Category Archives: 2011

Last Year’s Quake Shook Up Virginia Nukes

Posted on August 22, 2012 by Peter Galuszka| 5 Comments

By Peter Galuszka

A year ago tomorrow, Dominion Virginia Power operators watched dozens of brightly-lit boxes strung across several walls in their control rooms for two nuclear reactors at the North Anna Power station about 50 miles northwest of Richmond.

It had been a sleepy, sunny afternoon. Suddenly, at 1:51 p.m., delicate sensors noticed that uranium-filled fuel rods inside the reactors had moved slightly out of alignment. Within 100 milliseconds, control rods slipped immediately into place between the fuel rods, shutting down fission. The human operators were about 1.8 seconds behind, confirming the reactors’ “scram” as boxes flashed, lights in the room dimmed and a wild emergency chirping warning blared.

It was the first time ever in this country that a nuclear power station had gone through an emergency shutdown because of an earthquake. In this case it was a rare 5.8 magnitude seismic event with an epicenter a few miles away that ruined Louisa County school buildings, cracked the Washington Monument and shook the North Anna beyond what it was designed to deal with. The company’s response “was handled very professionally,” says Dan Stoppard, senior vice president for nuclear operations at Dominion who took reporters on a recent tour of the plant.

North Anna was shut down for three months although it was not seriously damaged. However, the overall impact for the U.S. nuclear energy industry was enormous.

Federal regulators immediately ordered Dominion and operators of more than 25 other nuclear power stations to review their ability to withstand earthquakes. The order took on urgency because just five months before, a tidal wave caused by a massive earthquake swamped the Fukushima Daiichi nuclear plant in Japan, causing the worst nuclear power accident since Chernobyl in 1986.

Both earthquakes last year shook off a renewed veneer of acceptability that global nuclear power had seemed to acquire. Until Fukushima, nuclear power had been getting a favorable look because it is not as dirty a source of power as large, coal-burning plants accused of contributing to climate change. The National Resources Defense Council reports that 20 U.S. states cause 92 percent of the nation’s air pollution. The biggest offenders are coal-heavy states such as Kentucky and Ohio. Virginia is No. 12 on the list.

Currently, utilities are seeking licenses for 30 new nuclear power stations in the U.S., say officials from Dominion which has applied for a license for a third unit at North Anna. The Southern Company has been awarded a license to build two nuclear units at its Vogtle plant in Georgia and Scana has the OK to build two reactors at its Virgil C. Summer plant in South Carolina. Most of the 104 nuclear power plants in the U.S. are 30 to 40 years old, however, and replacement is sluggish at best.

The North Anna event a year ago prompted a nationwide upgrade of earthquake precautions. The Aug. 23 incident showed some potential shortfalls at the Virginia plant. During the quake, not only did the plant shut down but area electricity was knocked out. The power plant needs electricity to keep critical controls and machinery running to prevent a nuclear accident. It has four large diesel generators plus a backup to ensure this. But just after the reactor shutdown, a coolant leak knocked one of the diesels out of service.

Dominion officials said the plant needs only two to operate and had enough on hand but the malfunction was of concern. Incidents such as this plus Dominion’s response and upgrades have made utility officials popular speakers on the global nuclear conference circuit. Dominion engineers, for instance, will be lecturing at an industry event in Taiwan this week. To train its employees, the utility has made a computerized recreation of the earthquake at its control room simulator near the reactors.

The cloud over nuclear power remains, however. Dominion officials still won’t say if they will go ahead with a third unit at North Anna. They applied for a license in 2003 and are doing some site preparation but won’t decide until 2015 whether to build it. The utility has selected a reactor design from Mitsubishi.

One unanswered question is how easily Dominion and other nuclear contenders will pay for the new nuclear plants whose price tags have been soaring. The Scana project will cost $10.2 billion and the Southern Company expansion will run $14 billion. The total of four reactors for these utilities will be get some kind of federal loan guarantees – something Dominion says it doesn’t need and would be hard to obtain during these times of budget cutting.

