• The Road to Wealth Destruction

    The Road to Wealth Destruction

    The soon-to-be-built Charlottesville Bypass provides a lousy economic return on investment. Only government would spend $244 million on a project that yields less than $8 million a year in benefits to the public.

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  • The Promise and Pitfalls of P3s

    The Promise and Pitfalls of P3s

    The $2.1 billion Midtown-Downtown Tunnel project will alleviate some of the worst traffic congestion in Hampton Roads. But the deal raises questions about transparency and accountability in Virginia's public-private partnership law.

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  • Games People PLA

    Games People PLA

    Will the recent deal to salvage the $2.8 billion second leg of the Rail-to-Dulles project require non-union bidders to play footsy with the construction unions? The answer is far from clear.

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  • The Era of Foreclosed Possibilities

    The Era of Foreclosed Possibilities

    The 2007 recession marked the end of the era of Mass OverConsumption. Suburban sprawl is over. It’s time to think about what comes next – and to adapt state and local government policies to new realities.

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  • In the Dark

    In the Dark

    The McDonnell administration omitted critical information from its presentation last summer when seeking the Commonwealth Transportation Board's approval to fund the controversial Charlottesville bypass.

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Teaching Like Socrates

Posted on February 17, 2012 by James A. Bacon| 18 Comments

Low tuition, classical education – what’s not to like?

By James A. Bacon

One day about two years ago Ann McLean, a devout Christian and mother of four, felt that she was “spoken to” by God and given a mission in life – to start a new school. She never looked back. If all goes well, she will enroll her first six classes of students for Hunter Country Day School this fall.

While the decision to launch a private school based on a classical education and Christian values came on suddenly, dissatisfaction with the conventional alternatives in the Richmond area had been percolating for quite a while. Educational standards in public schools, she felt, had collapsed. The curriculum in public and private schools alike had invaded by a dominant culture coarsened by sex and violence. And the college preparatory school where her children were enrolled heaped “crushing tuitions” on parents to pay for trophy buildings and athletic programs.

McLean’s intent is to focus on fundamentals, creating an environment where children can hone their minds and build character at the lowest tuition possible. Hunter Country Day will adopt a curriculum inspired by the classical education movement — the ultimate back-to-the-basics program — and charge only $6,000 in yearly tuition. That compares to $10,500 per pupil spent by public schools nationally this year and $10,900 in Virginia.

A slim, blonde banker’s wife with a Ph.D. in art history, McLean epitomizes the entrepreneurship sweeping K-12 education today. It’s a time of great ferment as Americans across the country seek to reinvent an educational system they see as badly broken. Indeed, that entrepreneurial, mission-driven spirit may be America’s best chance to break free from the rigid, suffocating stasis of the public school system. While private schools do offer an alternative, prep-school tuitions approaching $20,000 a year are unaffordable to the vast majority of Americans.

With the backing and support of two other Richmonders, McLean has leased classroom space from the Dover Baptist Church in Goochland County and scoured the region for second-hand equipment and desks. The school will have few frills. “We don’t need a huge football team. Sorry,” she says unapologetically. Technology has its uses but she doesn’t need high-tech school buildings either. “Socrates never had a classroom. Jesus Christ never had a classroom.”

Tuitions will go to hiring great teachers , keeping the teacher-student ratio down to an intimate 12 to one and implementing a classical education curriculum.  By “classical,” she doesn’t mean traditional, like teaching phonics (although she is a big believer in phonics). McLean is developing a curriculum based on the “trivium” developed in the Middle Ages: grammar, logic and rhetoric. Elementary school pupils are grounded in a foundation of facts, such as grammar. Middle school pupils learn how the facts relate in a logical framework. And high school students master rhetoric, or critical thinking. The curriculum is based on language and concepts, not photos, video and other images so prevalent in education today.

A core goal of classical education is to build students’ character. The founding fathers, says McLean, understood that humans were by nature selfish and fallen, the only antidote for which was the cultivation of personal virtue. “The American experiment depends upon an educated populace founded on Christian values,” says McLean, who makes no secret of her political and cultural conservatism. “The most important job of any culture is training the next generation” – a job at which the nation is failing. She wants to reverse the nation’s cultural decline. “I’m the little girl sticking my finger in the dike.”

