Author Archives: James A. Bacon

Justifiable Jitters or Unwarranted Worry?

Leslie Hartz, the Dominion executive in charge of pipeline construction shows the width of steel to be used in smaller-diameter sections of pipe.

Leslie Hartz, the Dominion executive in charge of pipeline construction, shows the width of steel to be used in smaller-diameter sections of pipe.

Virginians living in the path of the proposed Atlantic Coast Pipeline fret about the threat of explosions. Dominion Transmission says their fears are way overblown.

by James A. Bacon

Irene Leech, a consumer studies professor at Virginia Tech, grew up on a farm in Buckingham County where her family has raised beef for more than a hundred years. The family has preserved many of the original structures, including the old ice house, granary and smokehouse. Her husband, she says, devotes half his time to help keep the farm going. “Our plan is to retire to the farmhouse. Our goal is to pass on a sustainable business to the next generation.”

But Dominion Transmission, managing partner of the proposed Atlantic Coast Pipeline, has thrown her for a loop. The company wants to route a high-pressure transmission pipeline through the farm. While Leech acknowledges that the odds of gas leaking and igniting anywhere near her are remote, if the gas does explode, the farmhouse and outbuildings are within the danger zone.

“From my perspective, they put my life at risk, all our property, all our heritage,” says Leech. “I know the odds of something happening are very, very small. But I had a brother killed in a farm accident. My grandmother died in an accident. My husband was working for the Pentagon on 9/11. I was at Virginia Tech during the mass shooting. Things happen. We’ll have to live with the risk for the rest of time.”

Leech is just one of thousands of residents along the route of the proposed Atlantic Coast Pipeline (ACP) who worry about the safety risks. Like many others, she remains unpersuaded by Dominion assurances that the ACP will incorporate the latest, greatest technology, best practices, and specifications that exceed federal safety standards. Running pipe on the steep slopes and through sinkhole-ridden karst geology of the mountainous Nelson and Augusta counties poses issues that pipelines don’t encounter in less rugged terrain.

“The possibility of an explosion is the really frightening thing,” she says. “You can come up with statistics that make it seem very remote. The problem is, if it occurs, it’s really deadly.”

Dominion responds that it is pushing the envelope of industry best practices to ensure the safe operation of the pipeline, which, if approved by the Federal Energy Regulatory Commission (FERC), would run from West Virginia through Virginia to North Carolina. “We’re a safety first company,” says Dominion Transmission spokesman Aaron Ruby. That’s not a P.R. slogan, he insists. An emphasis on safety permeates the organizational culture and informs everything the company does.

Dominion makes every reasonable effort to accommodate landowners like Leech, says Ruby. The company has offered to re-route the pipeline from an 800-foot distance from her farmhouse to 1,900 feet, he says, “but she has refused to let us survey her property to see if the alternative is suitable.”

In the meantime, the company is designing safety into pipeline construction and operations at every step, says Leslie Hartz, vice president of pipeline construction. The quality-control process entails a rigorous inspection protocol for fabricating the pipe in the mill, and then X-ray and hydrostatic testing of pipes and welding in the field. When up and running, ACP will use robots to inspect the pipe interior and will deploy aerial patrols and sensors to monitor the exterior. If conditions deviate from narrowly defined parameters, operators will not hesitate to shut down the pipeline.

Pipelines co-exist with people all around the country, and hardly anyone thinks about it, says Ruby. As an example in Virginia, he cites Lake Monticello, a bedroom community in the Charlottesville metropolitan region with a 2010 population of almost 10,000. “Lake Monticello …. developed over many decades alongside four large-diameter natural gas pipelines!”

The Big Picture

Interstate gas pipelines are the safest mode of energy transportation, says Catherine Landry, a spokesperson for the Interstate Natural Gas Alliance of America (INGAA). “Last year 99.999997% of gas moved without incident.” That compares very favorably to moving propane or petroleum by truck or rail. Continue reading

Another Blow to Free Market Health Care

dpcby James A. Bacon

Citing fiscal reasons, General Assembly Republicans have blocked Medicaid expansion that would have extended medical coverage to 400,000 uninsured Virginians. But they have tried to enact other measures to make medical care more accessible and affordable. Among other ideas, they have fought for expanding medical clinics, rolling back Certificate of Need restrictions on competition, and pooling insurance company data to create databases that allow analysts to spot inefficiency and poor outcomes in the health care system.

