“No Excuses” Charter School Experience Can Be Transplanted to Public Schools National Bureau of Economic Research
The implementation of five core principles of the “No Excuses” charter school movement — increased instructional time, building human capital, differentiating between students, using data to inform instruction, and setting high expectations — has been implemented with positive results in nine low-performing schools in Houston.
Public Health Challenges of Prisoner Reentry Rand Corporation
Prisoners are sicker than the general population, with more infectious diseases, mental health issues and substance abuse problems. As states release an increasing number of convicts into the community, it’s time for communities to start planning now.
Rebooting Economic Development in Nevada Brookings Institution
The real estate boom didn’t end so well for Nevada. Time to try something new. Brookings thinks that Nevada’s economic development program needs a top-to-bottom overhaul.
Republicans and Democrats alike are focusing on tax expenditures — exemptions, credits, deductions and other tax loopholes — in the federal government. It’s about time that someone took at comprehensive look at tax expenditures in the state budget. Thanks to the Joint Legislative Audit and Review Commission, we now know that tax preferences in the state tax code reduced taxpayer liabilities by $12.5 billion — equivalent to roughly 90% of the state tax revenues actually collected.
“Like most states, Virginia uses tax preferences to achieve specific policy goals,” write the authors of “Review of the Effectiveness of Virginia Tax Preferences.” Because tax preferences are not subject to the State budgetary process, they often remain in effect, sometimes indefinitely, without any evaluation of their effectiveness. Little information is available about tax preferences, including which ones should be continued because they are effective, and which ones could be revised to improve their effectiveness or eliminated altogether.”
Some tax preferences achieve their goals, others do not. JLARC recommends that the General Assembly set up mechanisms to give tax preferences regular scrutiny and review.
Three large preferences account for half of the reduction in tax liability, the report states: (1) the exemption of services from the retail sales and use tax, (2) the exemption of manufacturing materials and equipment from the same tax, and (3) the treatment of federal itemized deductions on individual income tax
returns. Five other preferences, aimed at helping the poor, account for $2.2 billion in reduced liabilities: the tiered income tax rate, special breaks for social security income and an age deduction from the income tax, and exemptions for food, drugs and medical products from the sales tax.
Among the more controversial recommendations, JLARC recommended extending the sales tax to services. “Services now represent approximately two-thirds of the national economy, and Virginia could significantly broaden the retail sales and use tax base and improve the reliability of collections by taxing some or all services. Service exemptions represent the largest group of tax preferences in Virginia, reducing taxpayer liability by over $3.5 billion in 2008.”
As for the tax breaks that are justified by helping the poor, JLARC notes, they don’t accomplish that goal very efficiently. “While taxpayers
with incomes of $20,000 or less comprised 14 percent of Virginia households, they received only seven percent of the reduction in tax liability associated with the partial exemption on food purchases available to all taxpayers.”
Some breaks were given for purposes of administrative efficiency. The exemption from the sales tax on prisoner artwork, for instance, was granted on the grounds that it would be impractical to try to collect the tax. Other tax breaks seem to accomplish their goals. The tax credit for conservation easements, for example, has put significant acreage under protection. But others apparently are too meager to be effective. As an example, JLARC writes, “the Worker Retraining Tax Credit has been historically underutilized because, according to businesses interviewed by JLARC staff, the $100 credit for non-community college retraining is not large enough to encourage companies to retrain workers.”
My philosophy on tax policy is simple: We should strive for the broadest tax base and the lowest rates possible. We should balance those concerns with ease of administration, both for those who collect the taxes and those who pay them. Taxes should be equitable, as in, no carve-outs for small groups. Finally, taxes should be transparent: Taxpayers should know what they’re paying. If lawmakers want to help the poor, fine, create a line item in the budget and review it every year. If lawmakers want to stimulate economic development, great, set up a fund for dispensing grants so the costs and benefits can be measured. But don’t create tax exemptions, put them on auto-pilot and forget about them. That is simply bad governance.
What Do We Do With Violent Sexual Predators When They Leave Prison? Joint Legislative Audit and Review Commission
Virginia’s methodology for assessing the risk posed by violent sexual predators when they leave prison is flawed, leaving it vulnerable to using out-of-date actuarial science and limiting input from qualified professionals.