McLean’s philosophy of education is not for everybody. But that’s the beauty of free markets. Real competition would offer a broad spectrum of alternatives to the secular uniformity of public schools and the soaring cost of elite prep schools. More importantly, Hunter Country Day will succeed only if McLean provides the kind of education – at an affordable price – that parents want for their children.

Virginia’s General Assembly is debating a number of proposals this session to increase private school choice by means of tax credits. None of the proposals are bold enough.  Based on Governor Bob McDonnell’s proposed 2012-2014 budget, the commonwealth will distribute $5.1 billion, or roughly $4,000 per student, in Direct Aid to Public Education. If that $4,000 followed the students, rather than the schools, the vast majority of Virginians could afford a private education of their choice…. Or, if parents couldn’t find a school that suited, like Ann McLean they could start their own.

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Posted in 2012, Education (K-12)

Port of Virginia’s Growth Opportunity

Posted on February 17, 2012 by James A. Bacon| 29 Comments

by James A. Bacon

The Port of Virginia was the third largest East Coast port ranked by container traffic in 2010, with 11% market share. It trailed Savannah  and New York/New Jersey, and Charleston was nipping on its heals. But the market for U.S. containerized cargo is forecast to double over the next decade, and Virginia’s ports are ideally situated to benefit from that growth.

In a presentation to the Commonwealth Transportation Board Wednesday, Jerry Bridges, executive director of the Virginia Port Authority, explained how the expansion of the Panama Canal would give Virginia’s ports a big competitive edge over its East Coast rivals. I have blogged on this topic before, but Bridges offered a greater level of detail.

The widening, expected to be complete by 2014-2015, will allow ships holding 18,000 TEUs (twenty-foot equivalent units, half of a standard shipping container) to use the canal. Currently, the canal handles ships with capacity of 4,400 TEUs. The use of larger ships will dramatically cut shipping costs from China, Japan and other Far Eastern nations to the U.S. East Coast, bypassing America’s West Coast ports and trans-continental railroads. (I could not attend the CTB meeting Wednesday, so I am basing this post upon Bridge’s PowerPoint presentation, filling in the blanks as necessary.)

Other U.S. ports have limited options to expand capacity. Virginia has the only U.S. port with a permitted expansion project in place. Perhaps most crucial, Hampton Roads has the deepest channels of any East Coast port, meaning that it is best equipped to handle the giganzo container ships now coming out of the shipyards. The graphic below shows the current (blue), authorized (red) and desired (green) channel depths on the Atlantic coast.

Port channel depths. Source: Port of Virginia

Virginia also has partnered with the two East Coast railroads, Norfolk Southern and CSX, to upgrade rail routes emanating from Hampton Roads and Virginia by allow double stacking of container trains. The Heartland Corridor and National Gateway will connect Norfolk to the Midwest, while the Crescent Corridor opens up markets in the Northeast and deep South. Even though Norfolk International Terminals has added six new on-dock rail lines and doubled the capacity of its rail yard, the railroads aren’t expected to be able to handle the influx of traffic. Thousands of containers will have to move by truck.

Freight movement has multiple highway bottlenecks due to the necessity of crossing bodies of water. The map below shows the port’s priority transportation projects in Hampton Roads. Not included here is the upgrade of the U.S. 460 link to Interstates 95 and 85 in Petersburg.


The Midtown Tunnel and Martin Luther King (MLK) extension are already funded. The other multibillion-dollar projects are not.

Two critical questions: First, how solid is the forecast showing a doubling of U.S. containerized shipments by 2022? What assumptions are embedded in that projection? Can international trade continue at the same rate as in the past three decades? What happens if, as President Obama hopes, an increasing share of manufacturing relocates back to the U.S. as China loses its edge as a source of inexpensive manufacturing? Is the forecast solid enough to base an investment of billions of public transportation dollars? And what happens to toll-driven projects if the traffic fails to materialize? I’m not doubting the forecast. I just want to hold it up to public scrutiny.

Second, if the demand is as powerful as Bridges says it is, and if the Port of Virginia will enjoy such an overwhelming competitive advantage in winning the growth in container traffic, why does the U.S. 460 upgrade need to commit $500 million in state subsidies? Do the three construction consortia bidding to partner with the state accept these port projections? If so, how much new truck traffic do they expect the port to generate? And why can’t they pay the full freight?

