Bacon's Rebellion

The State Corporation Commission has given Dominion approval to proceed with pilot projects to test the viability of nine different conservation programs. The power company is billing the projects, some of which should begin as early as this quarter, as “consistent with the new Virginia Energy Plan” and potentially helpful in advancing the General Assembly’s target of reducing electrical consumption 10 percent by 2022 compared to what it otherwise would have been.

According to Dominion, pilot projects include:

• Cycling central heating and air conditioning units during peak-demand times (1,000 customers)
• Informing consumers about their real-time energy consumption patterns (1,000 customers)
• Promoting programmable thermostats that allow customers to control their use of electricity (1,000 customers)
• Educating customers about the value of reducing energy use during peak-use times (1,000 customers)
• Free energy audits and energy efficiency kits to 150 residential customers, 100 ENERGY STAR new homes and 50 small commercial customers. Plus, 250 new homes will receive energy efficiency welcome kits that include compact fluorescent light bulbs.
• Incentives for commercial customers to reduce load during periods of peak demand by running their generators to produce up to 100 megawatts of electricity — enough electricity to power as many as 25,000 residences at peak.

Bacon’s bottom line: These are all positive steps, but they barely scratch the surface of what’s possible. In “Conservation Capitalism,” I described a private-sector initiative (with support from Virginia Tech) to pump $500 million into retrofitting office buildings in the Washington metro area. Meanwhile, the potential exists to achieve massive reductions in electricity consumption in Northern Virginia’s ubiquitous, energy-hogging server farms and data centers.

While I insist that investments in energy conservation should be market driven, not government mandated on the basis of arbitrary goals, I do believe that regulatory policy — especially the structuring of electric rates — should be overhauled to reward conservation. Jim Kibler, with AGL Resources, described recently in “Cleaner, Cheaper, Better,” how a “decoupling” rate strategy could encourage natural gas companies to promote conservation. We should explore something similar for electric power. I suspect that we’ll find it ludicrously easy to achieve the state’s 10 percent conservation goal over the next 14-15 years. We should not use these pilot programs, as helpful as they are, as an excuse not to push for more ambitious, market-driven changes.

(Photo cutline: The Wattson, a unit the measures household electric consumption in real time. Photo credit: Conservation Consultants Inc.)

The 2008 session of the General Assembly has barely commenced, and already we’re generating editorial copy for the amusment of the rest of the world. Del. Lionell Spruill Sr., D-Chesapeake, has introduced a bill that would ban the display of ornaments that resemble human genitalia on automobiles. The display of such ornaments would be a misdemeanor punishable by a fine of up to $250.

Say what? It appears that websites are selling ornaments resembling bull testicles to hang underneath trailer hitches. Not to be picky, but… do we really want a law that will prompt a lawsuit — just for yucks? Do we really want the state Supreme Court adjudicating whether ornamental bull testicles sufficiently resemble human testicles to warrant a fine?

On the other hand, this bill gives a whole new meaning to the term “abuser fees.”

(Photo credit: Associated Press.)

Please humor me as I make one last blog post on “A Growing Divide: The State of Working Virginia.” The ground-breaking study by the Commonwealth Institute presents two more sets of important data: the percentage of Virginia workers with health care insurance, and the percentage of workers with pensions.

The health care insurance trends can be seen in Figure 10 (taken from the study), which depicts total private and public health care coverage. Summarizes the report: “In an environment where health care costs are rising rapidly, often substantially outpacing inflation, employers are finding it increasingly expensive and therefore financially difficult to continue to provide the same level of benefits. In particular, small businesses have found it difficult to afford to provide coverage for their employees.

I’m not certain this is quite the crisis it seems. Does the decline in “pensions” signify only a decline in the number of traditional, fixed-benefit plans? If those plans are being replaced with 401(k) plans, that’s not necessarily a bad thing. Employers may be shifting some of the risk of financial performance to employees, which could be a mixed blessing, but 401(k)s are portable. As the workforce becomes increasingly mobile, switching jobs with ever greater frequency, employees don’t lose accumulated pension benefits when they’ve failed to “vest” in a plan. Instead, they they take their 401(k) retirement benefits with them wherever they go.