The biggest impediment may be competing fuels. Thanks to controversial hydraulic fracking methods of drilling, the energy market is awash in cheap natural gas. Coal is being pushed aside by this cleaner form of energy. Henrico County-based Old Dominion Electric Cooperative has shelved plans for a 1,500 megawatt coal-fired plant in Surry County.

ODEC officials blame new carbon dioxide emissions rules but an equally important reason could be that coal is pushed back by gas. Those dynamics could also affect North Anna’s third nuclear reactor which could cost around $10 billion, although Dominion won’t give an estimated price tag just yet. Nuclear power’s revival might take more time to debut, if at all.

Parts of this posting were first published in Style Weekly.

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Posted in 2011, Disaster planning, Economic development, Economy, Energy, Environment, Federal, Planning, Public safety & health, Science & Technology, The Economy

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Virginia finishes #40 in 2011 state GDP growth

Posted on June 28, 2012 by Groveton| 13 Comments

Virginia – A legend in its own mind. The U.S. Department of Commerce has published the 2011 GDP growth for each of America’s 50 states.  Virginia, the oft-cited best state for business, finished in 40th place.  The Old Dominion squeaked out a barely positive 0.3% GDP growth rate in 2011.  U.S. real GDP by state grew by an average of 1.5% in 2011.  This marks the second year that Virginia has fallen behind the national average.  Last year (2010), Virginia finished with a 3.0% growth rate.  The overall average growth rate for the U.S. was 3.1%.

What do you feed an invisible cat?  Evaporated milk.  Virginians have seen and heard little from Lt Governor Bill “the jobs czar” Bolling lately.  Perhaps Virginia’s dismal economic performance is one reason that Lt. Gov. Bolling is keeping a low profile.  After all, there is more than a year until the next governor’s election and maybe Virginia’s economy will improve between now and then.  Meanwhile, Gov Bob McDonnell has been visiting Sweden while Marco Rubio is being vetted for the Vice President slot on the Republican ticket. Perhaps Mr. Romney has an aversion to running with the governor of an economically  under-achieving state.  Of course, even Virginia’s #40 position is better than where Gov Romney took Massachusetts during his tenure as governor.  I seem to remember #47 being bandied about.

The Best State for Business?  The Richmond spin machine never sleeps. There is no end of surveys, polls and projections touting Virginia’s brilliant economic performance and, by proxy, the excellence of its state government. Jim Bacon posted a blog entry entitled, “Virginia’s Major Metro Economies Looking Pretty Darn Good” just five days before the state GDP figures were published.  In the post, Jim notes that Virginia’s three biggest metropolitan areas were rated among the country’s top economic performers by the Brookings Institution. Bacon went on to write, “Outside Virginia’s major metro areas (and Charlottesville), the economy was not so hot.”  It seems that may be something of an understatement.  Just recently, Bacon found an even more far-fetched “analysis” of Virginia’s economic prospects which he detailed in his post, “We’re No. 4! We’re No.4!”.

Crying Uncle (Sam).  Virginia is a major beneficiary of the recent unprecedented level of government spending.  Yet, even with that, the state is incapable of achieving even average GDP growth.  The open question is how far Virginia’s economic performance will fall once the inevitable government cutbacks begin.  There is good news.  We’re number 40 now and there are only 50 states – we only can fall 10 more places.

D.J. Rippert

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Posted in 2011, 2012, Economic development, Economy, Politics, Uncategorized

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IG of the Day: Religiosity

Posted on March 30, 2012 by James A. Bacon| Leave a comment

Mississippi is the most religious state in the country, while Vermont and New Hampshire are tied for least religious. Virginia, where 42% of respondants to a recent Gallup poll described themselves as “very religious,” ranked with the middling states.

– JAB

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Posted in 2011, Demographics

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¡Viva la Revolución!

Posted on March 5, 2012 by Peter Galuszka| 2 Comments

Estimado Jefe!

