Suburbs: The Great American Ponzi Scheme

Starkey Baker
Candide Group
Published in
18 min readApr 12, 2022


“How are we going to stop?!” I screamed as we peeled off I-35 doing 65.

“I DON’T KNOW!!” mom screeched back, frantically stomping the brake pedal in vain.

We were on our way to school before dawn, hoping to avoid the Northbound traffic into Oklahoma City. This was just weeks after major, life-altering surgery that left her unable to lift more than a few pounds. Pressing the pedals at all was excruciating and even a minor crash could have easily been fatal.

We lived in Oklahoma, a state which ranks near the bottom in most quality-of-life metrics in the US, but mom and I were determined to beat the statistics. I attended Harding Charter, a school that has set the standard for education in Oklahoma. Most schools near me and throughout the urban area had terrible graduation rates on top of being far away. Even Harding struggled to get up-to-date books and supplies, but it was still the best chance we saw to go to college and make our run at the American Dream.

Aerieal view of sprawling suburbs. Near identical houses over and again for miles.
Suburban sprawl outside of Las Vegas, Nevada. Credit: Lynn Betts, USDA Natural Resources Conservation Service, image is in US Public Domain.

While I’d say now that I’ve largely succeeded, graduating high school and eventually college, that is despite one systematic barrier after another. I didn’t realize then how history, politics, culture, and finance are so intimately woven together.

Who we are now as Americans has been shaped by the laws of the past, and those were tailored to the interests of voters at the time. This is somewhat obvious in hindsight, but it escapes notice easily: we are living in the world imagined by the past.

Reflecting on this, we need to take a collective step back and understand why things in America keep breaking (literally and figuratively). It would be foolish to center all of the US’ problems on any one single issue and I won’t do that here. I will instead make the case that suburbs have done far more damage to all levels of society than we can imagine and they all but require a Ponzi scheme that fosters a dangerous and expensive world.

It has nothing to do with a preference for suburbs over cities, but about understanding the kinds of compromises that Americans have historically made to ensure the illusory success of endless sprawl. Critically, this essay is also about the reality that America’s car dependence was and continues to be an evisceration of the American Dream for all.

I. Unspoken Rule of America: If You Can’t Afford It, Sucks to be You

Person in sweater and jeans with belt turning their pocket inside out to show a lack of money.
Credit: Pixabay

My mom wasn’t planning to have her brakes just cut out on the highway if that wasn’t clear. We stayed in Moore because the recent passing of a family member opened an inexpensive place for us to live. She was maxing out her disability at work and relied on a constant donation of sick days. Even then, most of these days weren’t paid. Car maintenance, while literally life-and-death, just wasn’t as pressing as food or trying to keep me in school. Making this worse, mom worked in social services. Her job had been to help the elderly and disabled access life-saving benefits. Her Social Security application took years, and was denied multiple times on technicalities — though it was eventually approved and she was granted limited back-pay.

While very personal, I feel I have to lay this out because I live in the US. I know that by default, my mom will be blamed for any dangerous circumstance we lived through unless I can remove any possible doubt that this was her fault. And even then, some will say that she should have just found the money. Somehow. Or that she should have gotten a different degree, trying to rework her life without context.

Americans (and I’m as guilty as the next), presume that the “right” or “prudent” choice at any given time is obvious. What we ignore, however, is the realities of life. It’s rarely something so binary as choosing to maintain your car or not, or the choice between an extra hour of sleep, or fast food. And the compounding effects those choices have are often beyond the capacity we allow citizens. If we are tired, no one thinks that maybe the city should have been planned better to allow jobs closer to people’s homes.

We are human beings, basic necessities have enormous impacts on our ability to think clearly. We’ve all surely been hangry, right? Or exhausted? We build cities that cause these problems, that take away all the breadth of choices that life can give, and say there is one right answer: the single-family home with a driveway and family that spends one to two hours in their car.

Destroyed cookie-cutter housing development following major tornado.
One of my more eventful days, and perhaps the only thing Moore, OK is known for — colossal, record-breaking tornados. Credit: NOAA image is in US Public Domain

The core idea of the American Dream — that you can build wealth and bring yourself out of poverty — has been steadily declining since the 1850s. The reasons for this are many, but research shows that the single biggest factor is access to reliable transportation.