I would like some clarification on that final point before concluding that an increasing percentage of Virginians are heading to the poorhouse in their old age.

While a recent report by the Commonwealth Institute, “The Growing Divide: The State of Working Virginia,” issued stark warnings about growing income disparities in Virginia, it did offer one morcel of good news. Even as United States workforce productivity has soared over the past two decades or so, productivity gains in Virginia grew even faster. In inflation-adjusted numbers, Virginia productivity in 1998 stood only marginally ahead of the U.S average, with worker economic output measuring between $56,000 and $57,000 per year. By 2005, Virginia per-worker output surpassed $65,000 — surging $2,000 ahead ahead of the U.S. average, as shown in Figure 4, reproduced from the report.

In Bacon’s Rebellion’s “Economy 4.0” schema, productivity and innovation are the wellsprings of economic progress and material prosperity. It is a basic tenet of economic theory that, in the long run, wages and salaries can rise no faster than the growth rate in productivity. Rising productivity is very, very good news. Without rising productivity, there would be no growing income to distribute, either equitably or inequitably.

Write the authors: “Virginia has one of the most productive labor forces in the country. … As a result, Virginia workers continue to be competitive and have performed well in recent years. This has led some to classify Virginia’s labor forces has one of the state’s “greatest assets.”

The authors continue:

Worker productivity has grown consistently since 1991, although throughout most of the 1990s this growth was relatively small. Beginning around 1998, however, a different pattern begins to emerge. Since 1998, annual growth in worker productivity in Virginia has accelerated substantially, averaging around 3 percent per year through 2005. Additionally, during this same period Virginia’s labor productivity has generally outperformed not only the national average, but has even rivaled the highest performing state in several individual years.

Given the rising productivity, the report suggests, one would expect rising workers’ incomes as well. But, alas, growth in median household income has been erratic, declining in 2004 and 2005, as shown in Figure 6, reproduced from the report.

The question that “A Growing Divide” asks — are poorer Virginians failing to share in the general prosperity — is a legitimate one. One would like to think that all segments of society (save, perhaps, the criminal class) benefit from increasing prosperity and rising general wage/salary levels. But I would append a number of observations:

1. As noted in a previous post, there are two Virginias — Northern Virginia and the Rest of Virginia — with significantly different wage levels and cost of living differentials. To what extent do the changes in statewide averages reflect shifts in regional dynamics? I don’t know, but I fear that any generalizations are of limited value until we do know.
2. Real adjusted median incomes have been rising in Virginia over the long run – indeed, until 2003, it appears that they were rising faster than the national average. The last two years in the chart may be an anomaly. Let’s see what the next year’s data reveals before drawing hard-and-fast conclusions.
3. It is entirely possible that the disparity in income gains reflects a disparity in productivity growth. It the fact that certain sectors of the economy are soaring in productivity, leaving other sectors as dust on the factory floor, a sign of unfairness or injustice? Can we realistically expect all sectors of the economy to advance at equal rates? Would we prefer to hold back the dyanamic sectors of the economy out of some twisted sense of social equity?

I would suggest that there are three reasons for the apparent inability of less affluent Virginians to keep pace with the more affluent. One is the impact of globalization, which provides greater rewards for those who compete successfully on a global scale. A second is the structural problem of reinventing mill-town economies, based on cheap, semi-skilled labor, for the Knowledge Economy — a process that can take years, if not decades. A third reason is illegal immigration, in which hundreds of thousands of illegals compete for lower-wage work, depressing general wage levels for those at the bottom of the economic pyramid. If we want to redress the inequality in incomes, let us first make sure we identify the underlying causes.

Wilder and city establishment strike out and lose Braves. Predicament shows just how hopelessly dysfunctional Richmond’s leadership really is.

Three years ago, I was sitting in the skyscraper office of a large Atlanta real estate firm listening to Thomas D. Bell Jr., CEO of the firm, talk about how Atlanta was trying to deal with its problems. Atlanta’s political and business officials had mobilized a regional task force to address the Dixie Dynamo’s major issues including clogged roads, dire shortages of drinking water, lack of affordable housing and uncontrolled sprawl.