This year, a bill sponsored by Del. R. Stephen Landes, R-Verona, would have eliminated legal ambiguities discouraging physicians from contracting directly with their patients to provide primary care services for a fixed monthly fee. The bill declared that the contracting arrangement, commonly known as Direct Primary Care (DPC), did not constitute insurance and, thus, was exempt from insurance regulation. DPC proponents say it provides a cheaper alternative to accessing primary care through health insurance, which adds layers of bureaucracy and cost.

But Governor Terry McAuliffe vetoed the bill last week, saying, “While I applaud the patron’s desire to increase access to care, I feel this concept needs further scrutiny and study. … Not only would a product like this deter an individual from purchasing health insurance, it would still not cover any catastrophic care or chronic conditions requiring a specialist.”

Landes’ bill passed the House 97 to 0 with broad backing from patients, family practice doctors, small business lobbies and chambers of commerce. But it ran into trouble in the Senate when the insurance industry began lobbying heavily against it. As reported by the Associated Press:

Insurance companies don’t oppose the idea of direct primary care in principle, but don’t want imperfect legislation rushed through, said Doug Gray, executive director of the Virginia Association of Health Plans. This legislation, he said, is unnecessary and provides no consumer protections.

McLaughlin has joined a tiny but growing movement of doctors nationally — there are only a handful in Virginia — who have begun to provide subscription-like service to patients, a model known as direct primary care.

Similar to concierge medicine for the rich, direct primary care can appeal to middle and low-income patients who struggle with high deductibles or can’t afford insurance at all. McLaughlin charges $60 a month for people over 31, $30 for 30 and under and $15 for kids whose parents are enrolled.

The change from typical primary care has been “wonderful,” McLaughlin said: She can focus on fewer patients, spend more time with each one, and worry less about dealing with insurance companies. Other doctors are taking notice, she says, including young ones, who might otherwise avoid going into primary care because of its relatively low profit margins and high-volume demands.

“This can change the trajectory of our whole system,” McLaughlin said.

That may be the real problem with Direct Patient Care — it would change the trajectory of the system. Many players in the health care industry are vested in the status quo and don’t want to see the system change, except on their own terms. And many politicians are so ideologically committed to an expanded role for government in health care that they want to grind out market-based alternatives before they can prove their efficacy. Meanwhile, legal uncertainties may discourage other physicians from following McLaughlin’s example, and Virginia consumers will be denied a choice that might benefit them.

The New Map of Economic Growth

Jobs growth during the recovery from EIG

by James A. Bacon

Not only has job creation and new business formation been weak in the current business cycle, it has been more concentrated geographically than in the past. Unfortunately for the Old Dominion, between 2010 and 2014 that concentration did not occur here.

This analysis points to very different futures for American communities, suggesting that the gains from growth have and will continue to consolidate in the largest and most dynamic counties and leave other areas searching for their place in the new economy,” writes the Economic Innovation Group in a new publication, “The New Map of Economic Growth and Recovery.”

The report buttresses an argument familiar to Bacon’s Rebellion readers: that larger metropolitan areas enjoy a significant competitive advantage in the Knowledge Economy. Skilled and educated employees seek large labor markets that provide a diversity of employment opportunities, while corporations seek larger, deeper labor markets that provide access to a diversity of skilled and educated employees. The dynamics of labor markets outweigh factors that confer competitive advantage in the old industrial economy such as access to transportation and natural resources, lower labor costs, low taxes and a low cost of doing business.

In summary: Large metros enjoy a major competitive advantage, smaller metros are teetering on a knife’s edge, and rural areas and small towns are hosed.

“The U.S. economy is becoming far more reliant on a small number of super-performing counties to generate new businesses,” EIG says. “A mere 20 counties accounting for only 17 percent of the U.S. population were responsible for half of the net national increase in business establishments from 2010 to 2014.”

The report does not speculate whether the trend is the result of temporary economic or political factors or is an irreversible long-term trend.

Graphic credit: EGI

Graphic credit: EGI

Two trends contribute to the sharp decline in the number of businesses: a higher rate of firm deaths (more companies getting acquired or going out of business) and a collapse in new business formation, as can be seen below.

births_deaths

What could account for these trends? One logical possibility: In a blast of creative destruction associated with the digital economy, a relatively small number of new companies are displacing many established businesses. Another possibility: A wave of economic regulation in recent years has hobbled large swaths of the economy — the banking industry, the Internet, health care, energy, and so on — and has created new economies of scale that favor large, established corporations, encourages mergers and consolidations, and throws up barriers to entry to new firms. Most likely, both are at work.

Weakness in the national economy means that everyone is swimming upstream. Only a small number of metropolitan areas are strong enough to make any progress swimming against the current. Mega-trends favor the mega-metros.