There are good reasons to believe that the Panama Canal widening will create a great economic opportunity for Virginia. Of course, the state should endeavor to support that opportunity. But I would like to see the analysis, if it exists, that justifies committing the state to a half-billion dollar subsidy.

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A Pathetic Half-Time

Posted on February 17, 2012 by Peter Galuszka| 20 Comments

By Peter Galuszka

It’s so-called halftime at the Virginia General Assembly, and with conservative Republicans holding sway and many serious problems facing the Commonwealth, here’s what we’ve come up with so far:

  • Women exercising their constitutional right to have an abortion now will be forced to undergo and pay for an ultrasound before the procedure. There’s no medical reason for this, just to shame the woman into reconsidering so that right-to-lifers can feel good about themselves. Conservative Republicans, mind you, want to keep the government out of our private lives.
  • After years of supplying a lot of the East Coast with handguns, Virginia limited purchases to once a month. No longer. Now gun fanatics can exercise their Second Amendment Rights as many times a month as they want and blast away. Rock on!
  • If you have been laid off or were born into a low income family and need public housing, the state wants to check into your urine to see if you abuse drugs. If you are poor, you are suspect. If you are rich, congratulations, sir!
  • If you look foreign and sound like Cheech and Chong, the cops have to check to see if you are in this country legally if they happen to stop you for running a red light. How they do this quickly, no one knows exactly, since drivers licenses can be issued to anyone regardless of nationality. The police community is screaming that they don’t have the resources to handle this and even the Richmond Times-Dispatch says it is a bad idea. No matter, hard-right-wingers have to keep up with Alabama and Arizona.
  • In a move that is certain to save Virginia’s economy from the horrid onslaught of labor unionism, state money can’t be used to fund public works projects that have agreements that require that some of the work go to firms represented by unions. It has to do with Dulles Rail, a big transit project up DC way. It is important to let them Yankees and DCists know that this here’s the South and we don’t cotton to no unions.

Meanwhile, more pressing matters await, such as a budget. It seems that Gov. Robert F. McDonnell’s plan to put the screws to education and use part of its General Fund payments to boost transportation isn’t getting very far.

Ditto the conservative schemes to stick it to our lazy and inept public school teachers. They want to upend the status quo with new plans to subject teachers with tougher new performance appraisals. Mind you, there has been no solid evidence or public outcry that this is needed. Rather some of the right-wing think tanks decided it should be an issue. One reason could be that some teachers are organized into, God forbid, labor unions. It also has racist overtones since it seems aimed at minority teachers in minority and low-income areas.

The anti-teacher movement seems to have been orchestrated months before the legislative session. Read six months of some of the postings on this blog and you will see that somewhere, someone has decided that public school teachers are a major, major problem. Maybe you didn’t notice yourself, but you read it here first!

The big irony is that McDonnell has worked so hard to recast himself from social to moderate conservative so he can more easily pursue national political ambitions. As much as he spins the GA session as progress, it clearly ain’t. The agenda is being controlled by the likes of Bob Marshall and other wingnuts.

As for me, I blame the Democrats, especially national party boss and former governor Tim Kaine. They let the hard righters get a slender majority in the last election and now there’s hell to pay. Ironically, however, the one who might end up paying the most will be Bob McDonnell.

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Posted in Abortion, Blogs and blog administration, Budget, Children and families, Economic development, Economy, Education (K-12), Electoral process, Entitlements, Environment, Finance, Gun rights, Health care, Housing, Immigration, Infrastructure, Labor & workforce, Politics, Race and race relations, Social services, Taxes, The Economy

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Goodbye Grundy! Hello, Wal-Mart

Posted on February 16, 2012 by Peter Galuszka| 11 Comments

By Peter Galuszka

Hours west of Richmond by car  lies the old coal town of Grundy, lying at a confluence of the flood-prone Levisa Fork River below steep cliffs of sedimentary rock of sandstone and shale.

Grundy has been a touchstone for my various trips to the Virginia coalfields over the years. I hadn’t been that part of the woods in a while and when I drove through on Tuesday, I went into a state of shock.

Utterly gone was the pleasant old town with its rich collection of Depression-era buildings that could have been the subject of a Walker Evans photo study. Vanished was the black statute of the coal miner looking expectantly to heaven. The little movie house was gone. Everything was gone.