Challenges to Growth of Virginia’s Bioeconomy Southeast Agriculture & Forestry Energy Resources Alliance In Virginia the “bioeconomy” of biopower, biofuels and bio-based consumer products is limited mainly to biomass burned in industrial boilers and to biodiesel.
Revitalizing Georgia’s Forestry Sector Southeast Agriculture & Forestry Energy Resources Alliance
Georgia does wood like Iowa does corn. Trouble is, wood is dependent upon the housing sector, which is in the dumps. So the state is hoping to spark innovation and new markets by putting industry, academic and government player together.
Reforming Primary Care National Academy for State Health Policy
As Obamacare is implemented nationally, states are wrestling with how to create new, integrated models of primary care. State budget cuts aren’t making the job any easier.
The port of Baltimore. Photo credit: Baltimore Sun.
It often makes interesting reading to see our problems through the eyes of others. In this instance, it is illuminating to read an analysis of the Port of Virginia’s woes from the perspective of the Baltimore Sun. After years of playing second fiddle to its chief Mid-Atlantic rival in Norfolk, the Port of Baltimore is rebounding very nicely from the recession.
What Baltimore did that Hampton Roads did not is diversify. Finding itself at a competitive disadvantage competing against Virginia for the container market — Virginia handles three times as many containers — the port began to pursue autos, agricultural and construction machines and niche cargoes in the 1990s. The strategy worked. Baltimore’s industrial segments are enjoying strong exports in the economic recovery.
There’s a lesson here for the Ports of Virginia, although I doubt its one that the newly reconstituted board appointed by Gov. Bob McDonnell is likely to heed. Maybe it’s time to re-think the port’s strategy, which heretofore has focused on handling container imports and, even now, anticipates a shift in traffic to bigger, post Panamax-class vessels when the widening of the Panama Canal is complete.
One problem with that strategy is that Norfolk ports face a major constraint to import-led growth: the transportation bottleneck for container traffic. A continued rise in the number of trucks will overwhelm the region’s transportation connections. That’s why Gov. Bob McDonnell proposes to invest hundreds of millions of state dollars in a public-private partnership that will build an Interstate-grade highway between Petersburg and Suffolk.
The underlying assumption of Virginia’s strategy is this: Container traffic from Hampton Roads will continue to grow, and it is the obligation of the state to accommodate that growth by adding highway capacity — even if the project is not economically self supporting through tolls and other revenue sources. (As it happens, Norfolk’s maritime industry prefers the Third Crossing, which would tie into Interstate 64 on the Peninsula, but the underlying assumption that the state should pony up big bucks is the same.)
But what if… But what if the Ports of Virginia pursued a different strategy? What if, instead of seeking more containerized imports, it began capturing more exports — just like Baltimore started to do more than a decade ago? That wouldn’t strain capacity very much, if at all. Instead of dead-heading into Norfolk and Portsmouth to pick up cargo, trucks could carry containers full of export goods on the trip, utilizing transportation infrastructure we already have.
Admittedly, new export business is not likely to materialize overnight. It might take a decade or more of work. But economic mega-trends might be with us. I find it just as plausible to believe that the U.S. will experience an export boom in the future as to count on 10 or 20 years of continued import growth in the face of continued consumer over-indebtedness and frugality.
Maybe the idea is full of holes. I’m just trying to think outside the box. But I’d like to see more people asking questions instead of automatically accepting hoary assumptions that may have run their course.
Taylor Reveley, the president of the College of William & Mary, has been pushing some unsettling ideas for re-defining the university’s relationship to the commonwealth of Virginia.
State funding, which constituted 43% of the institution’s operating budget 30 years ago, now provides only 13%. The university has responded by jacking up charges for tuition, fees, room and board, which now stands at $44,854 for out-of-state students and $22,024 for in-state. The state should allow W&M to raise its in-state charges to market rates, Reveley proposes. That would mean doubling them to where out-of-state charges are now, according to this month’s Virginia Business magazine.
The university then would use a portion of the proceeds generated by families who can afford to pay full price to provide financial assistance to lower-income and middle-income families. From each according to his abilities, to each according to his needs.