Usted nunca debe salir de la ciudad, señor! Ahora que usted está ausente, la revolución comienza! Amados lectores de ya no ver los artículos que glorifican a los ricos y privilegiados. Vamos a ayudar a la tierra y los pobres y redistribuir los fondos de cobertura. ¡Viva la Revolución!

 

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Posted in 2011, Abortion, Agriculture & forestry, Blogs and blog administration, Budget, Children and families, Consumer protection, Courts and law, Crime and corrections, Demographics, Disaster planning, Economic development, Economy, Education (higher ed), Education (K-12), Electoral process, Energy, Gay rights, Governance reform, Government workers and pensions, Gun rights, Health care, Housing, Immigration, Infrastructure, Insurance, Labor & workforce, Land use & development, Money in politics, Planning, Politics, Poverty & income gap, Property rights, Public safety & health, Race and race relations, Regulation, Science & Technology, Social services, Taxes, The Economy, Transportation, Uncategorized, Unemployment, Water-waste water, Wonk Salon

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The Intercity Bus Revolution

Posted on January 6, 2012 by James A. Bacon| 14 Comments

Fed train follies fail while freedom actually works

by James A. Bacon

While President Obama dreams about spending hundreds of billions of public dollars building a high-speed, intercity rail network, an entrepreneurial revolution in the old-timey bus industry is scoring dramatic gains in market share for intercity travel – without government subsidies.

After decades of losing customers, the intercity bus industry began experiencing an entrepreneurial renaissance in the mid-2000s. And 2011 was the best year yet. According to a study published by DePaul University’s Chaddick Institute for Metropolitan Development, intercity bus was the only major long-distance passenger mode to grow appreciably this year. Daily intercity bus operations expanded by 7.1 percent.

The most spectacular growth occurred among curbside operations, including BoltBus and Megabus, which eschew traditional bus stations in favor of curbside pickups. This category expanded operations by 32.1 percent. Compare that to the 5.2 percent growth for Amtrak, 1.8 percent growth for airlines and 1 percent decline for private automobiles.

What’s going on? The higher cost of automobile ownership and gasoline is pushing people to consider alternatives to driving. But that’s only half the story. The intercity bus industry is highly competitive and driven by innovation. “Arguably, the explosive growth of curbside service has been the most significant change in downtown-oriented long-distance travel in more than a half-century,” write the authors of the DePaul study.

Even stodgy old Greyhound, which operates out of traditional bus stations, is getting creative. The company has introduced Greyhound Express, a premium service that provides free Wi-Fi and power outlets at every seat, has upgraded waiting areas for its Express passengers and has entered into a partnership with 7-Eleven stores to sell tickets.

Unlike publicly owned mass-transit companies, which face political pressure to maintain money-losing routes, private intercity buses are free to shut down unprofitable routes and redeploy resources to achieve greater growth potential. Flexibility is the hallmark of the curbside bus operators, which aren’t tied down by fixed investment in bus stations. This year, Megabus established new hubs in Pittsburgh and Atlanta, adding service to several new cities in the process. BoltBus set up a new hub in Newark, N.J.

The two giants in the curbside segment face plenty of competition, though. Smaller companies serve other cities and differentiate themselves by price or the quality of amenities they offer, such as more spacious seat configurations.

“The intercity bus is again becoming a force on the intercity transportation scene,” states the DePaul study. “Intercity bus operators are benefitting from an increasing level of demographic diversity among its customer base and from the rising interest among travelers in being able to continuously use port-able electronic technology, which is difficult or impossible when flying or driving.”

One thing intercity buses can’t do is zoom passengers from city to city at twice the speed limit of interstate highways as high-speed rail can. “Imagine whisking through towns at speeds over 100 miles an hour, walking only a few steps to public transportation, and ending up just blocks from your destination,” President Obama said when outlining his vision for high-speed rail in 2009. “Imagine what a great project that would be to rebuild America.”