It’s the broad homes, wide lawns and the car-bound family, in fact, that’s killed the American dream.

Where you can go determines what opportunities are literally within reach. With well-developed mass transit, the poor don’t have to buy and maintain their own vehicle, they don’t have to get insurance, or maintain their concentration while driving. These effects add up, and they are born overwhelmingly by the poor.

In fact, commuting time specifically is so important that it outweighs education, exposure to crime, and the presence of two parents in determining lifetime outcomes for children, particularly escaping poverty.

And the outcomes for one generation, in turn, are well-known to have substantial effects on future generations. Commuting time is also one of the largest factors in your lifetime happiness: how you get to work matters. Those that can walk or bike are much happier overall than those taking other modes. What might not be intuitive for everyone, however, is that taking buses and trains also significantly outperforms taking private transportation like cars on the happiness scale. It’s not just the environmental impact of cars that we need to be worried about — the way we’ve constructed the United States’ culture of car supremacy is a crime against our wellbeing, our people’s futures, and draining city, state, and national budgets.

As many return back to non-digital life after a year of remote work and school, let’s keep in mind that all this data points to the fact that people have better, more accessible, more successful, happier, more fulfilling lives when communities are built so walking and biking commutes are feasible options. So if car-centric urban planning actually reduces our freedom and our prosperity and our happiness, why are the US and Canada locked into it? The answer, as it so often does, comes down to money.

II. America Was Eviscerated For the Car

Over the past few decades, more than $50 trillion has been moved from America’s poor to the wealthy, according to a study by the non-partisan Rand Corporation.

When this figure was released in 2020, it resonated with many Americans. It seemed to represent a concrete number explaining how wealth inequality got so dramatic in the US. What that study didn’t examine, however, was the why and the how of this wealth transfer. But other studies clearly connect these dots for us.

Aerial view of busy Brainerd Street downtown in the early 20th Century. It is bustling and lively, without being overly crowded.
Credit: Brainerd Archive, Public Domain

Prior to the first World War, American cities largely developed like their global siblings. Brainerd, Minnesota looked similar to parts of Paris or London — bustling community centers worthy of reverence. Oklahoma City was connected by streetcars that ran for dozens of miles, connecting several outlying areas like Norman to the city core.

Many American cities developed streetcars and similar infrastructure. These were boons for their time, and people took billions of streetcar trips across the US. That began to shift thanks in part to the aggressive campaigns by car, oil, steel, and tire companies to quell public fears about car safety — prescient concerns as even with decades of safety engineering, driving is still quite dangerous. Once the private automobile had some momentum, though, it was easy to pose buses and trains as vestigial.

For the better part of a century, the vision of prosperity America sold to the world was one of big engines, wide roads, and massive homes. That image, far from being a prelude to or even an example of success, was financed by US taxpayers.

For a typical city, growth happens organically. New areas are built up. Often of moderate density, this kind of expansion keeps shops and residences close together, and allows them to reorganize as need arises. This growth is steady, incremental, flexible.

They aren’t perfect, but they’re human, organic, and most importantly as adaptable as the people that built them.

In the rush for suburban lawns and cars, though, the US began the suburban experiment — building entirely new developments, complete with roads, schools, sewers, commercial districts, and emergency services. This was a prime example of induced demand, where the economic assumptions distill to: if you build it, they will come.

Places like Levittown sprung up almost overnight, and the newly (white) middle class flocked to these vibrant, modern areas — often implicitly or explicitly to avoid people of color. Constructing entire new communities without Black or Brown people and “protected” in a little steel envelope to and from work. Isolating, dividing, and ultimately destroying what fragile semblance of unity the US had.

While the gradual bankruptcy of American cities by government investments into suburbs is the core of this piece, I’d be perverting history to not also highlight the immediate and catastrophic impacts this had.

After the 1956 Federal Aid Highway Act, many states were under pressure to invest that money into their communities. But, of course, this investment would involve leveling thousands of existing buildings and infrastructure in densely populated, urban areas.

For cities like St. Paul, Minnesota and Detroit, Michigan the choice was clear: bulldoze the Black neighborhoods to make room for the roads white folks would need to get from the financial center to their segregated suburb.

