Bacon's Rebellion

  • A Rare Instance of Sanity on the Rachel Maddow Show

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    James A. Bacon

    by James A. Bacon

    Last night, for the first time in my life, I managed to watch the Rachel Maddow Show on MSNBC without my blood pressure shooting through the roof. Even more amazing, I maintained my cool while Maddow interviewed Rep. Barney Frank, D-Massachusetts, the bilious co-author, among other dubious accomplishments, of the Fannie Mae-induced housing bubble. In commenting upon President Obama’s plans to radically downsize the U.S. military, Frank made the common-sense point that we can’t just cut spending and expect our men and women in uniform to maintain the same global-straddling commitments they do today. We will have to redefine America’s role in the world. We will have to make strategic choices. We can no longer afford to be the world’s policeman.

    Unlike Maddow and Frank, I have spent the better part of my 58 years arguing for a strong national defense and have been unapologetic about America’s role in the world.  For all our fumbling and flaws, the United States has presided over the most benign “empire” in history. Under the Pax Americana global trade has expanded exponentially, lifting literally billions of people from poverty. As much as many people despise us, the world will miss us when we’re gone. Whoever fills the vacuum will make the world a far uglier and more dangerous place.

    Be that as it may, we can no longer afford to maintain the military force it takes to support that empire. We are hurtling toward Boomergeddon. If, as seems likely, the federal government goes into default within another decade, it will be impossible to continue policing the world. But rather than make intelligent and rational choices about how best to defend our global interests in an era of constrained resources, we will face fiscal collapse, with wild and unpredictable consequences.

    The fiscal condition of the country is getting worse, not better. Two years ago, the president’s Office of Management and Budget forecast that the U.S. would rack up an additional $8.5 trillion in national debt in the ensuing 10 years. OMB also thought the deficit this fiscal year (2012) would amount to a mere $828 billion. Today, the budget deficit is expected to be $1,201 billion. Meanwhile, the strong, 4.5% annual economic growth that OMB had anticipated two years ago, has failed to materialize; even the optimists are projecting only 2.5% growth for next year… assuming no unpleasant surprises from Europe. The under-performing economy has more than offset whatever meager spending cuts Congress has managed to pass.

    The president’s policies are largely, though not exclusively, to blame. Obama refuses to cut domestic spending in any meaningful way, he has expanded entitlements rather than reform them, and his excess regulation and class-warfare rhetoric has chased capital to the sidelines. But he’s right about cutting defense. There simply is no way to close a budget deficit running at $1.1 trillion in the third year of an economic expansion without putting defense spending on the table… as his Republicans opponents are not inclined to do.

    I don’t give Obama credit for much — I think he has taken a bad situation and made it far worse — but I have to go along with him on this. We must cut defense spending and then redefine our strategic priorities in the world.

    None of this do we want to hear in Virginia, where our economy is more dependent upon federal spending — defense spending especially — than almost any other state in the union. But the alternative to closing the budget gap is fiscal collapse and economic depression that will bring defense cuts anyway. If defense cuts are all we can get out of Obama, let’s get on with it — and hope we can elect someone this fall who is willing to tackle domestic spending, entitlements, tax expenditures and to reverse Washington’s anti-growth economic policies.

  • Grrrrrr….

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    James A. Bacon

    My posting might be light the next couple of days. My PC died yesterday and I had to buy a new one. Now I’m focused on the laborious process of downloading all my old software and files. Fortunately, I backed up my files on Carbonite.com, a cloud service. But the darn thing tells me it could take 2 days to restore them! If you’re using a cloud service, beware — it may take longer to get up and running than you anticipated.

    Until Carbonite does manage to download my files, I have no access to my calendar (I hope I don’t have anything important scheduled!), my contacts or my pre-crash emails. I am currently receiving new emails, however…. And taking telephone calls.

    Update: Nearly two days later, I’m still downloading files. Got at least another day to go. Ugh. Carbonite sucks.

    — JAB

  • Nothing Exciting in the McDonnell Jobs Bill

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    James A. Bacon

    Gov. McDonnell announces his jobs agenda. Lt. Gov. Bill Bolling, the state's jobs czar, stands behind him.

    by James A. Bacon

    Gov. Bob McDonnell has released his legislative agenda for economic development, calling for a $36.8 million mix of initiatives over two years, including $10 million for life sciences, $4 million for Wallops Island, $4 million for advanced manufacturing and $4 million for non-course credits at community colleges, plus a grab bag of tax credits and program increases. (Read the press release here.)

