• New Subdivision Connectivity Requirements

    Dale City subdivision

    A re-write of the regulations governing the acceptance of secondary streets into the state-maintained road system was approved by the Commonwealth Transportation Board yesterday with only one dissenting vote. The changes affect mainly the extent to which subdivision streets must interconnect with one another and other streets.

    The purpose of the regulations, which arose from a 2007 law, was to encourage developers to design subdivisions with multiple connections to nearby roads and streets to avoid the problem of everyone in the subdivision emptying onto congested state roads at the same spot. In theory, greater connectivity between subdivisions gave drivers more potential routes to reach their destination without using overloaded main roads. If subdivisions failed to meet the requirements, the Virginia Department of Transportation would not accept them into the state system for maintenance.

    In this year’s General Assembly, home builders pushed for changes to the acceptance requirements, which they said imposed an inflexible template on their subdivisions, regardless of circumstances. In particular, they disliked the Connectivity Index, which rated a subdivision plan based on the number of street segments and intersections. The formulaic approach did not work well for laying out subdivisions, which they described as a creative endeavor that is more an art form than a science.

    The re-written regulations get rid of the Connectivity Index and substitute a simple requirement that every subdivision must have at least two exits, with an additional exit to be added for every 200 houses.

    Smart Growth advocates were not adamantly opposed to the change, but they did say that so few new subdivisions have been built in the past four years that the Connectivity Index was really never given a chance. Why not wait and see how it works in practice before getting rid of it?

    James E. Rich, Culpeper district representative, cast the only dissenting vote. He had only recently begun to get feedback from people on the re-write, he said. What was the rush in passing the new regulations? “I don’t like to vote on these things in a vacuum.”

    — JAB


  • Groping toward a New Formula for Distributing Maintenance Dollars

    A Commonwealth Transportation Board subcommittee seems to be making progress in deciding how to make Virginia’s formulas for allocating road maintenance dollars more equitable and efficient. In a meeting yesterday, the five-member group agreed upon the following statement:

    The most equitable approach to distribution of scarce maintenance funding may be a formula that incorporates a prioritized needs-based factor along with a commitment to maintain statewide assets, regardless of maintenance responsibility.

    State funding formulas are balkanized and inconsistent. One set of rules, based upon lane-miles of roadway, applies to cities and towns. Another set of rules applies to Arlington and Henrico Counties. And yet a third governs the distribution of maintenance funds to all other counties, whose roads are maintained by VDOT.

    The subcommittee is moving toward a single set of criteria for dispensing maintenance dollars. However, the group resolved to gather more data on the condition of roads in cities, which VDOT currently does not collect, and to convene again with city and county stakeholders to hash out the issues. Inevitably, any change in the formulas will create winners and losers.

    A consensus appeared to emerge, however, around the idea that maintenance dollars should be distributed according to the basis of need, with “need” being determined by a composite of factors such as the condition of the roads, the number of people who use the roads, and the economic value of the roads. Sheppard Miller, an urban at-large member from Hampton Roads, spoke of a mile-long road that he lives on and shares with only two or three other families. Regardless of its physical condition, his road just isn’t as important as a road that carries thousands of drivers. Maintenance on other roads should take precedence, he said. “I’d look at the needs across the state, serve the most critical needs first, and look at which roads have the most value.”

    The subcommittee report received a positive response from other CTB members. Virginia should not be hamstrung by 80-year-old legislation, said Cord Sterling, the Fredericksburg district representative. “We need more resources. But we also need to more effectively manage the resources we have.”

    — JAB


  • Virginians Driving Even Less in 2011

    Stalled: Vehicle Miles Traveled

    A week ago I questioned a fundamental premise of the argument that Virginia needs to raise taxes in order to build more roads: the fact that Virginians aren’t driving more, they’re driving less. Citing DMV figures, I noted that total Vehicle Miles Driven in the Old Dominion declined in 2009 and 2010. (See “Is Congestion Really Getting Worse?“) What I didn’t know then were the numbers for 2011. As the economic recovery (such as it was) took hold, would Virginians head back to the roads?

    The Virginia Department of Transportation thought they would, budgeting a 2.7% increase in motor fuels taxes for the first quarter of the fiscal year. But we found out differently when John Lawson, CFO for the Virginia Department of Transportation, updated the Commonwealth Transportation Board on the department’s financials.ย  Through September, he reported, motor fuels tax collections have declined 3.2% year to date compared to the same period last year. (In Virginia’s fiscal year, “year to date” covers July, August and September.) The decline for September was even worse — down 4.1%. Ouch!