Side-by-side comparison of a section of destroy. On the left, moderate-density housing, a healthy, vibrant neighborhood. On the right, broad, empty highway.
These pictures are the same place, two years apart. Hastings Street was a major, Black community and it was leveled for the Chrysler Freeway. Credit: Detroit Historical Society

This alone would be too high a price to pay, especially considering that most people dislocated by highway projects were paid a fraction of its value. Making matters much, much worse, of course, is the fact that these bets on suburbia were incapable of ever being financially solvent.

“Over a life cycle, a city frequently receives just a dime or two of revenue for each dollar of liability,” writes Charles Marohn, a civil engineer from Minnesota. Over time, he noticed that the projects he was building were bankrupting the towns and cities they were supposed to help.

The numbers vary by locale, but the figures are stark. For an apples-to-apples comparison, Marohn examined two properties just feet from each other — along the same stretch of poorly-maintained suburban street-highway melange. One block, built up in the 1920s, is broken up into about ten parcels. It’s basic, cheap, functional, and flexible. And many shops and residences have come and gone as need has waxed and waned.

Two blocks away, a similar sector of development was bulldozed and replaced with a single Taco John’s and its gargantuan parking lot. The shiny, brand-new development starts its life-generating 41% less tax income than its end-of-life sibling just two blocks away. Not because there’s anything wrong with Taco John’s per se, but because so much of the usable land is allocated to parking, a drive-thru, etc. and those aren’t good uses of space. Cars are just too big.

This is the most productive that Taco John’s will likely ever be, and it is thriving, but at the cost of a chunk of tax revenue that could have been re-invested into the town.

Developments, if they are designed from the bottom-up for the car, don’t make enough money to justify demolishing old structures for them. As soon as the pretty new properties are built up, they’re already hemorrhaging cash.

III. Why is it a Ponzi Scheme and Where’s Our Money Going?

Graph comparing Nominal GDP to both Public and Private debt liabilities, demonstrating that private sector debt, has become completely decoupled from public sector debt and Nominal GDP.
Credit: Strong Towns

Ponzi schemes are among the oldest and most prevalent kinds of scams. They work by promising high returns, usually well above that of other investment plans. This attracts clients and investments, which get the plan rolling. Those high returns are fictional, covered by the investments of new partners.

As shown, since new developments immediately cut the incoming tax base, towns can be forced to physically expand to compensate and sustain financial solvency. This growth often takes the form of taking in grants from state and local governments, expansion of infrastructure to develop the area, and then new debt to finance the construction of homes and businesses. All of this is done without reinvesting into the areas that have already declined.

New developments provide the illusion of prosperity, and help encourage further investment into the scheme.

“In the late 1970s and early 1980s, we completed one life cycle of the suburban experiment, and at the same time, growth in America slowed. There were many reasons involved, but one significant factor was that our suburban cities were now starting to experience cash outflows for infrastructure maintenance. We’d reached the ‘long term,’ and the end of easy money,” Marohn says.

“It took us a while to work through what to do, but we ultimately decided to go ‘all in’ using leverage. In the second life cycle of the suburban experiment, we financed new growth by borrowing staggering sums of money, both in the public and private sectors. By the time we crossed into the third life cycle and flamed out in the foreclosure crisis, our financing mechanisms had, out of necessity, become exotic, even predatory.”

The mechanisms that drive this — banking, real estate, construction, and more — cannot stop without the bulk of the economic engine of North America slamming to a halt.

When the buyers run dry, contrary to the laws of supply and demand we all learned in grade school, the “Invisible Hand” puppets the market to make new ones, as we saw in the 2008 financial crisis.

(Though it’s important to note that many, perhaps most, of the sub-prime mortgages were refinanced, which has other implications that go beyond the scope of this piece.)

Thinking about cities in these kinds of financial terms might seem reductive, but it’s essential because it’s a big piece of understanding the current state of the American experiment, and, more importantly, what can be done.

With so much public financial liability, it’s become untenable for cities to invest in the kinds of institutions and incremental change that do bring real returns — such as much-needed public transportation — because they’re already so over-leveraged they must keep building roads even when they can’t maintain what’s there.