    Before I launch into an explanation of why I am so underwhelmed by this patchwork effort, let me offer a few modest words of encouragement. First, McDonnell’s heart is in the right place. He should make job recovery a top priority of his administration. Second, he has held the line on tax increases, which is critical for maintaining a positive business climate. Third, he has not proposed any major legislative initiatives (that I can think of) that will impose new regulatory burdens on business. Fourth, this announcement does not include his transportation or higher ed agenda, which I don’t necessarily endorse but both of which are clearly geared toward job creation. Fifth, in a totally hypocritical violation of my principle that government should not pick winners and losers, I support whatever it takes to develop Wallops Island into a major commercial space launch facility.

    That said, it is difficult to imagine that breaking $36.8 million into 19 programmatic pieces and spreading around the crumbs over two years will make any material contribution to job creation. Moreover, there is no sign that McDonnell has conceptualized anything approaching a broad vision for economic development. His strategy amounts to parceling out more money to narrow-bore programs like the Motion Picture Opportunity Fund and the Virginia Winery Distribution Company without any thought to the bigger picture. Every traditional economic-development constituency gets a piece of the pie: tourism, industrial recruitment, agriculture and forestry, small business, community colleges, and the like.

    What is the McDonnell planning missing?

    Creative class. There is not so much as a glimmer of recognition that the driving force of economic development in a globally competitive, knowledge-intensive economy is what geographer Richard Florida refers to as the “creative class,” the 30% or so of the population that is engaged in scientific, artistic and entrepreneurial pursuits and complex problem solving. These people drive innovation and wealth creation. The surest path to creating more innovation, wealth and jobs is to do a better job of recruiting and retaining these creative people, which means building the kinds of communities where they like to live. But no program exists to advance this goal nor is there a bureaucratic constituency to lobby for it, therefore economic development policy in Virginia plods along oblivious.

    Human settlement patterns. As I have argued ad nauseum, there are fiscally efficient human settlement patterns and there are fiscally inefficient human settlement patterns. There are types of communities where people (especially the creative class) pay a premium to live and communities where people choose to inhabit only when real estate prices are depressed. Admittedly, land use is a local prerogative. But the state does drive transportation and other investments that help shape land use. The McDonnell administration has given zero attention to the idea of creating more livable and sustainable communities.

    Health care. Rising health care costs are bankrupting the nation, bankrupting state governments, bankrupting businesses and bankrupting individuals. Which is no surprise, considering that the U.S. health care system bears little resemblance to a market economy. Among the most obvious deficiencies, there is no price transparency in medical procedures. The absence of price signals distorts the market in ways too innumerable to describe here. As the administrator of Medicaid, a regulator and a major purchaser of employee health insurance, the state should take the lead to create the conditions for a market-driven health care system. If the McDonnell administration has taken any measures in this direction, I have yet to see it.

    Education. Education is critical to building human capital. The Old Dominion’s educational system is inadequate to the task of elevating Virginia’s students to the next level of educational achievement. McDonnell has proffered some modest measures — more money for higher ed, more virtual learning — but they tinker on the margins. We need to dynamite the traditional educational system and build one anew.

  • Full Funding for Virginia’s HBUs

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    James A. Bacon

    Go Spartans!

    by James A. Bacon

    A  Maryland school segregation case in U.S. federal court may bear watching here in Virginia. A lawsuit filed by students and alumni of Maryland’s historically black colleges and universities (HBCUs) accuses the state of failing to fulfill state promises to desegregate the schools. The plaintiffs are seeking more than $2 billion in funding for their institutions to compensate for what they describe as a legacy of discrimination.

    The Wall Street Journal sums up the case this way:

    The group claims the state’s higher education commission devoted millions of dollars over decades to “traditionally white institutions” that offer educational programs duplicating those from the black colleges. The overlapping offerings have made it difficult for the black schools, whose facilities often aren’t as up to date as the white schools’, to recruit and retain the best students and faculty members, the plaintiffs say.

    Maryland’s four HBCUs include Morgan State University, Coppin State University, Bowie State University and the University of Maryland Eastern Shore.