Imagine the cost of fulfilling Mr. Obama’s fantasy! After sinking $10.5 billion into high-speed rail since taking office, the administration proposed earlier this year spending an additional $53 billion over six years to advance the president’s vision for a national network. Meanwhile, despite ridership gains, Amtrak continues to lose money. Sinking tens of billions more into inherently unprofitable passenger rail lines will only accelerate the federal government’s rush to fiscal collapse, and it will bequeath to the nation an intercity transportation system dependent upon subsidies just to continue operating.

Instead of squandering billions on a fiscally unsustainable transportation solution, the federal government should focus on one of the few things it can do competently: safeguarding public safety. A number of high-visibility crashes involving “Chinatown buses” have cast a pall over the industry. Government can promote intercity bus traffic and take automobiles off the road by assuring the riding public that buses are operated safely.

Meanwhile, states and localities should be asking themselves whether private enterprises could operate local bus services more efficiently and creatively than municipally owned mass-transit companies. Private bus companies can operate free from the costs imposed by municipal unions, federal red tape and political resistance to shutting down money-losing routes. Maybe we should bust up the mass-transit monopolies and see what private bus companies can do.

This column was published originally in the Washington Times.

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Posted in 2011, Transportation

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Clash of Principles in Wind Farm Debate

Posted on January 2, 2012 by James A. Bacon| 9 Comments

Maui wind farm -- you should see it from the water. Spectacular!

by James A. Bacon

The Floyd County board of supervisors is considering a ban on structures taller than 40 feet on mountain ridges, an action that would kill any chance of building a wind farm in the Southwest Virginia county. The proposal is bound to be controversial in the sparsely populated jurisdiction — and it raises prickly questions on how to reconcile multiple environmental and property-rights goals.

Two companies have discussed building wind farms on Willis Ridge. Wayne Booth, a cattle farmer whose land provides breathtaking views of the mountain line, has collected more than 600 signatures from local residents opposing the placement of turbines on the ridge, reports the Roanoke Times.

Floyd County is a solid part of “red state” America, voting 59% for John McCain and 39% for Barack Obama in the 2008 presidential election. Conservative political values rule — yet those values provide no clear guidance regarding the ban. Red State America believes in economic development, and building the wind farm would represent a potential economic boon. Moreover, many farmers, timber owners and small property owners also tend to think that what a man does with his property is his own business. On the other hand, one could advance the argument that wind farms are driven by tax breaks and other federal subsidies, making them illegitimate in the minds of small-government fiscal conservatives.

Conventional blue state values offer little guidance either. The justification for subsidizing wind power is to decrease the use of fossil fuels in electrical generation that create pollution and contribute to global warming. But conservationists tend to favor preserving the natural beauty of mountain ridge lines from real estate development on the grounds of aesthetics — and windmills are as visually intrusive than vacation houses. Even more worrisome, windmills, dubbed the “cuisinarts of the air,” kill hundreds of thousands of bats and birds each year, including many threatened species.  A U.S. Fish and Wildlife Service field report stated that nearly 500 bird carcasses were discovered in a mere two-week span at the Laurel Mountain wind farm in West Virginia, writes Kenneth Artz for the Heartland Institute.

How do you trade off potential gains for global warming versus unsightly aesthetics and the slaughter of birds? Which is more compelling — job creation or opposition to the government picking winners and losers through subsidies and tax breaks?

Personally, I don’t find the “aesthetics” argument very persuasive. I remember a seeing a view of wind turbines on a mountain crest of the island of Maui that was simply breathtaking. Windmills are no more intrinsically ugly than any other man-made structure. Moreover, my “right” to a pleasant view is hardly a bedrock constitutional one. Where does that right stop? If I have a right not to view wind turbines on a ridge line, do I have a right not to see a subdivision built upon farmland in my view shed? Do I have a right to veto, on aesthetic grounds, your decision to paint your house in Hokie blue and orange? Can I compel you to take down the hideous pink flamingos in your yard? No! If you want to protect your “view shed,” I suggest that you persuade the land owner to put the land into a property easement or, failing that, raise the money to buy the property yourself.