It is ironic that this plan for redistributing the wealth would come from Reveley. The patrician, silver-haired, former law school dean is not anybody’s idea of a campus radical. He was appointed president in 2008 in place of left-leaning Gene R. Nichol, whose decisions on culture-war issues had plunged the campus into controversy.
The beauty of the plan, according to Reveley, is that it would not compromise affordability. “If Virginia is to sustain its system of public education, it must be creative about how to do it. I’m just deeply concerned that the money [from the state] isn’t going to be there. We’ve got to pursue other means of sustaining ourselves.”
Reveley’s plan would allow the university to grow undergraduate enrollment, a core goal of the Virginia Higher Education Opportunity Act, which calls for creating 6,000 new slots statewide for in-state students. The W&M president also calls for developing new revenue streams by means of research grants, entrepreneurial activities more aggressive fund-raising, and he recommends productivity-enhancing changes such as embracing long-distance learning and year-round use of the facilities.
The Virginia Business article, though one of the best pieces I have read about higher ed in Virginia recently, did omit one important perspective: One reason that state support has declined so dramatically is that W&M, along with the University of Virginia and Virginia Tech, agreed to second-class funding status in exchange for greater freedom from state bureaucratic control. The hope was that granting more autonomy to the three universities with the largest endowments would allow them to save considerable expense and give them more latitude in undertaking new initiatives.
If Reveley gets his way, William & Mary would take another big step toward independence, becoming more like private, non-profit colleges that charge exorbitant fees and rebate part of them back to lower- and middle-income parents.
I’m ambivalent. On the one hand, I’ve got problems with enacting another wealth-distribution scheme in order to expand capacity and admit more students who very likely will derive little benefit from attending college. On the other hand, I agree with fellow-blogger Groveton that it may make good sense for W&M, UVa and Tech to go private and become totally self supporting. That would free resources for the commonwealth to plow into George Mason University, Old Dominion University and Virginia Commonwealth University with the goal of building prestigious institutions in the state’s three main population centers that can ignite economic development.
Reluctantly, I conclude that Reveley’s proposal is a step in the right direction. We should be explicit, though, that the ultimate goal is to take W&M private.
The commonwealth of Virginia lacks the fiscal resources to maintain and upgrade its transportation system, argues Bob Chase, president of the Northern Virginia Transportation Alliance, in the latest issue of the Virginia Newsletter. There’s nothing surprising about his conclusion — he and others have been making essentially the same arguments for a long time. What Chase accomplishes in his essay is to explore the topic in greater depth than is possible in a typical op-ed column and to update his argument with the latest state data.
Maintenance expense is eating up a larger percentage of available funds and, even then, road conditions are deteriorating year by year. Federal stimulus funds are expiring. Virginia has finite capacity to issue transportation bonds. Public-private partnerships, while promising, are suitable only for large, complex and toll-driven projects. The federal government will permit only limited tolling of federal highways. Meanwhile, long-term growth trends will put the transportation network under increasing strain.
That much is beyond dispute. But Case also advances an argument for “new, sustained, long-term transportation funding” — in other words, higher taxes. Options include increasing the motor fuels tax, raising the sales tax, hiking the motor vehicle sales tax, imposing a Vehicle Miles Traveled tax, and, harder to sell politically, raising the state income tax. No one likes paying taxes, he argues, but the failure to address intensifying traffic congestion imposes costs such as time spent in congestion and lost economic growth that are even more onerous.
Percentage of roads classified as substandard. (Click on chart for more legible image.)
As I have argued repeatedly on this blog, Virginia is not spending enough on its transportation system. The mounting backlog of maintenance needs (shown in the chart at right, taken from the newsletter) means that our roads are getting in worse shape as time goes by. The McDonnell administration is addressing that problem in the short run by accelerating the outflow of unspent dollars that had accumulated excessively during the recession. Road conditions should show improvement this year. But the long-term trend is dire. We need more money, but none of the means for getting it are very popular.