    If the court rules against Maryland, there could be implications for every state with HBCUs. Virginia has five, although only two are state-supported: Norfolk State University and Virginia State University. Undoubtedly, NSU and VSU were under-funded during the Jim Crow era and probably for years afterwards, so it’s possible that a similar case could be made here. But the commonwealth has made a concerted effort since the Gilmore administration (and perhaps earlier) to redress the wrongs of the past.

    A quick consultation of the State Council of Higher Education for Virginia (SCHEV) data yields the following levels of state support for NSU, VSU, Christopher Newport University and Radford University (to pick two comparably sized institutions) and the University of Virginia, the state flagship institution, proposed by Gov. Bob McDonnell for FY 2013.

    NSU — $6,612 per student
    VSU — $6,293 per student
    CNU — $5,671 per student
    RU    — $5,314 per student
    UVA — $5,288 per student

    (Note: These comparisons are rough. They do not take into account varying percentages of full-time versus part-time students.)

    State support is one issue, desegregation is another. NSU and VSU still have predominantly black student bodies. NSU’s entering freshman class is 87% black; VSU’s is 90%. As long as blacks suffer no barriers to entry to predominantly white universities and as long as HBCUs aren’t receiving “separate but equal” funding, however, an argument can be made that preserving HBCUs provides an option for black students who prefer to be educated in a predominantly black cultural environment.

    I have no way of judging the merits of the case against the Maryland system of higher education, but based on the numbers above, I doubt there would be grounds for a case in Virginia.  The policy of full or preferential funding for HBCUs during Democratic and Republican administrations in Virginia for the past 15 years (or maybe longer) goes largely unheralded. But it’s a good example of how the Old Dominion has quietly moved beyond its segregationist past — in possible contrast to its liberal, northern neighbor.

  • More Hypocrisy from Philip Morris USA

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    Peter Galuszka

    By Peter Galuszka

    Tobacco has always been a powerful industry in Virginia since the days of the Jamestown colony. It is no less influential today as Henrico County-based Philip Morris USA and its parent firm, Altria,  constantly play shell games about the hazards of their products.

    Just before Christmas, and right in time for the 2012 election year, Altria trotted out a new Website called “Citizens for Tobacco Rights” that seems designed to tap some of the anti-government, anti-regulation fervor of the Tea Party movement to boost its top line.

    The company says that it is offering the Website so that smokers know their rights. It has a virtual smorgasbord of information about taxation, local and state laws limiting smoking and other government efforts to somehow restrict tobacco use, which is one of the largest health issues in the U.S. and kills a about 400,000 every year.

    Yet what makes this new Website peculiar is that it goes against Altria’s low-profile public image that the firm has been trying hard to invent since it was one of four cigarette makers dunned for $206 billion by 46 states in 1998 because of health risks.

    Philip Morris, consequently, started including health warnings about its products in four-color paper flyers and also on its Web page. In 2008, the firm split itself into two parts. Philip Morris International, based on Lausanne, Switzerland, was free to make cigarettes with several times the addictive nicotine and tar content as ones made in the U.S. and market them vigorously in the Third World where people might not understand the link between cancer, lung disease and other ailments and smoking.

    Philip Morris USA, on the other hand,  took a far more benign approach, and from its new headquarters in Richmond, clung to a gradually diminishing base of smokers while telling them they really shouldn’t smoke. As it states on its Website: “PM USA agrees with the overwhelming medical and scientific consensus that cigarette smoking cause lung cancer, heart disease, emphysema and other serious diseases in smokers. Smokers are far more likely to develop serious diseases, like lung cancer, than non-smokers. There is no safe cigarette.”

    The statement is on one part of the corporate Website. For an entirely different view, click on the new “Citizens for Tobacco Rights” page on the same site.  You get the impression that ordinary cigarette users are having their God-given rights trampled upon by nefarious do-gooders and government regulators. Let’s wave the “Don’t Tread on Me” flag. Invite Sarah Palin to speak.

    One can only speculate on why Altria is trying this gambit at this particular moment. The obvious reason is that the firm’s propagandists want to tap the Tea Party sentiment to boost sales. In 2010, Altria Group reported net revenues of $24.3 billon, a 3.4 percent increase over the previous year.