    Fuel tax collections are a function of two things: average gas mileage and vehicle miles driven. While improved gas mileage of the Virginia motor vehicle fleet might have contributed marginally to the dip in tax collections, the driving force (so to speak) was Vehicle Miles Traveled (VMT).

    I asked Lawson if he thought the decline reflected temporary economic conditions or a more profound change in driving patterns. He declined to speculate.ย  But it’s a question that VDOT officials and state legislators need to start asking. If Virginians are driving less, not more, the justification for many transportation projects gets blown out the exhaust pipe.

    — JAB


  • The Wonk Salon, October 20, 2011

    The Free Market Case for Opposing Caps on Medical Malpractice
    Heritage Foundation
    The insurance industry does a better job than government of punishing bad doctors. Capping malpractice awards undermines mutes incentives for physicians to reduce the risk of negligent injuries.

    Texas Halts Erosion of Property Rights
    Texas Public Policy Foundation
    Texas courts let the state’s traditionally strong property rights erode by giving more power to government. But recent Supreme Court rulings have reigned in the excesses.


  • Connaughton Tells It Like It Is

    Sean Connaughton. Photo credit: Lorton Patch.

    by James A. Bacon

    Where does Gov. Bob McDonnell stand on the issue of devolving responsibility for secondary road maintenance to the counties? I’m not aware that the governor has staked out a formal position, but his transportation secretary, Sean Connaughton, gave some strong hints today about where he stands.

    Two weeks ago, the Fairfax County Board of Supervisors voted to increase the density of Tysons Corner by 7%, Connaughton volunteered in a free-ranging riff during a meeting of the Commonwealth Transportation Board this afternoon. When informed that the cost of building the transportation infrastructure to serve that density would cost $1 billion, he continued, the county response was, “It’s the state’s responsibility.” In effect, he was saying — at least, this is what I read into his remarks — that the system that separates responsibility for land use and transportation is broken.

    Fairfax County’s actions have been replicated on a smaller scale endlessly across Virginia. County boards of supervisors make major land use decisions knowing that they can pass the buck for road improvements to the state. That’s the main reason the General Assembly passed legislation a few years ago allowing counties to take over responsibility for their secondary roads. So far, every county has balked at taking on the obligation, usually on the grounds that they distrusted the ability of Virginia Department of Transportation to pay them enough to make it worth their while. (Cities, towns and the counties of Arlington and Henrico maintain their own road systems in an arrangement that dates back, with minor modifications to 1932.)

    Click on chart for more legible image.

    The counties’ skepticism was driven home in a survey of county officials recently conducted by VDOT. Although county officials assign a far higher priority to maintenance over new construction, only a small minority are interested in taking over maintenance themselves. The number of positive responses did increase measurably (see chart) on the condition that the state provided additional resources.

    “Senator [Harry] Byrd was looking at a world of country roads” during the Great Depression when he crafted the road-maintenance responsibilities between cities, counties and the state, Connaughton said. But the situation is very different today. Three of the top ten wealthiest jurisdictions in the country are located in Northern Virginia. “We pave their cul de sacs,” he said. By contrast, the town of Dumphries in Prince William County is one of the poorest jurisdictions in the region. “They have to maintain their own roads.”

    (While Dumphries does pave its own roads, the state distributes maintenance dollars to offset the cost — I don’t think the secretary meant to imply otherwise.)

    Connaughton framed the larger issue this way: Should the state accept Fairfax County cul de sacs into the state secondary road system, or should the commonwealth focus on primary roads? Just because Virginia has done things the same way for nearly 80 years, he seemed to say, is no reason to continue doing it. “There’s a lot of crazy stuff that no one’s had the courage to look at.”

    Sounding very much unlike a former Northern Virginia politician — he previously served as chairman of the Prince William County board of supervisors — Connaughton dismissed the conventional wisdom that Northern Virginia doesn’t get its fair share of transportation revenues. He can’t speak for other areas of government, he said, but when it comes to transportation funding, “the rest of the state is subsidizing Northern Virginia.”

    When it costs $11 billion just to add an extra lane to Interstate 81, he said,ย  addressing a topic raised earlier in the meeting, the state doesn’t have enough money to fulfill everybody’s wish list. “It’s more than just a revenue issue now,” he said. “It’s about roles and responsibilities.”