IV. “The Finance of Poverty

Education, healthcare, and more have suffered time and again. For now, we’ll set these aside. The effects of any of one of which should be enough for us to reconsider the role cars and suburbs have in our society. But we don’t even need to talk about far-off, tangential effects, because the sprawling nature of American cities also often necessitates a car, which, for the poor, is dead weight.

Hurricane Katrina claimed nearly 2,000 lives. Almost all of whom were impoverished, elderly, People of Color, who lacked reliable access to public or private transportation. This is fundamentally unfair as it creates a damned-if-you-do/damned-if-you-don’t conflict. You can either spend a massive chunk of your paycheck on buying, maintaining, and insuring a car, or you can trudge through the hollowed-out mass transit systems. And recall again, that most cities in the US, and New Orleans in particular, had thriving streetcar systems. That transit even forged the very same communities that gave New Orleans its iconic slice of Americana.

“We did not build the Eiffel Tower so we could get Paris,” Marohn says in his 2021 TedxMidAtlantic talk. “We didn’t build the Colosseum so we could get Rome. They were the celebrations and culminations of many generations of work.”

When my mom and I were driving to school, her brakes went out because she couldn’t afford to maintain them. Bus access was non-existent. My neighborhood, at that point of my life anyway, was a cold and sterile place. Commutes were 30 minutes to an hour both ways, meaning that even though my mom was recovering from surgery and unable to work, as a single parent she had to subject herself to the pain and stress of rush hour traffic for at least an hour a day. My own health, too, likely suffered. Such car trips are awful for the physical and mental well-being of children, and commutes over just 15 minutes, in general, contribute more to unhappiness than almost any other single factor.

The costs of transit are carried by the poor daily. Not just financially, but in stress, trauma, risk, and liability. And what is to be gained from all of this? Who benefits?

Fundamentally, very few. The mechanisms of American finance are not totally transparent to the public, but what is known suggests that there are lots of ways the exceptionally wealthy — not even the top quintile, but the top percent or less — are able to convert public debt into private holdings.

Aerial view of an ostensibly ideal city of the future. Broad, empty highways stretch between towering skyscrapers. The cityscape is sterile and not too far off from many 80s cyberpunk dystopias.
This exhibit from the 1939 New York World’s Fair, dubbed “Futurama,” is exactly how you get dystopias. No part of this city is designed for people. It’s designed for heavy machinery — cars. Credit: Library of Congress

Since the 1980s, the top percent of households have financed a significant portion of the overall rise in household debt for the lower 90% according to University Chicago Booth School of Business professor Amir Sufi. Alongside colleagues Atif Mian and Ludwig Straud of Princeton and Harvard, respectively, Sufi argues what we all know — the rich have gotten richer, and the poor have gotten poorer. And, according to these professors’ research this glut of savings among the wealthy has also financed unproductive debt, more financial instability, and a decline in savings for the overwhelming majority of Americans.

What hasn’t gone to those hands has largely been wasted. The maintenance of gargantuan road, sewage, power, and other infrastructure networks is obscene. In Collin County, TX, the annualized road upkeep exceeds the total budget of the county. What doesn’t end up skimmed from the cream and distilled into the hands of a few gets torched. Because it’s not just that roads are expensive, but that so much was taken and destroyed to build them, and so few benefit from their existence, and even those that do, face a higher chance of death on the road in general.

Another factor making things that much worse, is that the more cars and car-dependent infrastructure we have, the worse things get for car users, too. The mathematics and geometry that go into it are for another time, but there’s plenty out there. The more we have invested in cars, the more we want to drive, and the easier we want those drives to be. But the fundamental inefficiencies of private transport, which no Musk can overcome, mean that building our society around large, individual vehicles is always going to be a losing strategy. Regardless of the real progress in electrifying the modern car, cars still take up too much space and need too much infrastructure and support that cannot be used for anything else, in order to be the practical foundation for a society.