That’s an argument in favor of allowing the wind turbines. Now let me provide an argument against them. Our national energy policy is a disaster. We are spending tens of billions of dollars trying to promote wind, solar and other alternate energy sources, most of which are grotesquely uneconomical. It is foolhardy to subsidize the current generation of alternate energy sources, which will lock in expensive electric rates that both harm energy-intensive industries, thus costing jobs, and punish lower-income families whose incomes aren’t keeping up with rising costs as it is. Instead of subsidizing projects with inadequate technology, the U.S. government should invest in research on the next generation of energy technology. Subsidizing projects destroys wealth. Underwriting research creates wealth.

Taking all factors into consideration, I would oppose the wind turbines at the present time. Given the evolution of technology, it could take a decade or more before wind turbines can compete on a level playing field. Then I would tell the people of Floyd County, if you want to protect your views, raise money to buy the view-shed rights to your neighbor’s property. You’d be wise to start fund raising right away.

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Posted in 2011, Energy, Environment

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Public Private Partnership Laws Need a New Look

Posted on January 2, 2012 by James A. Bacon| 33 Comments

Norfolk MidTown Tunnel. Photo credit: Virginian-Pilot.

The Virginian-Pilot has published a polished version of a blog post I wrote last month. In case you missed the original, here it is.  — JAB

While Virginia’s Public Private Partnership Act may be experiencing growing pains as projects from the Midtown and Downtown tunnels to HOT lanes on Interstate 95 see the light of day and invite public scrutiny, there is little doubt that PPPs, or P3s, are the wave of the future.

Indeed, the United States is something of a laggard in embracing this financing tool, which draws upon private-sector capital and management to build roads and other infrastructure. Europe has roughly five times the P3 investment as the U.S. Even Latin America exceeds the U.S. as a market for this type of project.

However, P3s are getting more attention in the United States as resistance to higher taxes starves federal and state governments of funds to ameliorate congestion and promote economic development.

Two recent reports, one from the libertarian-leaning Reason Foundation and the other from the center-left Brookings Institution, are a sign that P3s are gaining legitimacy as a transportation-funding option.

In Reason’s “Risk and Rewards of Public-Private Partnerships,” author Baruch Feigenbaum writes that PPPs have five major advantages. They deliver needed transportation infrastructure sooner, raise large new sources of capital, shift risk from taxpayers to investors, provide a business-like approach and enable innovation. “PPPs can be utilized in most types of projects and are most successful in states with strong enabling legislation.”

Imilia Istrate and Roberto Puentes at Brookings write in “Moving Forward on Public Private Partnerships” that P3s are complex contracts, and negotiating them is not a task for amateurs and part-timers. They suggest that states develop “public private partnership units,” entities within the government that develop the technical and financial expertise to evaluate, negotiate and monitor P3 projects. It is encouraging to see that the paper specifically cites the Office of Transportation Public-Private Partnerships in Virginia as one of only three examples of a genuine “public-private partnership unit” among the 50 states.

Virginians should take pride in the state’s recognition as a leader in implementing P3s, but the commonwealth’s enabling law, which was written in 1995 and amended in 2005, still may need massaging. As I reported in “Promises and Pitfalls” on baconsrebellion.com, there is an inherent tension between inviting public input and protecting the integrity of the complex negotiations between the state and the private-sector concessionaire.

Citizens have a right to know how these mega-projects will affect them before deals are signed, and they should have some right of appeal if the terms are onerous. Yet openness and transparency must be tempered by the reality that it would be difficult to complete a transaction if the public were involved at every turn, especially if key negotiating points were politicized.

A related problem is the project selection. The most fundamental question we need to ask ourselves is, “Should this road, bridge or tunnel even be built in the first place?” It is of little comfort to know that a P3 can bring in a project cheaper and faster if we’re building infrastructure in a location that cannot be economically justified.

In Virginia, P3s circumvent the normal process for approving transportation projects. The Commonwealth Transportation Board, which sets priorities for traditionally funded projects, is informed of major P3 developments, but its approval is not required.