In its place around the dynamited sides of mountains was a multi-level Wal-Mart. I had to rub my eyes in the misty rain. An entire town had disappeared to make room for a Big Box.

To be sure, this had been a long time coming. The Levisa Fork is flood prone, in part because ruthless strip mining practices in the Southwest Virginia coalfields have ripped out vegetation that can hold back rainwater. One of the biggest floods came on April 4, 1977.

Grundy became a cause celebre among local economic development officials and U.S. bureaucrats. U.S. Rep. Rick Boucher worked out a plan in 1997 to forever change Grundy with town leaders, the U.S. Army Corps of Engineers and the Virginia Department of Transportation. Helped by $96 million in public money, VDOT bought and ripped down the old Lynwood Theater and local hardware stores and fives and dimes. The Army spent $100 million ripping out 2.4 million cubic yards of rock, enough for 68 football fields, and helped relocate rail tracks.

In all, according to a 2007 Post story, Grundy’s makeover ended up costing $196 million or $175,000 for every man, woman and child in town. But all didn’t work out according to plan. Many of the building owners, the Post reported, did not rebuild as planners hoped. They merely pocketed their money and left.

What’s left is a Wal-Mart in perhaps the most dramatic geological setting possible. The utter madness of the scene is commemorated on YouTube with a pictoral.

Even nuttier is that government officials have spent so money on Grundy when there is still so much oppressive poverty and health care needs that have infected the coalfields from the day the first coal prospector set foot on the remote and beautiful mountains of Southwest Virginia.

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Posted in Budget, Infrastructure, Labor & workforce, Land use, Planning, Transportation, Unemployment

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MWAA Plays Chicken with McDonnell over PLAs

Posted on February 16, 2012 by James A. Bacon| 15 Comments

Train wreck. Photo credit: Washington Metropolitan Area Transit Authority.

by James A. Bacon

The Metropolitan Washington Airports Authority (MWAA) board pressed ahead yesterday in its bid to preserve the $2.8 billion Phase 2 of the Rail-to-Dulles project as a union job.

First, under pressure from Republican legislators, the board retracted a previous decision mandating that Phase 2 be subject to a Project Labor Agreement (PLA). Instead of requiring the prime contractor to hire workers from a union hiring hall, the board substituted a 10-percent scoring bonus for bidders whose proposals contain a PLA. That bonus gives companies using a union workforce a significant advantage in the bidding process expected to take place later this year, and it could be sufficient to even deter many non-union contractors from submitting bids.

MWAA’s action appears to be designed to skirt bills passed by House of Delegates and the state Senate that would prohibit mandatory PLAs for any project receiving state funds. If the MWAA board had kept its PLA mandate, it would have put into jeopardy a contribution of $150 in state funds that was critical to a delicate restructuring of the project financing worked out under the auspices of U.S. Transportation Secretary Ray LaHood.

The PLA is a top priority of Dennis Martire, vice president of the Laborers International Union (LiUNA), which between its national and Mid-Atlantic offices has contributed $1.1 million to political candidates since 2008, overwhelmingly to Democrats. The MWAA board is comprised mainly of appointees by Democratic officials, and Democrats in the General Assembly have opposed Republican-sponsored bills to hold the MWAA board accountable.

Second, the board heard a presentation by a consultant who warned that rates for the Dulles Toll Road could double starting next year if, in the words of the Washington Post’s Dana Hedgpeth, “Virginia doesn’t deliver on a promise to contribute $150 million for the second phase of Metrorail’s new Silver Line.”  The not-too-subtle message: If Governor Bob McDonnell refuses to hand over the $150 million, he’s to blame for toll rates going up.

Under the financing arrangement agreed to by the funding parties, Loudoun County, Fairfax County, MWAA and the Commonwealth of Virginia will pay fixed sums. Any additional costs — such as a winning bid higher than the official $2.8 billion cost projection — will be covered by Dulles Toll Road commuters, who will pay higher tolls.  Writes Hedgpeth:

Tolls for a one-way trip that now costs $2.25 could increase to $4.50, according to a consultant’s report prepared for the Metropolitan Washington Airports Authority and presented during a board meeting Wednesday. If the state money comes through, tolls for the same trip could still rise to $2.75.