    The firm complains that it has been under heavy pressure since federal excise taxes were boosted in the late 1990s and many states and localities have banned cigarette smoking in public places. One is New York City, where city officials and not easily impressed with corporate money and from which Altria retreated its headquarters to Richmond. Another reason for the Web page could be that it’s been a long time since the 1998 health settlement and people tend to forget.

    In Virginia, Altria is considered a sacred cow. It employs about 6,000 people and is one of the leading donors to universities, the arts and research. Its impact is especially strong in Richmond, where it operates its last large cigarette manufacturing plant in the country and funds everything from chairs at Virginia Commonwealth University to the Richmond Symphony.

    Don’t think that the largesse doesn’t come without strings. When an artist wanted 400,000 cigarettes for a piece of artwork that was to be displayed at the Virginia Museum of Fine Art, Philip Morris said no even though it is a major sponsor of the museum. VMFA public relations people were careful to play that one down.

    The new Website underlines, once again, the hypocrisy and contradictions of Philip Morris USA and Altria. Its ploys to encourage people to stand up for their rights while warning them its products kill are beyond routine cynicism. As it has since 1609, Virginia just plays along.

  • Clash of Principles in Wind Farm Debate

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    James A. Bacon

    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.

  • Public Private Partnership Laws Need a New Look

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    James A. Bacon

    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 dev.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.

  • Good Bye and Good Riddance to 2011

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    James A. Bacon

    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.

  • Virginia: Mother of Bad Ideas

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    Peter Galuszka

    By Peter Galuszka

    The Mother of Presidents is back at it again.

    Through some legal quirk — typical for the Old Dominion — only Mitt Romney and Ron Paul will be on the ballot for the March 6 Republican primary. Newt Gingrich and Rick Perry did not meet the state’s onerous requirement for 10,000 petition signatures including 400 from each of the state’s 11 congressional districts to get on the ballot.

    Readers know that I am not generally sympathetic to Republican causes, but what’s happened to Gingrich and Perry is downright idiotic. Virginia is the only state that has such tough primary qualification rules. Indiana is the next strictest, which requires only 4,500 signatures.

    Consider some of Virginia’s other strange laws and requirements. We are the only state in the nation that limits its governor to one term, meaning that Virginia only gets maybe three years max work out of a governor’s four-year term. By Year Three, the politician’s mind is already focused on what’s next.

    During the Jim Crow era, Virginia was a legislative leader in racism. That wasn’t unusual for the South but the racism seemed to linger very long. Until it was struck down in the late 1960s, a state law made it a felony for a white person to marry an African-American so as to preserve racial purity.

    Other bad ideas abound. Luckily, some don’t get to law. One absurd proposal a few years ago would have regulated how low someone could wear his or her pants and how much underwear could be displayed. Legislator Terry Kilgore is the master of strange-O laws. He’s proposed, for instance, tax breaks for people who have their cremated remains blasted into outer space from a commercial spaceport on Wallops Island.

    The political nonsense continues with another oddity. Voters participating in the Republican primary are supposed to sign a “loyalty oath” that they will vote for whomever ends up running as the Republican presidential candidate. Wasn’t Virginia supposed to have been the Mother of the Bill of Rights? Besides being unconstitutional, the idea is also downright dumb. How can they enforce it?

    Atty. Gen Kenneth Cuccinelli, who is running for governor in 2013 against the plans of the ruling state Republican Politburo, at first said he would try emergency legislative proposals to untie the mess. Then, however, he went along with the GOP Establishment and said that changing laws midstream would somehow be unfair to Romney and Paul. Go figure.

    Legislative idiocy has been part of the state’s make-up for far too long. They make Virginians seem like Cooter of the Dukes of Hazzard. With all the state has going for it, one wonders why this nonsense just doesn’t go away.

  • Still Honoring TJ’s Tradition of Indebtedness

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    James A. Bacon

    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.

  • Is Virginia’s Population Growth Slowing?

    Posted on

    by

    James A. Bacon

    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.

  • Mary Washington as Academic Innovator

    Posted on

    by

    James A. Bacon

    Image from the UMW blog publishing platform page

    by James A. Bacon

    Kudos to the University of Mary Washington, one of the lesser known lights in Virginia’s pantheon of colleges and universities, for setting the standard for integrating blogs into academic teaching methods. The university warrants mention in a new book, “Abelard to Apple,” by Richard deMillo, on the future of higher education.

