were coincident in New York City, of course, and the huge boost to tax revenues there helped the process along, but the rejuvenation of center cities has been far too widespread to be attributable to a boom in the financial sector.

In fact, the shift can largely be explained (I think) by three major factors. One is the change in information and communication technologies, which has increased the return to locating in central cities for many professional and knowledge-driven industries. Another is a demographic shift away from households with children; Boomers are now empty nesters and their kids are having fewer kids. That has significantly dulled the attraction of suburbia. And finally, there are shifts in the cost of suburban life. In particular, the last decade has entailed a steady and substantial rise in both congestion and the price of gasoline. The latter factor has ebbed in recent months with the onset of deep recession, but for the most part these forces are unaltered.

The second big point to make is that Megan’s prime mover in this scenario — a resurgence in urban crime — is not showing up in the data. Through the first quarter of the year, crime in New York was down substantially. The same is true here in Washington, where a rash of recent shootings obscured the point that homicides are off nearly a quarter from last year’s pace. And last year’s pace is miles away from the murder rates that prevailed back when families were still fleeing the city.

And finally, what’s the better alternative? Megan lives here in Washington, she should ask herself: have recent economic changes made her look more favorably on a move to, say, Prince William County? Sure, home prices in the exurbs are off some 40%, a much greater decline than has been seen in the center city. But there’s a reason for those dramatic falls. Excess supply, for one. In Washington’s exurbs, some neighborhoods sit half empty and blighted. Strip malls are filled with vacant storefronts. Municipal bidgets have been hammered by the drops in property tax revenues. Services have been cut, and crime has been increasing in suburban settings. And once one has plopped himself down in the middle of that, he still has to drive miles to work everyday.

It seems to me that while the recession has hurt center cities in many ways, it has left them in better shape than their suburban outskirts.