The McDonnell administration will have $1.5 billion in state funds to allocate to P3 contracts, which can commit the state to concessions lasting 50 to 80 years, cost citizens billions of dollars in tolls and impose financial penalties should the state undertake other projects, even decades from now, that might cut into toll revenue. Once a project advances beyond the concept stage, no forum exists for the public to question, debate or comment upon major terms and conditions.

By drawing attention to the problems inherent in the P3 enabling legislation, I do not mean to single out Gov. Bob McDonnell for criticism. The governor is working within the rules created by previous administrations.

But he is pursuing P3s more aggressively than his predecessors, and the flaws in the law are manifesting themselves on his watch. I’m not sure how we strike the right balance between transparency and confidentiality, but we need to do a better job.

Upon reflection, I would add one more point. Another advantage of P3s is that they rely upon toll revenues, which conform to the bedrock principle that those who use and/or benefit (from higher land values) from a transportation project are the ones who ought to pay for it. In an ideal world, P3s would require no state money — they would be entirely supported through tolls and/or capture of increased property values. In an ideal world, there would be no doubt that the project is economically justified. In the real world, P3s always have a state contribution. The greater the state subsidy, the greater the cause for skepticism that a project is economically justified and the greater the reason to suspect that project is being undertaken for the benefit of special interests and not the public. Still, P3s provide a level of transparency into the economics of a transportation project that we don’t get from conventional funding methods.

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Posted in 2011, Transportation

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Good Bye and Good Riddance to 2011

Posted on January 1, 2012 by James A. Bacon| 8 Comments

Glimmer of hope

by James A. Bacon

Good riddance to 2011, 365 days of misery that brought us the Gulf Oil Spill, Quantitative Easing 2 and the bulge in Anthony Weiner’s briefs. Most distressing of all, the year marked another failure by the country’s political leadership to address the nation’s fiscal free fall and avert the hard, hard landing that awaits us all.

Readers are well acquainted with my reasons for believing that Boomergeddon is at most a decade away, so I will not belabor them here. Instead, I go against type by listing three positive trends. To be sure, they won’t come close to staving off federal government default, but they do offer a glimmer of hope.

Violent crime is down. Violent crime in the United States has declined to the lowest rate in four decades. The odds of being robbed or murdered are less than half of what they were 20 years ago, and the downward trend shows no sign of abating. Society is so much safer that crime has vanished from the list of Americans’ top worries. As a bonus, coinciding as it does with the highest unemployment rate in 60 years, the downturn discredits the notion that “poverty” and “lack of opportunity” are driving forces behind crime. The experts and other social engineers took it on the chin. They still are at a loss the explain the cultural phenomenon.

Fossil fuel production is up. I’ve long been a proponent of the “peak oil” theory that says oil production has peaked, demand for petroleum products is soaring as China, India and other developing nations become more prosperous, and the price of oil will hit a permanently higher plateau that will cause considerable economic hardship in America’s auto-centric economy. I still believe that. What I did not anticipate was the Marcellus shale revolution. (I’ll withhold any judgment on the environmental impact of the new natural gas-drilling technologies until more authoritative data comes in.) Clean-burning gas will supplant dirty coal as the preferred fossil fuel for electric power generation and, in an added benefit for those who worry about Global Warming, will significantly reduce greenhouse gas emissions.

In a parallel trend, U.S. oil production is rebounding and is expected to reverse much of its 40-year decline. If you include Canada in the mix, the U.S.-Canadian economy could be producing record volumes of oil within five years. North America may never achieve “energy independence,” but we’ll ship a lot fewer dollars to hostile petro-states.

While the greens advocated reorganizing the energy economy around solar, wind, electric cars and other alternate energy technologies that squander billions of dollars in economically inefficient investments — think Solyndra on a trillion-dollar scale — they were blindsided by disruptive innovation coming from the private energy sector. Once again the “experts” are looking pretty ignorant.