That’s a key topic that Chase did not address. In 1986, Virginians trusted Gov. Gerald Baliles to spend the money well when he raised the motor fuels tax and sales tax to current levels. They don’t trust Virginia’s political establishment to spend the money wisely today. People belly ache about potholes and traffic jams but for all the talk about the cost of congestion and lost economic opportunities, the average citizen just doesn’t see the benefit to higher taxes. And there are very good reasons for that.
First, the cost of congestion is higher for people who perceive their time as more valuable — mainly higher-income Virginians and companies for whom transportation and travel is a cost of doing business. That’s why business lobbies have consistently endorsed higher taxes as a means to “get Virginia moving,” to borrow a phrase from Gov. McDonnell. Trouble is, they don’t want to pay for the roads in proportion to which they would benefit from them. They want the general public to pay. And that’s a hard sell.
Second, money isn’t funding projects that benefit the general public. The Charlottesville Bypass is a classic case. The Virginia Department of Transportation is spending $245 million to build a bypass designed mainly to accommodate freight traffic passing through the Charlottesville-Albemarle area. That expenditure for a 6-mile bypass will do very little to alleviate congestion for the people actually living there. It’s not clear how other expensive mega-projects in the works, from the U.S. 460 upgrade of the Coalfield Expressway, will help the average Joe either.
Third, there is no system for ranking projects, big or small, on a Return on Investment basis. The paucity of objective metrics encourages people to think that projects are funded largely on the basis of political considerations, for the benefit of developers and other special interests. That’s not, in fact, always true. But sometimes it is.
Fourth, the McDonnell administration has not re-prioritized transportation projects in light of the 2007-2008 recession, which brought an end to the post-World War II growth patterns characterized by increasing indebtedness, Mass OverConsumption and “suburban sprawl.” A very strong case can be made that the United States is entering an era of infill and re-development driven by higher gas prices, changing demographics and the collapse of the housing boom. Yet projects in the state’s Six-Year Investment Program, conceived in a time when metropolitan areas pushed ever outward with scattered, low-density and disconnected development, have never been re-visited. In other words, higher taxes would address yesterday’s perceived needs, not tomorrow’s.
If the General Assembly raised taxes to fund more transportation projects, the administration would find a way to spend it. But spending more money on the wrong projects makes no economic or political sense.
Virginia’s Republicans failed to replicate their national party’s success in last year’s mid-term national elections and barely squeaked by to win both houses of the state General Assembly.
The 20-20 split in the state Senate hung on a spare 222 votes in a Spotsylvania County race. By conceding his election race Democratic State Sen. R. Edward Houck does give Republican Lt. Gov. Bill Bolling the opportunity to cast the deciding vote on critical issues in the Senate.
Overall, however, Tuesday voting results are hardly a mandate for the GOP, despite how much pro-GOP commentators such as the publisher of this blog and Wall Street Journal columnists wish it to be so. The key is how the Gov. Robert F. McDonnell and other GOP leaders intend to use their new power in the legislature.
Possible agendas are not promising. McDonnell probably wants to change the state worker retirement system in ways that screw state workers and dump more costs back on them. He’s already raided the system indirectly by deferring payments the state is obliged to make in a smoke and mirrors attempt to present the state with budget that is in the black. Doing so lets him cast himself as a hotshot new Republican governor so he can pursue national ambitions.
He’s going to try to somehow change public schools, but he has already cut critical education spending and Virginia children are suffering the results with their worsening performance on national tests.
He might try to revive, once again, his efforts to privatize ABC stores but even with the seven new Republican state senators that’s going to be a battle since many GOP legislators abandoned McDonnell in his earlier efforts.
What is likely is more of the same corporate pork barrel we’ve seen for big corporations and Hollywood moguls like Steven Spielberg and West Coast defense industries. Spielberg got millions from the state film office to make a Lincoln movie in Richmond where the payback to the state seems to be limited to actress Sally Fields patronizing cute downtown and Cary Street restaurants in the capital. As far as corporate welfare, expect a new charge to lift the ban on uranium mining by a group of rich Southside farmers and Canadian businessmen who have already been taking legislators on suspicious, all-expenses-paid trips to uranium mining hotspots such as Paris.