The MWAA board appears to be playing a game of chicken with the McDonnell administration. If the governor refuses to hand over the $150 million, MWAA may have no alternative but to jack up rates on Dulles Roll Road commuters, many of whom live in Loudoun County. If that happens, Loudoun County might drop out. Is McDonnell willing to see the Rail-to-Dulles financing run off the rails because he won’t cough up the state’s promised share?

McDonnell may have no choice but to withhold the funds. HB 33, whose lead sponsor was Del. Barbara Comstock, R-McLean, not only prohibits mandated PLAs, but it seeks to ensure that “neither the state agency nor any construction manager acting on behalf of the state agency … discriminate against bidders [not adhering] to agreements with one or more labor organizations.” Arguably, MWAA’s 10-percent bonus for PLAs would discriminate against non-union contractors.

Northern Virginia needs mass transit to accommodate its transportation needs in an age of ever-increasing congestion and gasoline prices. But the process of building heavy rail is so polluted by special interest maneuvering — labor unions, big construction firms, real estate owners — that costs mount inexorably and financing becomes a game of the politically strong shifting costs onto the weak. As Old Dominion enters an era of ever tighter fiscal constraints on state and local government, we need to find a cost model for mass transit that Virginians can afford and a political process that doesn’t leave citizens feeling like they’ve been raped.

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Lawmakers with Nothing Better to Do

Posted on February 16, 2012 by James A. Bacon| 7 Comments

How’s this for inane micro-management of the education system? Sen. Dave Marsden, D-Burke,  submitted a bill requiring all textbooks approved by the Board of Education, when referring to the Sea of Japan, to note that the body of water is also referred to as the East Sea.

Only Marsden knows what prompted this exercise in geographical correctness, but it clearly messes where the General Assembly shouldn’t be a messin’. It seems that the Koreans are irate that the body of water lying between Japan, Korea and Russia (see map) should be referred to as the Sea of Japan. They propose the neutral-sounding “East Sea.” Of course, the sea is “east” of Korea, but “west” of Japan, thus implicitly endorsing its connection to Korea. If I were Korean, I’d probably get torgued up, too. But it appears that the Japanese are equally keen upon retaining the name. (Two posts by Japanese citizens upon the Richmond Sunlight website make good reading, if you are interested in geographic and historical arcana.) Thankfully, the Russians have kept their noses out of it so far.

It has been common usage among Western countries to call the body of water the Sea of Japan since at least the early 1800s, and so the name appears in the textbooks read by Virginia students.

The last time I checked, the federal government is responsible for the conduct of diplomacy and foreign affairs, not the Commonwealth of Virginia. (Very few of the things that the federal government does are legitimate, to my mind, but this is one of them that is.) We have no dog in this fight. But both the Koreans and the Japanese are vital partners to Virginia’s economic prosperity. All we can do by taking sides is to tick someone off. Let the textbook publishers take the heat.

Thankfully, the state Senate did the right thing… though just barely. The Education and Health Committee defeated the bill in a 7 to 8 vote. I can’t begin to imagine what the seven “yea” voters were thinking.

– JAB

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Posted in 2012, Education (K-12)

Devolve Federal Transportation Spending to the States

Posted on February 15, 2012 by James A. Bacon| 8 Comments

Transportation bill to nowhere

Worth reading: an op-ed penned by Sen. Jim DeMint, R-SC, in the Wall Street Journal today. He explains how Senate Democrats and House Republicans have “surrendered to the status quo” of unsustainable fiscal policy by cranking up transportation spending and bailing out the Highway Trust Fund with borrowed money.

DeMint makes a modest proposition: “We should devolve the federal highway program from Washington to the states. We can dramatically cut the federal gas tax to a few pennies, which would be enough to fund the limited number of highway programs that serve a clear national purpose.”

States then could adjust their state gas taxes, avoid congressional earmarks, devise their own transportation construction plans without petitioning the federal highway bureaucracy, and sidestep the Davis-Bacon Act requirement to pay labor-union wages on federally funded projects.

Why aren’t Virginia’s congressmen making a similar case?

– JAB

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Posted in 2012, Transportation

The Road to Wealth Destruction

Posted on February 14, 2012 by James A. Bacon| 23 Comments

The soon-to-be-built Charlottesville Bypass provides a lousy economic return on investment. Only government would spend $244 million on a project that yields less than $8 million a year in benefits to the public.