  • Coming Soon: Master Plan for NoVa North-South Corridor

    Click map for more legible image.

    by James A. Bacon

    A major north-south highway in Northern Virginia took a step closer to reality today when the Commonwealth Transportation Board voted to develop a master plan for a “corridor of statewide significance” that would cut through Prince William, Fairfax and Loudoun counties.

    Northern Virginia has the worst congestion in the United States, said Deputy Transportation Secretary David Tyeryar. The gridlock is aggravated by poor access to Dulles airport, which forces people to drive much farther along major arteries like Interstate 95, Interstate 66 and the Dulles Toll Road than they should. The new corridor would better integrate Dulles with the region.

    While the route bears a strong resemblance to a proposal for an outer Washington beltway spanning the Potomac River that was scrapped a decade ago, McDonnell administration officials were at pains to say that this project is more limited in scope. The corridor will originate in a southern terminus on Interstate 95, align with the proposed Tri-County Parkway (shown in map), run north past Dulles airport and terminate at Route 7, Tyeryar said. “We will not study a river crossing,” he emphasized.

    Tyeryar got pushback, however, from two CTB members who said that the corridor should include a river crossing. “I don’t think we should put artificial limits on what we look at for connecting Dulles,” said J. Douglas Koelemay, who represents the Northern Virginia transportation district. “My goal is river to river. We have connectivity needs with Maryland.”

    “The governor of Maryland has been contacted,” said Gary Garczynski, an urban, at-large member from Prince William County. “Senator [Mark] Warner favors a river crossing. It’s in dialogue.”

    The only board member to express reservations about the study was James E. Rich, representative of the Culpeper transportation district. It makes more sense to fund smaller projects that can improve mobility in Northern Virginia right now, he said, than to conduct a long study for a megaproject for which no money currently exists, he said. “There are concrete affordable steps to improve access to Dulles.”

    Other than Rich, however, when it came to a vote, all CTB members voted in favor of the study. When asked when he could get started, Tyeryar replied that he’d already taken the liberty of putting the project into motion. He promised the board to report back at 6-, 12- and 18-month intervals.

    Powerful interests are pushing for construction of a major thoroughfare. The localities along the proposed route have added 300,000 people in the last 10 years, said Robert Chase, president of the Northern Virginia Transportation Alliance. The next two decades will see another 650,000 people settle in the region. That’s nearly a million people — almost the population of Fairfax County. “There is a huge demand for a north-south corridor. If we do something or not, those people will be there.”

    Smart Growth representatitves were quiescent at the board meeting. But they have criticized the outer beltway in the past on the grounds that it would contribute to sprawl by opening up vast tracts for development while diverting funds from smaller, more targeted improvements that would do more to reduce congestion.


  • The Wonk Salon, October 18-19, 2011


    Dealing with Diversity in Virginia
    Center for American Progress
    Think tank sponsors roundtable discussion about increasing ethnic diversity in Northern Virginia.

    Government Workers Are Almost as Unprepared for Retirement as the Rest of Us
    Center for Retirement Research
    Thanks to generous pension benefits, state and local government workers tend to be less unprepared financially for retirement than other Americans but, on average, they still fall short.

    Saving the Unemployment Insurance Funds
    Tax Foundation
    Thirty-four states have borrowed a total of $37 billion from the federal government to pay unemployment benefits. States must begin paying interest on their balances in 2011. Good luck with that.


  • Older Is Wise Guy-er

    The good thing about older prison inmates is that they tend to be less violent than their younger peers. It helps keep down on the guard-staffing expenses when the warden doesn’t have to worry about convicts knifing one another in the exercise yard or sexually assaulting the beta males in the showers.

    The bad thing about older prison inmates is that they’re not as healthy. Now there are so many gaffers in the hoosegow that their medical bills are creating a financial problem for the corrections system. Not only has the number of inmates in Virginia age 50 or older increased nearly sevenfold over the past 20 years, reports the Washington Times, the average cost of providing them with specialized health care was nearly seven times the average expenses for younger prisoners in fiscal 2010.

    The cost per capita to house an inmate in the previous fiscal year was about $24,000, one corrections officials said. But at Deerfield Correctional Center, a special-needs facility in Capron with an average inmate age of 55, the cost was $29,600.

    Politicians are exploring the option of expediting geriatric releases. That’s a clever idea. Shift the health care burden to Medicare and Medicaid!