    The traditional university structure “will not survive the coming changes,” writes deMillo, as quoted by George Leef in the John William Pope Center for Higher Education Policy blog. DeMillo, who has held high-level posts at both Georgia Tech and Hewlett-Packard, believes that information-technology tools will turn teaching methods topsy-turvy.

    Surviving institutions will be those that:

    1. Focus on value, delivering what students want based on their skills and aspirations.
    2. Drive down costs
    3. Earn a reputation for quality education through continual validation in the marketplace

    DeMillo cites Mary Washington as an institution experiencing great ferment. “At the University of Mary Washington, learning takes place in the digital spaces engineered by Jim Groom and his band of Edupunks. At UMW, learning takes place in blogs.” Leef elaborates:

    There are more than 2,500 public blogs at the school. Professors don’t have to make their course material available to outsiders, but for each class there is a blog. Students see the blogs as a “space to do work” that enables them to easily connect with their professors and other students. The result is vibrant communities of learners, sometimes including strangers. DeMillo writes that it’s “not uncommon for an outsider to stumble into a UMW blog, find that there are interesting people to talk to, and jump uninvited into the middle of a conversation.”

    Here is an example of a blog that accompanies a class on Western Civilization taught by Nabil Al-Tikriti.  Not only does the professor post the syllabus and course outline online, he provides several weekly blog posts to complement the course material. He also uses blogging technology to accommodate student-generated “group study guides” that include ” links to websites offering more information on these topics, primary source samples, photos, paintings, music samples, sample essay questions, and any other resource relevant to the topics covered in their respective chapter. ” Students are graded for the quality of their study guides.

    UMW allows any member of the UMW community to publish a blog using WordPress software. Judging by this list of courses, the English and History departments have really gotten on board with the technology. As Al-Tikriti’s course description makes clear, however, the blog supplements traditional teaching measures such as lectures, reading, discussion and tests, it does not replace them.

    From what I can see, UMW blogs have yet to constitute a disruptive technology that will transform higher ed single-handedly. On the other hand, the idea is still new. The process of experimentation is only beginning. Bad ideas will be jettisoned, successes will be replicated. If students feel like they learn more, practices perfected at Mary Washington could well boost the institution’s academic reputation. Moreover, practices may well spread beyond traditional academic centers. Leef cites the example of Abelard, a 12th-century French monk, who attracted a personal following of students, much as Socrates, Plato and Aristotle did in the ancient world. The technology will be truly revolutionary when free-lance professors can use IT tools to disseminate knowledge outside the institutional setting. Mark my words, the great disruption is only a matter of time.

  • The Dangers of Creeping College Privatization

    Posted on

    by

    Peter Galuszka

    By Peter Galuszka

    Virginia residents have long enjoyed a special advantage with higher education. Tuition at some of the country’s best-rated public universities — the University of Virginia, the College of William and Mary and Virginia Tech — is relatively modest. The schools offer a great deal for parents and students compared with nationally ranked private colleges.

    But this advantage is unraveling. The process began seven years ago, when the General Assembly agreed to a deal whereby it would pay not as much for top public universities. In exchange, the schools would get more autonomy, including more freedom to set their own tuitions, capital spending programs and curricula.

    The result? A creeping privatization that threatens to undermine the very
    advantages that make Virginia’s top public schools what they are.

    To be sure, state education bureaucrats and legislators call it not “privatizing” but “restructuring.” This euphemism means the schools will
    gradually demand tuition closer to what is charged at the top national, private institutions but won’t have to go through the hassle that true privatization would entail — such as the selling of public property and making good on repaying decades of public investment.

    There is some logic to this approach: If Virginia’s elite public colleges
    start approaching market rates for tuition, the thinking goes, state money could be freed up to spend on lesser institutions. More financial-aid money would become available. The state could use those resources to reach for its goal of 100,000 more students earning degrees. Since 2005, when the concept was formalized in General Assembly legislation, Virginia Commonwealth University added itself to the list of schools willing to trade funding for autonomy.

    The same year that “restructuring” was approved, John T. Casteen II, then the president of U-Va., announced an ambitious campaign to raise $3 billion through fundraising. Most of that has been collected, although the effort to raise so much private money at a public school raised eyebrows. More recently, Taylor Reveley, president of William and Mary, proposed
    bringing his school’s tuition levels to market rates    , which, for a nationally rated private institution, would be about $45,000 a year for tuition, room and board. Out-of-state W&M students now pay $44,854 a year, while in-state students pay $22,024.