By James A. Bacon

The citizens of Charlottesville and Albemarle County think they have a traffic congestion problem on U.S 29 north of the city. Of course, everybody thinks they have a traffic problem. You should see the intersection of Parham and Patterson near my home in Henrico County around 5:30 p.m. It can take three or four cycles to get through the stop light. And try driving on Interstate 95 in Prince William County. It’s far worse than anything in the Richmond region – you can get stuck in stop-and-go traffic at 6:30 in the morning!

The question is whether the congestion on U.S. 29 north of Charlottesville is so numbingly God-awful compared to all the other traffic hell-holes in Virginia as to warrant a $244 million investment (including sunk expenses) to build a bypass, as the McDonnell administration has decided to do.

For more than a half year now I’ve been writing about the Bypass from a distance, here in Henrico. At times, the controversy seemed remote and abstract. To really understand the controversy, I decided I needed to experience the frustration, the agony and the road rage of driving on U.S. 29 first hand. So, one day in December, using a digital stop watch to track my time, I spent more than an hour driving up and down the congested highway corridor slated for bypass. I wanted to see for myself just how bad things got during rush hour.

It was a regular workday, the University of Virginia was in session and traffic conditions were routine. I set some rules for myself: no lane weaving, no bumper hugging and no gunning through yellow lights to alter the outcome. While I was behaving myself, there would be no cursing, fist shaking or banging on the steering wheel either. I would drive like a normal person.

The results were far from anything I expected.

The stretch of U.S. 29 in question runs through 14 stoplights and is lined with restaurants, shopping malls, office buildings and other development. Although the road is designated a highway of statewide significance — one of Virginia’s three major north-south freight  routes — Albemarle County zoned the land around it as a primary growth corridor. Thousands of people use the road to drive to work every day at the University of Virginia and other Charlottesville employment centers.

Figuring that morning rush hour would experience the worst congestion, I picked the period of 7:30 a.m. to 8:30 a.m. to drive back and forth between Ashwood Boulevard at the proposed northern terminus of the Bypass and the U.S. 250 Bypass underpass to the south. Driving north against the rush hour traffic established a base line: My three trips averaged 7 minutes and 42 seconds. Traffic was smooth flowing throughout, although delays did occur during lengthy stop lights at the Hydraulic and Rio road intersections.

Likewise, I drove south three times with the rush hour traffic. My first trip took the longest. I was surprised at how smoothly traffic moved but I did get hung up at the Rio Road intersection for a long stoplight cycle. Thanks to the synchronized lights, however, I whizzed through the major intersections without a hitch on the next two trips. The average drive time for all three: 7 minutes and 21 seconds – faster than when I was driving against the rush hour tide!

At the end of the exercise, I had one question: Traffic congestion? What traffic congestion? These people know nothing about traffic congestion!! What is all the hoo-ha about?

ROI – No, that’s Not French for “King,” although It Is a Foreign Word in Virginia

A variety of claims have been advanced in favor of building the Bypass. First, there is an economic benefit to reducing the amount of time people lose being stuck in traffic congestion. Second, the project will improve safety, reducing the number of traffic accidents on an accident-prone stretch of road. And third, it will promote economic development – not necessarily in the Charlottesville region but in points south, specifically in Danville and Lynchburg. Building the Bypass around Charlottesville’s congestion hot spot, it could be argued, will reduce truck travel times and improve the competitive posture of manufacturing businesses that use U.S. 29 as a freight corridor.

While the claims are not implausible on their face, no one has subjected them to rigorous study. The Virginia Department of Transportation has never conducted a Return on Investment (ROI) analysis to determine how much economic benefit the commonwealth will derive from its $244 million expenditure, much less how that ROI would compare to alternative transportation improvements. Continue reading.

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An Economy Built to Crash

Posted on February 14, 2012 by James A. Bacon| 15 Comments

President Obama delivers budget remarks at Northern Virginia Community College.

by James A. Bacon

President Obama has a catchy new slogan. He wants a budget that will create an economy “built to last,” evoking the best-selling book of the same name that explored the secrets of exceptional, long-lasting corporations.