Colorized graph shows which areas of an urban area are net contributors of tax revenue and which are net drains, with labels “affluent labels” for the biggest drains, and poor neighborhoods marking the most productive areas.
This map, created by Urban3, illustrates the tax value of each property in Lafayette. Green areas create a net profit and red areas are a net loss. The higher the block goes, the larger the amount of profit/loss. Credit: Urban3, Strong Towns

In yet another case study, Vice President of San Miguel’s Board of Directors, Anthony Kalvans did some digging. He worked to construct a value per acre calculation for the township. Kalvans found that Jazzytown, a denser area, was producing almost $3.8 million per acre across five acres, while the suburban area produces less than 5% of that and takes up nearly 70 acres. Both places pay the same for water, but the wealthier suburbs are absorbing millions of dollars in benefits that never come back to the poor areas. If the wealthy want to live expensively, that’s fine, but they should never make us pick up their bill.

Countless towns and cities face the same problem and have the data to back it up, thanks to programs like Strong Towns and Urban3, the latter of which produces detailed maps in collaboration with municipalities to track their finances and plan paths towards solvency.

V. Don’t Despair, The American City Can Be Salvaged

Google Maps slide of a rebuilt area that is designed for pedestrians, cyclists, and for effective use by local businesses.
Part of Lancaster Boulevard in Lancaster, CA. Credit: Google Maps

It would have been great if academics, planners, and legislatures listened to the poor and displaced decades ago. And, the reality is that there are going to be some tough choices, but they are necessary. We cannot issue escalating bond measures forever, but, we are here now, today. What’s been done is done. So what comes next?

A lot of care. Most of the US population lives near places in dire need of care. And, in some cases, volunteer labor from the community, well-organized, is all it takes to revitalize a block, like Broad Avenue in Memphis. Deeper work, however, like the process of reclaiming our money, our country, and our future, starts with education.

Strong Towns is a great comprehensive resource with nine classes as well as success examples and case studies of what not to do. You can even reach out to Strong Towns, and the organization will help you on the journey of building a resilient community. Either with a group or by yourself, Tactical Urbanism is a great resource that helps citizens take direct action in their communities to improve comfort, safety, and utility.

Andrew Burleson also published a succinct 10 step guide to strengthening one’s town with clear, specific suggestions like ensuring your municipality isn’t taking on liabilities it can’t afford to pay back with existing development. If you’re a fan of numbers and want to create the resources your town leadership will need to make informed decisions, you can create a value-per-acre analysis, which can help you demonstrate the effects of car-dependent planning. If you are a city planner or are involved in city government, Urban3 is another great resource that can help your community rebuild itself.

Fundamentally, though, we need to shift away from thinking of our communities as a hands-off process. These are our lives. Our places. Our futures. We need to stop focusing on what the Monorail Man is selling and look at how people are living now and what we can do to make their lives easier. We need to look at where people are struggling and ask what can be done to support them.

Parodying “Music Man,” a classic Simpsons skit. Amusingly, monorails are a perfect example of a flashy public transit project that seems like it makes sense until you look at how it will likely work. Transit is hard, complex, and community-specific. Nothing, even cars, are universally useless. But making every city the same ignores the rich communities and cultures that make cities unique and wonderful places to live. Most of the downsides — noise, pollution, crime, and more — come from myopic ideas that fail to consider that what we build now will need care, as everyone and everything does, in time.

What Can You Do?

Care — Our cities are dying because we’ve ignored them for a cycle of construction and neglect. We have to care for what we have. Make what exists better. Even if you don’t plan to stay your whole life where you are, you can still make your time and the lives of others better by caring.

Learn — Once you’ve got the motivation, you need to learn about what broke where you are, and why. That could be some Main Street that was forced to take on loads of extra parking, making it hostile to anyone without a car. Or it could have been part of the Highway expansions in the 50s, 60s and 70s. In any case, there’s typically lots of resources to help you learn about your local history.

Vote locally — The common refrain of vitality of voting to our society holds the weight at the local level. Many positions run unopposed and easily swayed by external influences because of lack oversight and accountability. Your vote is literally and mathematically the most effective at the local level, and if you want to see changes in how you live, it starts with where you live.

Ask questions about your city’s finances — Once you’re involved in local and community government, and are equipped with the right educational resources, you can start getting into the meat of the problem. If your town’s finances are liquid, great, but if you like many others have a town or city facing down major liabilities, then you’ll need help to fix it.

Organize and get connected with others — there are many thousands of citizens across the US and Canada just like you who have noticed the decline of their town and want to do something. Strong Towns has great tools to get working groups together so that you can take back your town.

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