In other areas, there’s not much McDonnell can hope to accomplish. His dream of erecting dozens of oil derricks off the Virginia caps to make Virginia “The Energy Capital of the East Coast” have come to naught. The U.S. Department of the Interior left Virginia off the list for new leases for at least a few more years.
The way appeals courts are running against right-wing Atty. Gen. Kenneth Cuccinelli’s efforts to block Obamacare, McDonnell will be hard-pressed to do much to further challenge the law which faces the ultimate constitutionality test in the U.S. Supreme Court. The ball here is no longer in Virginia’s court.
Lastly, despite McDonnell’s efforts to make himself over from staunch social conservative to moderate, the election results Tuesday have a conspicuous nut factor. Corey Stewart, the Prince William County politician who wants to make Virginia the next Alabama in terms of racist anti-immigrant laws, won. Loudoun County has a completely GOP board, including homophobe Eugene Delgaudio. And, ultra-nut Dick Black is heading for the Senate.
True, the Democrats did poorly and Obama is weak. But the real message is they are not as weak as the Republicans wished.
This chart, found in the Commonwealth Institute’s new report, “Unemployed, Underutilized, Undone: Employment and Labor Force,” shows why the 2007-2009 recession still feels like a recession here in Virginia, even though it technically ended two years ago. In contrast to the past two economic recoveries, this business cycle truly has been a “jobless recovery.”
Among the highlights of the CI report: Unemployment in 2010 was stuck at the highest level since the early 1980s, underemployment was at the highest level in 15 years, and the drop in employment rates for Virginians with low levels of education were roughly twice the drop experienced by their better educated peers.
Digging a little deeper into CI’s report, it is somewhat disconcerting to see that the “bright spots” in Virginia employment, showing the strongest job growth between 2007 and 2011 were: (1) the federal government, (2) education and health services (both of which are experiencing unsustainable bubbles), and (3) state government. Only one private sector occupational category, professional and business services, eked out a barely detectable job gain.
It was a long, hard fight but the Elephant Clan seemingly has won control over all the levers of power of state government — adding a tenuous control of the state Senate and a bigger majority in the House of Delegates to its three statewide offices. Awaiting vote recounts, the elephants aren’t trumpeting their victory yet. But the rest of us can begin to ask, what will the Republicans do with their untrammeled power?
The GOP has the greatest opportunity in modern history to transform Virginia’s indispensable but increasingly antiquated institutions around the principles of small-but-effective government, fiscal responsibility and a free economy. Will the Rs seize the once-in-a-lifetime chance to enact fundamental reform that will propel the commonwealth into the 21st century? Or will they engage in an orgy of culture-wars legislating that turns off swing voters? Or, worse yet, will they emulate the disastrous 2000s-era K-Street strategy of cozying up to the moneyed special interests with an eye to bankrolling the next election cycle?
Only time will tell. But as a Republican-leaning independent, I desperately hope that the Rs forego their natural instinct to pursue symbolic culture-war silliness, avoid the temptation to align themselves with the special interests, and start digging into the hard work of making government more effective and more economical. That means a lot more than balancing the budget without raising taxes, although that will be an ample challenge in itself. I see six broad strategic imperatives where the Elephant Clan can make its mark on Virginia for years to come:
Bullet proof the budget. Hard times are coming for a state whose economy is as dependent upon the federal government as it is. When federal spending crashes, we will be hard-pressed to maintain our AAA bond rating. We need to make every conservative budget assumption it’s possible to make, cut extraneous spending to focus on core services, and pay down debt and liabilities.
Reinvent K-12 education. Bust up the monopoly of the public schools, increase parental choice and foster experimentation and innovation. We can no longer afford to support a 19th-century school system to teach our children what they need to compete in a 21st-century economy.
Hold higher education more accountable. Although Virginia’s public colleges are leaner and more affordable than most, they are still too expensive. We must make college more affordable without sacrificing excellence.
Build a market-based health care system. The health care industry in Virginia is dysfunctional, just as it is across most of America. Insofar as federal laws allow, repeal antiquated regulations, empower patients as consumers and spur market-based innovation in health care delivery models with the goals of bringing down costs and improving quality.