But mega-trends won’t tell the whole story. Some large metros bungle their opportunities though corruption, business-hostile policies and mal-investment of public resources. Some smaller communities buck the broader trends by building defensible economic niches. The news from the EIG report is discouraging, but short-term trends need not dictate our long-term destiny.

McAuliffe’s Dangerous Game

by James A. Bacon

Once upon a time, when he helped run L. Douglas Wilder’s history-making gubernatorial campaign, Paul Goldman was regarded as a progressive voice in Virginia politics. If he writes many more op-eds like the one published Sunday in the Richmond Times-Dispatch, he could well become anathema to progressives. Not because he has changed his principles, mind you, but because progressives have come to toss around accusations of racism with such reckless abandon.

Goldman’s topic was Governor Terry McAuliffe’s executive order restoring full civil and voting rights to 206,000 felons convicted of both violent and non-violent crimes. The Richmond attorney and political activist makes two critical points that dovetail with my critique of contemporary progressivism.

One is that McAuliffe’s defenders make unsupported accusations of racism and discrimination that only “make it harder for those fighting for honest change.” Specifically, Goldman tackles the notion that Article II, Section 1 of the Virginia Constitution — “no person who has been convicted of a felony shall be qualified to vote unless his civil rights have been restored by the Governor or other appropriate authority” — was intentionally written to disenfranchise African-Americans.

To the contrary, notes Goldman, disenfranchisement of felons dates back to colonial times when only white men were allowed to vote. Moreover, Virginia civil rights legend Oliver Hill reviewed and approved the provision for inclusion in the 1971 Virginia constitution.

A second point is that the people who get so agitated about the injustice done to felons are remarkably quiet about the injustices the felons inflicted upon their victims. While felons in Virginia are disproportionately African-American, so are crime victims.

As Goldman writes, “For the government to suggest a victim or loved one is anti-black because she opposes automatic restoration [of civil rights] without any showing of contrition is unjustified. It demeans the victim.”

A strong case can be made that the process of restoring rights to non-violent felons should be made easier — no individual petition necessary. But blanket restoration for violent felons without giving the victim an opportunity for input or any requirement for the predator to show contrition should be prohibited, Goldman writes. “The petitioning process must not itself be punitive. Yet it can’t be pro forma.”

Lastly, Goldman didn’t make this point but I will: Finding the proper balance for restoring felon rights is not the sole prerogative of the governor. McAuliffe needs to engage in give and take with the legislature. Sadly, the rule of law is regarded among political elites as increasingly optional — something to be enjoined when they can harness it to advance their aims and sidestepped when it cannot. A couple of years back, I said that progressives should be cautious with the precedents they set — just imagine how worried they would be if Sarah Palin were elected president with the power to re-write laws through executive decree. Now they face an even more terrifying prospect — an imperial presidency run by Donald Trump, the man for whom everything is negotiable and “so sue me” is a business best practice. Granting presidents and governors power to re-write laws at will cuts both ways.

Update: General Assembly Republicans are filing suit to halt enforcement of McAuliffe’s executive order.

Solar Co-Ops: Competing through Innovation

solar_installationby James A. Bacon

Solar co-ops are popping up all around Virginia, as they are around the country. The concept is simple: Individuals who want to install solar power on their houses band together to select a single contractor to install their solar systems, saving up to 20% to 30%.

The Virginia Solar United Neighborhoods (VA SUN) website lists open co-ops in Northern Virginia, Richmond and Farmville and closed co-ops in nine other Virginia locations.

In an era of fast-improving solar efficiency and near-zero interest rates, the economics of residential solar look attractive. VA SUN advises that nine- to twelve-year paybacks (including the 30% federal tax credit) are typical. That implies a relatively low-risk return on investment in the neighborhood of 7% to 9%, which is better than most people can get parking their money in bank CDs or U.S. Treasuries and a lot less risky than investing in the stock market.

Bacon’s bottom line: While I’m skeptical of promoting solar energy production in Virginia through mandatory Renewable Portfolio Standards, I’m a big fan of innovators who improve the economics of solar and drive down the cost of installation. I could see myself giving serious thought to installing solar on my own house. (A decisive factor for me would be determining how many trees I’d have to cut down. Tree-cutting services charge charge a small fortune!)

Residential solar accounts for such a small percentage of the electric-generating capacity in Virginia that it doesn’t pose a problem for the stability and reliability of the electric grid. Yet. That could change as rooftop-solar becomes more ubiquitous. Solar homeowners and businesses like selling surplus electricity into the electric grid, and they like drawing upon the grid when the sun isn’t shining. They also like not paying a fair share of the cost of maintaining the grid that guarantees them a 24/7 supply of electricity. At some point rooftop solar could extend to so many customers that would undermine the financial integrity of the electric grid.