    Reveley notes that Richmond provides only 13 percent of W&M’s funding,
    which is way down from the 43 percent of 30 years ago. This trend has been even more pronounced at other elite Virginia public colleges. At the University of Virginia, the state pays less than 8 percent of what the school needs. At Tech, the process has been slower. In 2000, the state provided 58 percent of the school’s needs; today it’s 28 percent.

    Reveley argues that if more in-state parents or students paid full freight,
    then his school could offer more generous financial-aid packages to middle- and lower-income students. He also believes that as top schools become more self-sustaining, a second tier of Virginia schools could be given more state funding and raise their own academic standings. These would include Old Dominion, George Mason, James Madison, Radford, Longwood and the state’s community college system.

    But there is cause to worry about this argument. At present, many complain that lower-income Virginians have been forced to compete with an increasing number of deep-pocketed out-of-staters, whose higher tuition helps to balance the schools’ books. As those schools look to capture more revenue via in-state tuition, they will face strong incentives to accept a greater portion of in-state students with the means to pay all or most of their own way. And even with increased aid, worthy but less affluent students will confront barriers. Some will simply opt for less expensive, less competitive schools; others will emerge from school more deeply in debt.

    Such an uneven playing field is contrary to the spirit of a state-funded
    higher education: Why should a kid from affluent Fairfax have a better chance at attending U-Va. or W&M than someone with the same grades and test scores from Big Stone Gap?

    I’ve noticed this kind of elitism beginning to appear in “Virginia” magazine,
    published by the school’s alumni association. Its pages are filled with four-color advertisements hawking multimillion estates mostly in blue-blood
    horse country. The message that’s suggested? “If you can’t afford these kinds of properties, then maybe you don’t belong at Mr. Jefferson’s University.”

    Privatization is thought of by Virginia conservatives and even some moderates as a panacea for addressing the state’s budget woes while adhering to the state’s dominant anti-tax ideology. Tax hawks, for instance, constantly dodge the need for higher taxes to pay for highways by tossing the problem over to public-private partnerships. But applying the same thinking to public higher education risks undermining the very purpose of such institutions — building the highly educated middle class needed to keep Virginia competitive nationally and globally.

    A straight sell-off of state schools isn’t likely. What is possible, says
    James Alessio, chief of higher education restructuring at the State Council for Higher Education, is a steady series of tuition hikes in the 5 to 7 percent range. “Within maybe 40 years, you’ll see tuition at the public schools go to $40,000 or $50,000,” he told me.

    Once that happens, the stealthy, half-privatization of Virginia’s academic
    jewels will be complete, and probably irreversible. One possible solution comes from the University of California at Berkeley, which announced this month that it will cap tuition at 15 percent of what “middle class” families make, defined as $80,000 to $140,000 a year.

    Virginia could try something similar. Otherwise, on its current trajectory, the state is fast moving toward a two-tier public college system heavily based on income — the exact opposite of what public higher education is supposed to be.

    First published in The Washington Post

  • Merry Christmas, Amazon.com!

    Posted on

    by

    Peter Galuszka

    By Peter Galuszka

    Christmas, regretfully, is forced, propagandized consumerism under the guide of market capitalism, albeit in new forms. One is digital sales, of which Amazon is dominant.

    Amazon also is about to become a big player in Virginia since it will open distribution centers in Chesterfield and Dinwiddie that will cost $135 million and employ 1,350. Gov. Robert F. McDonnell announced the projects with great flourish. Typically, the Richmond Times-Dispatch played its role as McDonnell’s personal “Pravda” and bannered the news to make us all understand just what a great jobs magnet our photogenic governor is.

    To its credit, however, the RTD did break some news. It turns out that Amazon, which is getting $3.5 million from the Governor’s Opportunity Fund and $850,000 from the tobacco fund, will not be required to pay any states sales taxes on the goods its ships to Virginia customers from the two centers.

    If you are a traditional, non-digital retailer, you will have to continue charging and paying the usual 5 percent sales tax. You may be competing for the same market with Amazon (2010 sales of $34 billion) but Amazon automatically gets a 5 percent advantage. That, dear shoppers and taxpayers, is Bob McDonnell’s idea of free and unfettered market capitalism.