Re-think economic development. State government has not altered its approach to economic development since the 1960s. There’s a lot more to “creating jobs” than putting money into corporate recruitment and tourism. While Virginia may be a good place to do business, it lags in indicators of creativity and innovation, the true wellsprings of wealth creation.
Reform transportation and land use. If Virginians want to reduce the cost of government and improve the quality of life at the level of local government, they need to re-think their dysfunctional human settlement patterns and the zoning and transportation policies that cement them into place. One place to start: Insist that Virginians pay their full locational costs, starting with funding new transportation projects on a user-pays basis.
The United States is is entering a perilous time. The world order that has prevailed since World War II is collapsing. The welfare state is disintegrating. The debt- and consumption-driven economy is faltering and the wealth gap is growing. Our state-level institutions are failing us. The time to start reinventing those institutions is now. If we do, Virginia can survive the storm to come and prosper in the years that follow.
Update: The GOP is now putting its spin on the election. A communique from the state GOP’s Garren Shipley makes a couple of key points. First, the Elephant Clan majority in the House, at 68 seats, is the largest in history. Second, it wasn’t due to gerrymandering. Sixty-one percent of voters cast ballots for GOP candidates statewide in House elections, compared to 33% for the Dems. Fifty-seven percent of voters cast ballots for GOP Senate candidates, versus 41% for Dems. Indeed, if gerrymandering was a factor, it was in the ability of the the Donkey Clan to retain 20 Senate seats. Assigning seats in proportion to votes would have given the donkeys only 17 seats.
Teacher Evaluations: No More “Culture of Nice“ American Enterprise Institute
Something’s wrong with teacher evaluation systems that rate 97% of all teachers satisfactory or good. It’s time to find ways to rate the quality of the teaching, not the quality of the teacher.
How to Recruit More Minority Teachers Center for American Progress
Minority students comprise 40.7% of all students in the classroom but only 14.6% of all teachers. Because teachers can be positive role models for students, school systems should expend greater effort recruiting and retaining minorities.
Florida’s Patient-Centered Medicaid Reform Saves Millions Heritage Foundation
If Florida’s patient-centered Medicaid reforms were replicated nationally, Medicaid programs could save up to $28.6 billion annually. The secret: Increase patient choice of health plans.
More Strife Inevitable with Public Employee Unions Manhattan Institute
The interests of taxpayers, public employee unions and welfare state beneficiaries are fundamentally opposed. There are three broad options to dealing with the conflict: (1) restructure union pay and benefits, (2) cut spending, or (3) raise taxes. Take your pick.
Stronger Fathers, Stronger Families Urban Institute
The New York “Strengthening Families Through Stronger Fathers initiative program focused on creating better employment opportunities for non-custodial fathers. The result: Participants increased earnings by 22% and child support payments by 38%.
The Charlottesville Bypass isn’t the only big transportation project that Gov. Bob McDonnell intends to advance through the “design-build” method of project delivery. The governor has just announced that the Virginia Department of Transportation will use the approach for nine other projects.
The design-build procurement method streamlines project delivery by assigning responsibility for the design and construction of a project to a single entity. The design-build team constructs the project while design is still under way, greatly reducing the overall time necessary for completion. In theory, the approach will enable VDOT to award contracts quicker, speed construction and generate cost savings compared to traditional methods, in which VDOT designed projects before putting them out to bid.
“By using design-build to speed our nearly $4 billion transportation investment to construction,” McDonnell said in a press release issued this morning, “Virginians will be able to experience transportation relief faster and we will create transportation industry jobs during this difficult economy.”
The switch from a “design-bid-build” process to a “design-build” method will represent a major change in the way VDOT does business. The move reflects the belief of Transportation Secretary Sean T. Connaughton that VDOT has over-engineered many projects in the past, making road-building projects more costly than necessary. Design-build incentivizes private-sector bidders to use their creativity to reduce the cost of projects and win the bids.
Smart Growth critics are leery of the design-build approach, however, on the grounds that it will limit public input and make VDOT even less responsive to citizens than it already is. The $245 million Charlottesville Bypass will be an important test case in how the process works. The McDonnell administration is counting on the private-sector bidders to find ways to bring down the cost of the project, which central office engineers had warned could run way over budget. Foes fear that public input will be ignored.