I was there on assignment for a national business magazine and I was struck by how the Atlantans seemed to have it together. The Georgians don’t dither around about petty regional jealousies and the black-white playing cards. They seem to have gotten beyond those issues long ago. And while there are elements of Atlanta that I don’t go for, I appreciated their can-do attitude, realizing that this has made them the most important city in the Southeast.

How unlike Richmond, I realize. My current home town once was the capital of the South but that moniker proved very short lived. Both Richmond and Atlanta were largely destroyed by the Yankees but Atlanta roared back in ways that left Richmond in the dust.

And now, Atlanta has outflanked Richmond again. The Triple-A Richmond Braves have one season left to play here. They’re being herded out of town by their owner, the Atlanta Braves who got fed up with indecision and stupidity in Richmond. They got tired of having to kiss Mayor Doug Wilder’s behind again and again as he came up with screwball alternatives to renovate the badly-outdated Diamond, such as the hapless Fulton Gas Works. They got frustrated that no one else in Richmond’s establishment could break the ice and get Wilder off the dime. And, I guess, they got tired with the same old nonsense about how historic and wonderful Richmond is supposed to be when the truth is that it is a dysfunctional, leaderless place.

Don’t get me wrong. I’m not in love with the Atlanta Braves, whom I consider a rather bloodless crew. To be sure, there are limits to be put on public funding for the benefit of the huge and well-oiled corporation that owns the two Braves teams.

But the Diamond? Come on. The stadium, only 23 years old, is a shameless dump. The Atlanta Braves are correct to expect a lot better. Norfolk managed to build a beautiful, waterfront park. As for the Diamond, before my father died three years ago, he used to come up from North Carolina for the games he loved. He couldn’t walk that well. I don’t know if many of you have elderly parents or handicapped relatives, but have you ever tried using the elevator at the Diamond? It fits maybe four people, is very slow and has walls that are all put beaten out. Big lines form of people in wheelchairs or crutches waiting to fit in the tiny box.

So as Wilder’s typically abrasive personality prevailed, and no one else in the establishment had the guts to confront him, the Braves got frustrated over the acidic local politicking over various new stadium venues. They said, “screw it” and quietly began talking with officials of Gwinnett County, Ga., an Atlanta suburb in October. Commerce-minded Georgians don’t mess around and on Jan. 15, the Braves announced the new home for their Triple A team.

In Richmond, of course, Henrico and Chesterfield want to go their way and Richmond doesn’t know which way it wants to go on any number of important issues, from regional transit, to corporate recruitment, to growing disparity in incomes to controlling sprawl. Instead of taking meaningful action, the city and region hire the same old consultant who writes pretty much the same old report that they all read 15 years ago.

For baseball teams, Atlanta’s switcheroo follows a pattern that Major League Baseball teams are trying to locate their farm clubs closer to home. The relatively new Washington Nationals, their new DC stadium almost ready, have a Triple A club in Columbus, Ohio. It would be an extreme long shot if the team could move to Richmond. But it sure would be a great replacement and would follow the close-to-home trend. Of course, Wilder would have to be somehow kept on ice as Richmond proceeded with plans to rip down the Diamond and put a better stadium nearby.

I’d like that very much. Dad would have, too. After all the first game he ever took me to was Griffith Stadium, home of the Senators, back in the late 1950s. Now that was an old firetrap.

— Peter Galuszka

(Photo cutline: The Diamond, stadium of the Richmond Braves. Photo credit: Nationals Nation.)

Last November, Peter Galuszka penned a column for the Bacon’s Rebellion e-zine, “The Invisible Working Class,” in which he decried the condition of working class Virginians. Drawing upon the book, “Deer Hunting with Jesus: Dispatches from America’s Class War,” by Winchester writer Joe Bageant, Peter offered considerable anecdotal evidence for the shrinkage of manufacturing jobs, stagnant incomes and lack of medical insurance. If he had had access as well to a new report by the Commonwealth Institute, he would have had a field day.