    To be sure, very few states charge a sales tax on goods traded over the Internet. The rationale was, back in the 1990s, was that the Net was waaay too cool to tax. The guys who developed it are waay cool types with a 60s hippie bent, like Bill Gates of Jeff Bezos, and if you make them play by the usual rules, well that’s like, soooo Old Economy. Everyone bought into this nonsense, especially George Allen who lobbied not to tax anything on the Net.

    Of course, a lot of these Net heros are really conservatives or libertarians who don’t wear neckties. They are not out for the betterment of mankind, rather the betterment of their bottom lines. Meanwhile,  routine mortals, such as journalists like me,  have seen our free lance pay plummet because we are forced to accept far less or nothing at all for our content posted on the Web rather than in print. Anyway, that’s my private hell.

    This kind of “The Net is Sacred” thinking is McDonnell’s excuse to land needed jobs. No argument about the need. Dinwiddie is mostly rural and can use jobs. Chesterfield has an imbalance of too many subdivisions and not enough industry.

    The hypocrisy of the McDonnells is that while they play free market and tight budget and stick it to the schools and retirees and Medicaid recipients, they have no trouble handing out goodies to big firms like Amazon, that have no trouble taking care of themselves. Other states seem to be driving tougher bargains than Virginia. Tennessee got a similarly-sized distribution center from Amazon but also starts getting its sales tax from Amazon in 2014.

    Also, it’s not as if big distribution centers are unheard of in Virginia. Back in the early part of the past decade, China was exploding with exports of consumer goods. Hampton Roads was booming. Mid-Atlantic distribution centers were going up from Suffolk and others spots for Wal-Mart, QVC, Target and other big box, mass retailers. I believe they did have to pay the 5 percent sales tax.  Of course, the recession cooled that trend and Hampton Roads is stuck with the big box centers while competitors like Baltimore and Savannah eat Virginia’s lunch with other cargo. That’s another story, however.

    Among the groups rightly angry with the big Mickey D are members of Richmond’s Retail Merchants Association, who still have to pay that pesky 5 percent sales tax. “The bottom line is that we just want a level playing field,” says Nancy C. Thomas, the group’s CEO and president.

    Well, not in Virginia and not with Mickey D.

  • And a Happy Unpacking-and-Repacking Season to You!

    Posted on

    by

    James A. Bacon

    Once again, Times-Dispatch columnist Bart Hinkle proves himself to be an acute observer of the human condition. Today he writes:

    The Hinkle household is a blended one, which is to say that half the management is male and the other is female. This usually works out fine until around Christmas, when certain politically incorrect gender stereotypes exert themselves.

    At the time of the merger several years ago, the male half’s holiday décor consisted of whatever Christmas cards came in the mail. Pick out a festive one, tape it to the front door, and voila! — you’re done. The female half of the enterprise came with several large storage tubs filled with tree trimmings, lights, stockings, garlands, advent calendars, ribbons, bows, wreaths and so on. This admittedly amps up the holiday atmosphere by several notches, but somebody has to haul it all out and put it all up. So the male half of the household hauls it out and then waits for instructions.

    That is exactly the way it works in the Bacon household. Bart left out only one thing. When Christmas is over, the work isn’t. Holiday detritus must be taken down, put back in boxes and hauled back to the attic.

    As a consequence, I’ll be out of action for a few days. Aside from the unpacking and repacking of Christmas decorations, the Bacons will be traveling hither and yon,visiting with relatives, eating a lot of food, drinking a lot of eggnog, cleaning a whole mess of dishes and taking long snoozes. I will return to Bacon’s Rebellion as soon as humanly possible.

    Happy holidays to all!

    — JAB

Now Available

Book cover of 'Dust Mites: A Second American Revolution' by James A. Bacon, featuring astronauts planting a flag with a blue and white emblem on a lunar landscape, with Earth visible in the background.
For sale on Amazon.com

The year: 2075. The American colonies on the Moon are getting restless under Washington’s tyrannical rule….

This second edition of “Dust Mites” has a snazzy new cover, includes helpful lunar maps, and is 5,000 words tighter than the original. The sequel, “Trogs,” is scheduled for publication this summer.

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Bacon’s Rebellion is Virginia’s leading politically non-aligned portal for news, opinions and analysis about state, regional and local public policy. Read more about us here.

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