In addition to the 6.2-mile Charlottesville Bypass on U.S. 29 just north of Charlottesville, the governor announced that the following design-build projects have been or will be issued before December 2011:
Interstate 64 Zion Crossroads Interchange Improvement: Estimated cost of $8.8 million.
These projects are scheduled for 2012:
Interstate 66 Widening to Route 15: estimated cost of $78.1 million.
Interstate 64 Widening and Improvements to Route 623 Interchange: estimated cost of $35.8 million.
Interstate 395 HOV Ramp at Seminary Road: estimated cost of $80 million.
Virginia Capital Trail Charles City County and New Market Heights Trail: estimated cost of $11.9 million.
Route 5 Virginia Capital Trail Varina Phase: estimated cost of $9.5 million.
Update: Morgan Butler with the Southern Environmental Law Center has just issued a response: “It’s commendable that the Governor wants to save the state money, but using the design-build approach for complex projects like the 29 bypass puts the public at risk because it commits the state to a project before a design is complete and we know its full impacts. The 29 bypass is by far the largest and most complex proposal the Governor identified in his press release. If he truly wants to save taxpayers money, he should scrap the bypass and work with this community on real solutions to Route 29 traffic.”
To understand America’s fiscal future, it is instructive to look at Italy. The land of la dolce vita has the 8th largest economy in the world and, by some measures, the 8th highest standard of living. The country also has one of the largest government debt loads in comparison to the size of its economy. That’s equivalent to about 120% of GDP, higher than that of the United States, which is about 100% of GDP. On the other hand, Italy’s deficits are smaller than the United States’ as a percentage of GDP, and now that Prime Minister Berlusconi has announced his intention to resign, the country does seem poised to pass genuine budget reforms.
But it may be too late. Interest rates are climbing as investors, spooked by the prospect of massive losses in Greece, demand a higher risk premium for Italian debt. Interest rates on 10-year Italian bonds have shot up to roughly 7% — roughly twice that of the United States. Italy now confronts a situation where it literally may be unable to raise taxes/cut spending fast enough to offset the higher interest payments.
A new report by Barclay’s Bank suggests that “Italy may beyond the point of no return.” It is entering a “fiscal event horizon,” at which point the gravitational force of the black hole of debt is so powerful, there is no escaping its pull. Writes Barclay’s: “We doubt that Italian economic reforms alone will be sufficient to rehabilitate the Italian credit and eliminate the possibility of a debilitating confidence crisis that could overwhelm the positive effects of a reform agenda, however well conceived and implemented.”
As interest payments mount, deficits worsen. As deficits worsen, investors demand higher risk premiums. As investors demand higher risk premium, interest rates and interest payment shoot even higher.
Right now, the United States is the beneficiary of the euro crisis. Risk-averse investors are parking their money in U.S. Treasuries. As a result, interest rates here remain astoundingly low. Those low rates have bred a sense of complacency. Yeah, we know that budget deficits are out of control, but it’s not like we’re in an emergency situation yet. But Italy shows how quickly investor psychology can change. Borrowing costs there have surged from 4% to 7% in one year.
For the United States, which is laboring under $15 trillion in debt, a comparable increase in interest rates would be very troubling indeed. Currently, the nation expects to pay $242 billion in interest on the national debt — big but manageable. Increase the interest rate by 75%, as happened in Italy, and the number rises to $423 billion (although not right away, given the fact that many bonds will take years to roll over). Scary, but still manageable.
It’s a different story when we reach 2021. According to Office of Management and Budget forecasts, absent major changes in legislation, interest payments will reach $844 billion by 2021 due to (a) a bigger national debt and (b) the somewhat higher interest rates that attend the mature phase of a business cycle.” But tack on a 3 percentage-point risk premium like the Italians are experiencing, and we’ll add nearly $570 billion extra a year in interest payments. The following year, just the interest on the extra interest would amount to roughly $45 billion! Clearly, that is unsustainable.
Basically, without massive budget reform, we’re about 10 years behind Italy. Boomergeddon is running ahead of schedule. Batten down the hatches while we still can!