The Commonwealth Institute, a liberal think tank focusing on Virginia, covers the same ground as Peter and Joe — but with charts, graphs and statistics. The Institute’s newly issued report, “The Growing Divide: The State of Working Virginia,” reaches much the same conclusions. Among its main findings:

• While Virginia’s growth in average wages has outpaced the national average, the trends are primarily benefiting Virginians in the top income brackets. Median wages (marking the point where 50 percent of wage earners fall above and 50 percent below) have stagnated or declined.
• The gap in wages between whites and African-Americans in Virginia has been consistently higher than the U.S. and has not decreased substantially since 1979.
• Despite favorable economic conditions, the number of Virginians without health insurance has been on the rise since 2001, and private pension coverage has declined almost 10 percent since 2001.

First, let me applaud the Commonwealth Institute for approaching the issue of income distribution in Virginia on a dispassionate and factual basis. All too often, people make a lot of wild claims with no grounding in the facts. The Commonwealth Institute has transformed the terms of debate in what appears, at least upon cursory examination, to be a fairly even-handed treatment. Although their purpose is to highlight disparities and injustices, the authors readily acknowledge the strengths of Virginia’s economy.

“The Growing Divide” is a fine example of the form that public policy debate should take. The report has opened up fresh avenues of inquiry, and it raises the level of debate in Virginia. I can pay no higher compliment.

That said, “The Growing Divide” is not without its flaws and limitations. My primary concern is that it is deceptive to discuss average or median incomes in terms of statewide averages. There are two Virginias: Northern Virginia and the Rest of Virginia. Wages and salaries are significantly higher in NoVa than RoVa. From the numbers in the report, it is difficult to tell if the wage disparities reflect a growing income gap within regions or between regions. If the gap reflects mainly the higher wages and faster growing population of NoVa, that’s quite different than a growing gap within regions. If the wage differential in NoVa is offset by a higher cost of living (especially housing), the implied disparity in living standards may be more apparent than real. We just won’t know until someone crunches the numbers region by region.

The same criticism applies to the comparisons of race. African-Americans comprise a higher percentage of the population in RoVa than NoVa. If wages are significantly higher in NoVa, and NoVa’s population is growing as a percentage of the state’s, the wage gap could signify little more than the fact that fewer African-Americans live in NoVa. Meaningful comparisons would look at the wage gap within regions.

Despite this significant reservation, the study highlights indisputable problems such as the fraying private safety net (medical insurance and pension funds), and looks at income statistics in refreshing ways. I am particularly impressed by the discussion of productivity. I will mine this data in future posts.

“The city seems prone to consulting things to death to such a degree that nothing happens. You’ve got to have the strength to pull the trigger.”

— William Pantele, Richmond City Council president, in reaction to news that the Richmond Braves would leave the city after 42 years. After years of study, the Richmond region still hasn’t nailed down a definitive plan to replace the aging Diamond baseball stadium.

With education a topic of consideration on the blog recently, I’ll toss this into the mix:

A prominent supporter of a market-based approach to improving public schools, Sol Stern, says he no longer believes charter schools or vouchers are a “panacea.”

In an article published in the latest edition of City Journal, Mr. Stern, a Manhattan Institute fellow, portrays the libertarian approach that once inspired him as a failed experiment, and urges those who agree with him to search for a “Plan B.”

I don’t have access to the City Journal article referenced in this New York Sun piece, so it’s difficult to assess just how dispirited some in the choice camp may be these days.

But it seems rather deep, if Chester Finn’s lament is any indication:

…Finn, who has been a vocal advocate of school vouchers and charter schools, said yesterday in an e-mail message that he has “growing sympathy” with Mr. Stern’s skepticism. Mr. Finn stoked debate himself recently by declaring that one factor hurting charter schools in Ohio is “too much trust in market forces.”

I’m not sure it’s time to strike the tent and give up on school choice. I’m also not sure one can have “too much trust in market forces.”

But has the time for choice come and gone? And if it has, is there a Plan B?