Unfortunately, Obama’s budget, if ever enacted, would more likely create an economy that’s “built to crash.” In essence, his formula is this: Raise taxes on the rich. Instead of using the revenue for deficit reduction, he will use it to expand government “job creating” initiatives. Evidently, the geniuses in the White House, despite having presided over the weakest economic expansion since the Great Depression, still believe they can do a better job of allocating the nation’s wealth than the people who got rich by actually creating the wealth.

One way to gauge the effectiveness of Obama’s interventionist policies is to compare the Office of Management and Budget real (inflation-adjusted), year-to-year growth assumptions embedded in Obama’s four budget documents. In nearly every instance, the result of Obama’s policies has been an economy that has under-performed expectations by a wide margin.
Particularly instructive are the results for Fiscal Year 2011, which Obama assumed early in his administration would grow a robust 4.0%. But succeeding budgetary assumptions downgraded growth expectations to less than half that rate, to 1.8%, over three years. Likewise, the OMB has lowered growth assumptions for fiscal 2012 and 2013.

But in the out years of 2015 and 2016, the fiscal forecasts get rosier than before on the basis of no known evidence or logic. Whereas the Obamanauts had assumed early in the administration that robust economic growth would taper off in five or six years as the business cycle matured, such realistic thinking has largely disappeared. Now, for growth assumptions to prove accurate, one of the weakest business expansions in U.S. history will have to morph into one of the longest lasting. Good luck with that.

Moreover, the optimistic growth numbers coincide with the expiration of the Bush-era tax cuts for the “rich” — millionaires, billionaires… and households making more than $250,000 a year. The projections are predicated on the beliefs that (a) taxing the rich at a higher rate will not induce them to shift more of their wealth into non-taxable assets, and (b) that unburdening the rich of their unjust share of the nation’s wealth will have no deliterious effects upon job creation and economic growth, with the result that (c) economic growth will continue unimpeded.

Both suppositions are, I believe, incorrect, although I am fully aware that I will not persuade anyone who does not want to be persuaded. All one can do is wait a few years, look back and see who was right and wrong… which I fully intend to do.

If my analysis continues to prove correct, then budget deficits will greatly exceed the $7 trillion in Obama’s forecast over the next decade. Barring a seismic shift in spending patterns, the tax structure or economic growth rates, the United States will continue to rack up $1 trillion-a-year deficits for the foreseeable future. Inevitably, the United States will endure a financial crisis, either defaulting outright on its debt or engaging in its moral equivalent, the engineering of hyper-inflation. Either way, an economic catastrophe — a crash — will ensue, devastating job creation, tax revenues and the social safety net. That day is still years off, and Obama always can hope that the calamity will not take place on his watch. But it will come. Indeed, there is likely no reversing it now, regardless of which party controls Congress and the White House.

For the record… There are two glimmers of light in the proposed 2013 budget. First, Obama continues to cut military spending and to reformulate a strategic doctrine aligned with smaller military resources. That is something that Republicans and conservatives are not willing to do, yet must be accomplished if there is any hope to balance the budget. Second, he actually proposes cuts to farm subsidies. Of course, farmers are doing better than most of the rest of us, so it’s high time they get off the dole. The proposed cuts are more of a no-brainer than an act of budgetary courage. But the solons in Washington typically quail before the farm lobby, so any sign of fiscal discipline, meager though it may be, should be celebrated.

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Posted in 2012, Budget, Economy, Federal

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Fraud a Minor Factor in Virginia Medicaid Spending

Posted on February 13, 2012 by James A. Bacon| 4 Comments

A piece of good news on the government efficiency front: Medicaid fraud by recipients and providers cost the General Fun only $6.1 million in Fiscal 2009, according to a report published by the Joint Legislative Audit and Review Commission (JLARC).

The less-than-g0od news is that payments to individuals improperly enrolled in Medicaid amounted to beween $18 million and $263 million, based on federal review of Virginia’s eligibility determination process. Assuming the real number lies between the two extremes, that’s a relatively small portion of Virginia’s Medicaid budget, which in fiscal 2011 was $7.2 billion.

Still, any fraud is too much, and JLARC thinks performance can be improved. States the report: “Additional investments are needed to reduce future errors through improved State oversight of local departments of social services, modernized information technology, and provision of additional training to caseworkers.”

– JAB

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Posted in 2012, Budget, Health care

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