Technology innovation continues apace. The advance of technology continues to amaze. Moore’s Law is old hat — we take it for granted that each new generation of computer will be faster, smaller and more powerful. What will really change things is the ability to embed computing devices with voice recognition, artificial intelligence and GPS sensors so (a) we can talk to the devices and (b) the devices “know” where they are.  “Smart” phones are just the beginning. Soon, everything from your car to your refrigerator will be smart as well. If there’s one thing that can bail this country out of its budgetary morass it’s the potential for extraordinary gains in productivity and economic efficiency made possible by technology. Let’s just hope that human-designed institutions can keep up.

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Posted in 2011, Crime and corrections, Energy, Science & Technology

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Still Honoring TJ’s Tradition of Indebtedness

Posted on December 30, 2011 by James A. Bacon| 6 Comments

Experian's map of 10 Best (blue) and 10 Worst (yellow) average credit scores for major U.S. metros.

James A. Bacon

It’s basic economics: Consumer spending drives the American economy, accounting for 70% of GDP. One reason the United States economy is in the doldrums is that consumers can no longer sustain the borrowing binge that propelled the economy during the 1980s, 1990s and 2000s.

In “Boomergeddon” I predicted that the savings rate would return to historical levels from the near-zero rate that prevailed before the recession as Americans worked to mend personal balance sheets and Boomers got serious about saving for retirement. Alas, I was wrong. I under-estimated the extent to which Americans were addicted to Mass OverConsumption. After rising to around 5% for a couple of years — better than before the recession but about half of what is needed — the savings rate dipped back to the 3.5% range in the months before Christmas. That gave a temporary boost to the economy, but it means Americans have a long way to go before restoring their personal fiscal health.

I also underestimated the polarization, myopia, self delusion and craven cowardice of our rulers in Washington, D.C. — and that’s saying something because I cut them little slack in the book. Given the pathetic performance of Congress and the Obama administration in closing the budget gap, the country now is hurtling toward Boomergeddon on an accelerated timetable. When I was writing a year and a half ago, I risked branding myself as a scare-monger by suggesting that the federal government would go into default within 15 to 20 years. Today, that’s the optimistic scenario! A year ago, it seemed ludicrous to compare the U.S. to Greece. Today, it’s apparent that Greece is a dress rehearsal for the collapse of Euro-styled social democracy and, soon thereafter, of the U.S. welfare state.

As individuals, we are helpless to change Washington. The main question worth pondering is where best to locate ourselves to ride out the coming calamities. I would say New Zealand — but that tiny country won’t be able to accommodate more than a couple million of the world’s economic refugees, which rules out most of us. That means picking a place in the U.S. If you’d like to live in a locale with still-functioning state and local governments, then you might consider one of the states with AAA bond ratings. Of course, as argued on this blog with some frequency, Virginia’s premium bond rating is built upon a rickety foundation of out-of-control federal spending that cannot long continue.

Which brings us back to consumer spending. Another indicator worth examining is the credit-worthiness of the population. Are there meaningful geographical differences in how responsibly Americans have prepared for the future by spending less, saving more and repairing damaged personal finances? All other things being equal, populations with higher average credit scores will be better situated to ride out the depression that will ensue from federal default.

Experian, the credit report company, has compiled the average credit scores for 143 metropolitan areas across the U.S. The worst credit scores (the yellow dots in the map above) are concentrated in the Gulf Coast from Texas to Mississippi, with Myrtle Beach, S.C., and Las Vegas thrown in for good measure. Gambling and credit don’t mix? Who knew?  Conversely, the best credit scores (the blue dots) appear not in the nation’s wealthiest metro areas but in a tight cluster within the Midwest, primarily Wisconsin, reflecting no doubt the frugal propensities of the Germanic-Scandinavian populations that predominate. Wausau, WI, with an average score of 789 on a 330 to 830 scale, has proven more immune to the siren call of Mass OverConsumption than any of the other 143 largest metro areas.

