Bacon's Rebellion

Cooking the books on Transportation numbers

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by

James A. Bacon
in

In the Summer of 02, I asked my Virginia Senator, Marty Williams, for the analysis behind the Yes! Campaign to raise our taxes for transportation. I was the Chairman of the Poquoson City Committee and State Central Committee !st Cong. District representative, RPV. Marty’s staff sent me their inch and half book of expensive analysis.

I found the cherries the politicians had picked for sound bytes – like the $100 a year for an average family in the sales tax bite. Of course, the ‘average’ family had 2.3 people or so and an income that was well below the median of most communities in Hampton Roads.

I found the cherries the politicians ignored – like at the end of 20 years of construction delays and billions of dollars there would be substantially more ‘congested’ road miles in Hampton Roads than before all the concrete was poured. And that tolls alone could pay for most of the cost of a Third Crossing.

Yesterday, I got the latest bowl of transportation cherries from Marty. There are two aspects worth more attention. The first is the flagrant con of cherry picking the stats. The second is the issue of the model they tried to use.

First, go to http://www.thomasjeffersoninst.org/main/main.php where Michael Thompson shows the results from his institute. (Is he still running this thing out of his basement office? When we met several years ago he was). Click on ‘to see a powerpoint summary of each of the proposed tax and transportation plans’.

Look at slide 12 – Marty’s plan adds 8405 government jobs in year one and KILLS 5805 private sector jobs in year one. Oddly and magically, then the private sector employment increases by year 4. Marty only shared the last number.

Look at slide 12 – Marty’s plan LOWERS disposable real income and per capita income. Translation – Virginia’s families have less money. Then, the magic happens again and it gets better by year 4.

Keep reading the slides… conversely, the House Plan INCREASES private sector jobs and income from year 1 on. Duh.

Second, this study needs study. It’s called the ‘Virginia’ STAMP Model, but it’s actually other states’ econometric models kinda sorta made to fit for Virginia.

Like all economists the folks in Massachusetts who put this together made assumptions. If you drill down (same url as above) and click on “to see an explanation of the Virginia STAMP Model, along with the formulas, data, and assumptions used in the model when first developed two years ago. None of the formulas or assumptions have changed since that time”, you will note that this model doesn’t include the economic impact of the 04 largest tax increase in Virginia history.

See the assumptions on household taxes.
Look at how it assumes the expenditures for vehichles from a model for the NE is good enough for Virginia. Likewise, the distribution of households used is one for the NE.

This isn’t a macro-economic model for Virginia. It’s a proxy. Someone with econometrician friends at the Heritage Foundation – please share this with them.

I’d like to know the model magic that increases income after 4 years – what drives that – certainly not the tax hike?

Sen. Marty Williams is a gifted politician. Read that in many meanings. But, when it comes to analysis and economics, he should stay with his chosen employer – waste management.

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5 responses to “Cooking the books on Transportation numbers”

  1. James Atticus Bowden Avatar
    James Atticus Bowden

    I’m a lousy proofreader. Second slide is 13 for income. And it’s 1st Cong Dist for SCC, RPV.

  2. Jim Bacon Avatar
    Jim Bacon

    Bravo, Jim, Thank you for doing the press’ job for them.

  3. Anonymous Avatar
    Anonymous

    With respect to the Virginia STAMP model, the writer may have done the job of the press, but nothing of import was said with respect to the economics of the plan.

    If a model is constructed in a basement, but it predicts gravitational flows properly then my hat is off to the model writer. In economics, the proper response to a model is a better prediction, not a series of “oddly and magically” citations.

    The intuition of the model seems clear. In the early years, taxes do come at the expense of state production, thus the job losses. But, no magic here, the investment in infrastruce happens to be VERY productive. See the literature for evidence on that claim. (Heritage will have it)

    Then, no magic here, as investments pay off, incomes rise, and they rise such as to overwhelm the initial tax impact. If true, this is very good policy. A competing model is needed to rebut the STAMP model at this point.

    When this model was “kinda sorta” made to fit Virginia, was that a good thing? It seems helpful to me.

    Now to be fair, no one likes economists from Massachusetts, so we have agreement there, but as to assumptions, what do you conclude about the economic impact of the 04 tax increase? It was not clear. The impact needs careful study and I look forward to your contriubion.

  4. James Atticus Bowden Avatar
    James Atticus Bowden

    Anon: We agree that better economists from Heritage might shed more light.

    I studied econ, but didn’t get a degree in it in grad schools.

    I’d love to see the data that pouring concrete (translation for investing in infrastructure)with business as usual actually decreases congestion and improves productivity (the main multiplier in improving the macro-economy).

    Likewise, the deletrious effects of the 04 tax hike – lost family income – and its effect on job loss wasn’t factored into the base. The base economic assumptions in 06 are not what they were pre-04.

    Finally, the economic data on the relationship between tax cuts and increasing jobs and tax hikes and job loss is profound. The ability of more concrete, causing more delays and producing darn few miles of roads in just 4 years, to increase productivity to overcome the harmful effects of the tax hike in years 3 and 4 is suspect. That looks like magic until there is some explanation.

  5. Ray Hyde Avatar
    Ray Hyde

    I don’t have enough information to comment, I’d love to see more. I wouldn’t object to a good analysis, just because it came from Taxachusetts, and I’m not sure Heritage is infallible, either.

    Congestion is not going away under any scheme that doesn’t involve a serious reduction in commerce or massive job relocation. We should not hold up congestion relief as a metric or success criteria, unless we are willing to use that as a metric for alternative proposals as well.

    If that is the case, transit and Metro wouldn’t fare very well. The real issue at hand is what is the quantity, quality, and flexibility of additional transportation you can buy for the money at hand.

    Coors, is presently moving a number of enormous brewing tanks over the highway, you can’t do that on a bike trail or Metro. Every day, I see convoys of trucks moving preconstructed buildings and building parts into the central NOVA area. This means that there are factories out in the Valley producing building panels, trusses, cabinets etc. and supporting people working there who don’t have to commute to the city as construction workers. That is a job that Metro cannot do. What Metro can do is move an enormous number of people and briefcases, in a limited area, in a short amount of time.

    When you call the police, fire, or rescue squad, you are not going to want to wait for them to arrive on alternate modes of transportation or bicycles. What this means is that alternative proposals are really additional proposals, because you are going to have to build the roads (or some other infrastructure) anyway.

    We have not defined or prioritized the problem(s) yet, let alone offered competing specific proposals to address them or defining and agreeing to the criteria by which they will be evaluated. Instead we are already debating the (unknown) economic effects based pre-defined dogma.

    There are probably only a few days left before we find out how much money is available and who is going to pay. If we believe that those who benefit should pay, then we should consider proposals that benefit those areas that provide the most money. We should also consider where the money will buy the most good, regardless of who pays. We should also set aside some incremental amount to promote the best of those other ideas we think we would like to see because they are ostensibly less polluting or socially noble. If the best ideas prove out in practice, then they will gain traction in the next budget cycle, and we can use the results to adjust and modify the models.

    If instead, the process consists of everybody driving their particular stake in the ground, then we will be well on our way to building a circus.

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