If you've got to commute solo, do it in one of these babies, a Honda 3R-C, which runs on batteries, takes up less space in the parking lot and has space for carrying grocery bags.
Wendell Cox has laid his hands on some U.S. Census commuting data that I cannot find on the Census Bureau website. In a recent column, he disseminated what he deems to be key findings. Solo automobile commuting reached an all-time record high in the United States in 2010, he says, increasing by 7.8 million commuters. Solo driving came partly at the expense of carpooling, which lost 2.4 million riders.
Working at home (telecommuting) also gave a strong showing, gaining 1.7 million workers over the decade. Mass transit enjoyed its first 10-year gain since the Census Bureau began collecting data 50 years ago — picking up 900,000 daily commuters. Washington, D.C. was the third-largest transit commuting market in the country, following New York and San Francisco, picking up 130,000 commuters.
It strikes me that traditional carpooling and van pooling — workers sharing the same vehicle between home to work — is doomed to continue declining. The practice requires participants to drive to work and back, with no stops along the way, at the same time every day. Fewer and fewer people have jobs that allow them to punch the clock like that. The nature of work is changing — hours and schedules are becoming more flexible as people juggle work-life balance, run errands and chauffeur kids around town. Carpooling doesn’t match social and economic realities anymore.
Technology may come to the rescue, however. Now that half the population has smart phones, it’s possible to wake up in the morning, check your phone and find someone nearby who is going the same place you are at the same time. The more people who participate, the more choices there will be, and the more attractive the car/van pooling will prove to be as a commuting alternative. It will be interesting to see how that pans out.
Cox is an outspoken foe of Smart Growth, so the spin he put on the Census Bureau numbers may not be the same spin I would use. I’ll report the data first hand as soon as I come across it.
Linking Databases to Spur Educational Reform Education Sector
By linking school, college and workforce databases, the federal Statewide Longitudinal Data Systems initiative has awarded $515 million to help states divine how well schools are preparing graduates for college and the workforce.
Income Tax as Tool of Crony Capitalism John Locke Foundation
North Carolina’s corporate tax stands at 6.9% but it’s riddled with loopholes. Politicians grant exemptions to subsidize favored or politically correct businesses. The system is “hidden, dishonest and inconsistent with informed decision making in a free and democratic society.”
Pension Liabilities Bury Rhode Island in Deep Kimchi Mercatus Center
Rhodes Island’s state and municipal debt is a lot worse than official figures indicate. Using more realistic assumptions about the rate of return on investment on pension assets, unfunded liabilities climb from $9.3 billion to $18 billion.
New Priorities for Public Health Urban Institute
With its emphasis on preventive medicine, the Patient Protection and Affordable Care Act can provide a big boost to public health care.
Educrats are fighting back against the public frustration with rising college tuitions. And who can blame them? Once Americans get properly fed up with the bloated and insulated world of higher ed and start holding colleges and universities accountable for their price gouging, a lot of people will lose their cushy sinecures. Writing for the New York Times, Judith Scott-Clayton says the tuition increases aren’t nearly as bad as they seem.
Clayton, an assistant professor at Teachers College, Columbia University, notes in the Times’Economix blog that while the sticker price of college has indeed increased, the average full-time student pays only half that amount, thanks to increased financial aid. “Many students,” she writes, “are actually paying less now to attend college than they would have five years ago.” (Hat tip: Larry Gross.)
That’s of comfort, I’m sure, to those who are poor enough to qualify for student aid, though not to the suckers who sacrificed to save up enough money to send their kids to college. The hard-working middle/upper middle class gets stuck paying not only their own kids’ tuitions but those of other parents as well. Higher ed has transformed itself into yet another mechanism for the redistribution of wealth in American society.
But the fact is, the cost of college continues to increase even after adjusting for grants in aid. This chart comes from the newly published The Condition of Education 2011 from the National Center for Educational Statistics.
(Click on chart to see more legible image.)
The chart shows total prices for three categories of higher ed: public institutions, not-for-profit private institutions and for-profit private institutions. Then it deducts for scholarship grants (in light green), leaving the actual price paid (in blue-green). The increase (in inflation-adjusted dollars) between 1999 and 2008 was dramatic for all three categories.
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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