And how about Virginia? The national average score is 749. Metropolitan Washington scores 766 (29th best nationally), Roanoke scores 752 (64th) and Richmond scores 750 (71st). Norfolk scores 740 (89th), dragged down no doubt by all those drunken sailors. Virginians are not the worst spendthrifts in the country, but we’re definitely upholding the tradition of Thomas Jefferson who, like most other members of the planter class, died with massive debts.

Bottom line: Virginian consumers are as over-leveraged and addicted to debt as other Americans. When governments around the world go into default, banks take massive hits on their government bond holdings, credit tightens and interest rates rise, Virginia’s consumer economy will offer no safe haven from Boomergeddon. Spending will decline, sales and property tax revenues will plunge and state/local governments will have no choice but to slash spending in turn. There will be no succor for the weak.

Have a Happy New Year. Boomers, enjoy the last few years of prosperity you are likely to see in your lifetime.

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Posted in 2011, Demographics, Economy

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Is Virginia’s Population Growth Slowing?

Posted on December 29, 2011 by James A. Bacon| 7 Comments

by James A. Bacon

The 2011 U.S. Census numbers are in, and the Brookings Institution is on top of them. The big story: Population growth continued decelerating across the United States and in Virginia, although the Old Dominion is still growing more rapidly than the national average.

Brookings attributes the decline to several factors: weak immigration, a downturn in fertility and the passage of Bay Boomers out of their child-bearing years. The aging of the Boomers is irreversible. However, the dip in immigration and fertility could be temporary, related to the economic downturn. Fewer immigrants are coming to the U.S. because they see less economic opportunity, while women are deferring child-bearing until economic prospects improve. Giving credence to this interpretation, the chart below shows that the decline began around 2006-2007, more or less when the recession began.

Annual Growth Rates by Census Region, 2001-2011. Credit: Brookings Institution.

Annual Growth Rates by Census Region, 2001-2011. Credit: Brookings Institution.

However, the fit is less than perfect. For starters, the recession didn’t begin until 2007. The downturn in population growth preceded it. Moreover, the Northeast saw a significant uptick in population growth through 2009, defying the economic downturn. Recession is at best a partial explanation. Another reason may be stronger economic growth and an increasing in economic opportunity in countries, most notably Mexico, that accounted for most immigrants. As I have suggested in an earlier blog post, the 1990s-2000s immigrant surge may have peaked and may be undergoing a long-term hiatus.

As for Virginia, the Old Dominion has never been a top-tier growth state. Although we are lumped in with the “South” and population growth has exceeded that of the Northeast and Midwest, we never kept pace with Texas, Florida or North Carolina. While Virginia ranked as the 15th fastest-growing state in 2010-11, according to Brookings numbers, compared to 2005-2006, our growth rate has fallen faster than the national average. Admittedly, the picture is complicated: Population growth in Virginia actually increased through 2009-10 before plunging last year.

I would hypothesize that the population growth was concentrated in Northern Virginia, which benefited from an unprecedented level of federal deficit spending, hiring and outsourcing to contractors. As the stimulus package petered out in the last year, so did some of the economic impetus for economic growth. Federal spending cannot possibly continue growing at the same rate as the past few years, so that economic prop for Northern Virginia population growth is likely to disappear.

Brookings frets about the slowdown in population growth from a national economic perspective. Fewer people in the workforce means slower economic growth and fewer taxpayers to support an aging population. Both are valid concerns. The picture is more mixed from a state-local perspective, however.

Fewer people equals reduced growth pressure — fewer houses to build, fewer schools, fewer roads, less infrastructure — in Virginia’s fast-growth counties. As the state and counties plan for future growth, there is a temptation to rely upon  population projections extrapolated from past trends. But if immigration is slowing, women are having fewer babies and the population is growing older, those projections may not pan out.

It’s certainly too early on the basis of a single year’s spectacular fall-off in Virginia population growth to draw firm conclusions. But the trend bears watching. The last thing we need to do in an era of constrained public finances is over-invest in transportation and other infrastructure based on projections that never materialize.

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Posted in 2011, Demographics, Infrastructure, Transportation

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