Here’s a sign of the times. I just received a e-mail from the University of Virginia “Travel & Learn” program, which I presume is targeted at alumni of advancing age like myself with the time and financial means to enjoy travel. The sales pitch is fascinating in itself:

The New Year has blown in a breath of fresh air: The January 14, 2008, edition of the Bacon’s Rebellion e-zine. If you don’t visit this blog regularly, subscriber for a free subscription to make sure you never miss an issue. Click here.

Here is our line-up of commentary:

Building Human Capital
Human capital is the driving force of prosperity in a globally competitive economy. Soon, regions will vie for it like they compete for investment capital. Will Virginia be prepared?
by James A. Bacon

Gray Matter Migration. A Web chart ranking the 50 states by net in-migration.

Virginia Migration Winners and Losers. A spreadsheet ranking Virginia localities by net in-migration.

Hypercompetition
Here’s the sub-text of Tim Kaine’s state of the commonwealth speech: Invest in Virginia’s economic future. We can afford it. Our economy is still out-performing the nation’s.
by Doug Koelemay

The Road Ahead
As the MainStream Media fails to provide information citizens need to function as voters and consumers, a citizen-driven media will emerge to fill the void. It’s not yet clear what that new media will look like.
by EM Risse

Unleash the Private Sector
Many localities are too financially strapped to execute Tim Kaine’s pre-K initiative for at-risk tots. He could bypass that bottleneck by engaging private daycare providers.
by Chris Braunlich

Rooting for Hillary
Hillary Clinton has friends in strange places. Among the millions of Americans who reveled in her New Hampshire primary comeback, there were quite a few in Virginia’s Republican Party.
by Norm Leahy

Hot Air or Cold Logic?
The Governor’s Commission on Climate Change could guide Virginia’s energy and environmental policy for years to come. One option it needs to consider: geo-engineering.
by David Schnare

Nice & Curious Questions
Birdies, Bogies and the Back Nine: Golfing in the Old Dominion
by Edwin S. Clay III and Patricia Bangs

So, this is what the Civil Rights movement has come to 50 years after Brown v. Board of Education: There’s nothing wrong with Virginia’s failing public school systems that showering them with more money won’t solve. In a nutshell that’s the message conveyed by Oliver Hill, Jr., and Andrew Block in an op-ed piece in today’s Times-Dispatch.

Hill and Block construct a rickety argument that leans upon nearly every prop of liberal thinking about schools in common currency today. They start their column by hijacking the moral authority of the 1960s civil rights movement. “Our political leaders,” they write, “should continue to honor Virginia’s civil rights legacy by funding an educational system that meets the needs of all of our students, including those same children of color for whom so many fought so hard.”

The Standards of Quality, which redistributes billions of dollars in state aid from affluent school districts to poor ones, is not enough to “ensure equality of educational opportunity,” they continue. Neither is the $354 million in “at risk” funding that supports special programs for poor children. Low-income students, they assert, need “additional resources to be successful.”

Nowhere in their column do Hill and Block allude to the fact that many minority-dominated school districts spend significantly more per pupil than neighboring suburban school districts. Nowhere do they mention the scandalous bureaucracy and waste in many of those school districts — a bureaucracy that Mayor L. Douglas Wilder, incidentally, has targeted in his ongoing battle with the Richmond School Board.

The thrust of the Hill-Block column is to absolve minorities from making any financial sacrifice themselves, restructuring educational bureaucracies or altering their own cultural values or attitudes towards education. More money is the solution, and the onus falls squarely upon the taxpayers of Virginia to dig deeper into their pockets — or dishonor the civil rights movement.

This is the same old, minorities-as-victims ideology that has fostered passivity among poor African-Americans and kept them them dependent upon the largesse of whites. While Hill and Block purport to honor the heroes of the Civil Rights movement of 50 years ago, their antiquated thinking keeps poor African-Americans mired in the role of supplicants. Virginia would do far better to emulate the example of those hundreds of thousands of African-Americans who have escaped poverty and joined the economic mainstream of society. What was their secret? How can their success be replicated?