We’re nowhere near that point now, but we could get there. It would be prudent to start thinking now about what a next-generation grid capable of accommodating hundreds of thousands of solar rooftops would look like, and what would be reasonable for solar households to pay to support it.

— JAB

Virginia 11th Best for Veteran Retirees

Source: WalletHub

Virginia scores a disappointing 11th place in WalletHub’s ranking of the “2016 Best & Worst States for Military Retirees” based on 20 metrics encompassing economic environment, quality of life and health care.

The Old Dominion racked up creditable 3rd place for economic environment (eight metrics including state taxes on military pensions and percentage of veteran-owned businesses, among others) and 4th place for quality-of-life (seven metrics including veterans per capita and percentage of homeless veterans). But the state scored a dismal 48th place finish for health care, which reflects five metrics including the number of VA health care facilities per number of veterans and recommendability of VA hospitals.

The impression created by the metrics is that veterans receive sub-par health care in Virginia. Whether that is a function of poorly run VA facilities or issues with Virginia’s broader health care system is impossible to deduce from WalletHub’s presentation. But it’s a question worth asking.

— JAB

Do Virginia Schools Have “Crisis” of Too Much Discipline?

school_discipline

Data source: Virginia Department of Education, “Discipline, Crime and Violence Annual Reports”

by James A. Bacon

The drumbeat of studies and pseudo-studies purporting to show endemic discrimination in public institutions continues with the release of a new report by the JustChildren Program of the Legal Aid Justice Center.

“Virginia schools have a crisis on their hands,” states the press release. “Waves of students are being pushed out of school through the widespread, discriminatory overuse of suspension and expulsion.” Last year Virginia schools issued more than 126,000 out-of-school suspensions to approximately 70,000 students. One fifth were issued to elementary pre-K and elementary school students. The majority of suspensions were for “relatively minor, non-violent, subjective behavior like ‘disruption,’ ‘defiance’ and ‘disrespect.'”

Moreover, the suspensions were disproportionately issued to males, African-Americans and students with disabilities. African-Americans were nearly four times as likely as whites to receive short-term suspensions.

The report recommends “five proven methods” of addressing misbehavior in school, including social and emotional learning, multi-tiered systems of support, threat assessments and restorative practices.

Needless to say, the supposed discrimination against African-American students is an illusion. Some of the greatest disparities exist in school systems in majority-black cities with black superintendents, black-majority school boards and predominantly black teachers and administrators, such as Richmond and Petersburg. The problem isn’t that the students are black, the problem is that disruptive students are more likely to come from dysfunctional families characterized by no father, substance abuse, domestic violence, and chronic economic insecurity, which, for various historical reasons, affects far more black households than white households (although, in a trend that should please those who fret over such disparities, is affecting an increasing share of white households as well.)

The larger story can be seen in the chart above, taken from Virginia Department of Education annual reports on discipline, crime and violence in Virginia schools. Over the seven years leading up to 2013-2014, the number of crimes and disciplinary infractions reported by Virginia schools plummeted from 372,000 incidents to 146,000 incidents — down 60%. Over the eight years up to 2013-2014, the number of suspensions declined gradually but steadily from 199,000 to 146,000. Expulsions, not shown in the graph, have dropped more than half to 479.

Something is going on, but I’m not sure what it is. The period between 2006-2007 and 2010-2011 showed a mind-boggling decline in disciplinary incidents and then suddenly decelerated to a level almost identical to the number of short-term suspensions. Call me a cynic, but I doubt the numbers reflect the reality in Virginia schools. I would conjecture that administrators’ reporting practices changed far more than the behavior of students in hallways and classrooms.

Perhaps I’m wrong. Perhaps the touchy-feely approach to school discipline advocated by Legal Aid Justice Center is actually working. It would be a wonderful thing indeed if we could find ways to improve the behavior of the 70,000 students who received suspensions. Getting booted out of school, even temporarily, only subtracts from their time to learn. On the other hand, those 70,000 students disrupted the educations of far more students who came to school ready to learn. As documented here, the cost to non-disruptive students, who themselves are disproportionately black, is substantial.  The Legal Aid Justice Center doesn’t seem to notice them at all — perhaps because they cannot be portrayed as victims of discrimination.

I’d like to hear from readers. Is school discipline improving as much as the numbers suggest? Or are the numbers a mirage? Are local administrators ignoring infractions in order to report numbers that please their bureaucratic overlords in Richmond and Washington?