    — JAB


  • McDonnell’s Energy Pep Rally

    By Peter Galuszka

    One conceit of Gov. Robert F. McDonnell is that he magically wants to transform Virginia into “The Energy Capital of the East Coast.” The idea smacks of Alice in Wonderland.

    An example is “The Governor’s Conference on Energy,” that began in Richmond onย  Monday. I dropped by today and noted that the conference logo has a map with the state colored red as the aforementioned energy capital. There were the usual fossil fuels — coal, petroleum and natural gas — represented in exhibits along with a fair showing of nuclear power. Scattered here and there were cogeneration and wind turbine possibilities.

    A keynote speaker was by Christine Todd Whitman, a former New Jersey governor and head of the U.S. Environmental Protection Agency under George W. Bush from 2001 to 2003. During her tenure, she helped emasculate the agency. She now advocates nuclear power.ย Despite the Fukushima disaster and the fact that Dominion’s North Anna nuclear plant remains shut down after a 5.8-scale earthquake on Aug. 23, Whitman beat the drum for more nuclear plants.

    Coal companies also had a big role, likely because Dominion and American Electric Power, the state’s two largest utilities, have a large coal-fired capacity. And McDonnell is still pushing for oil drilling off the state’s coast despite the Deepwater Horizon disaster and the lack of evidence of any significant deposits.

    The favored mix did not sit well with the few environmentalists at the conference. “It’s nuclear, nuclear, coal, coal, gas,” Glen Besa, an official with the Sierra Club told me. In fact, the Sierra Club intends to give a counter
    speech favoring non fossil and alternative energy as McDonnell gives his
    keynote address Tuesday evening.

    There’s more odd about the conference. The “Energy Capital” moniker is a bit of a stretch for one thing. Take coa. The coalfields in far Southwestern
    Virginia produce between 30 to 40 million tons a year. Next door, West Virginia produces 144 million tons and Kentucky 96 million tons a year. Total U.S. production is about 1 billion tons, so Virginia’s 40 million tons is rather puny.

    Ditto oil. There’s isn’t much in Virginia although there are natural gas wells. Nuclear? In the state are four reactors, two of which are shut down due to the earthquake.

    Yet there’s lots of interest in wind, especially offshore where Google plans a big farm and on the Eastern Shore where a turbine test facility is planned. Plenty of wind blows in the mountains near the West Virginia border. McDonnell ought to emphasize wind a lot more than he does.

    Another curiosity is that the conference entrance fee was $245 ($50 for students).ย In ย other words, the conference was not intended as an informational session for the general public. Rather, it was a pep rally for well-heeled energy executives who might enjoy the governor’s nonsense about Virginia being the “Energy Capital of the East Coast.”


  • Women and Children First!

    Source: CBO. Click the chart to view more legible image.

    by James A. Bacon

    Boomergeddon is running right on schedule. The Congressional Budget Office released a report earlier this month disclosing that the federal budget deficit for Fiscal Year 2011, which closed September 31, was $1.3 trillion — equal to 8.6% of GDP. Two years into the economy recovery, the United States still racked up the third largest percentage deficit since the end of World War II. Meanwhile, economic recovery continues to drag. We’ll all consider it a triumph of economic policy simply to avoid a double-dip recession. One way or the other, the outlook is for chronic annual deficits above $1 trillion.

    The response of President Obama to the nation’s fiscal challenge is so inadequate as to be contemptuous. As if $1.3 trillion in deficits weren’t sufficient counter-cyclical spending, he proposes to roll out a $450 billion Son of Stimulus. His plan: Keep the economy running on Keynesian crack, fight cuts in government programs, beat Republicans with the class warfare stick and raise taxes on job creators. If Obama were the captain of the Titanic, he’d be manning the helm and shouting, “Damn the iceberg, full speed ahead!”

    But are the Republican candidates much better? To the extent that they don’t propose running up $450 billion in extra deficits, they would not accelerate the ruination of the country, as Obama would do. But to the extent to which their deficit cutting plans are weak-kneed and lily-livered, they won’t avert Boomergeddon. They will just put the economy on a slow glide path to catastrophe.

    Mitt Romney, who represents the technocratic wing of the Elephant Clan, has called for initial cuts to non-security discretionary spending of $20 billion, reports the Wall Street Journal. But he won’t cut defense and hasn’t proposed serious entitlement reform. He would roll back corporate taxes and eliminate capital gains, dividends and interest for taxpayers earning less than $200,000. But even with dynamic scoring (recognizing that lower tax rates stimulate growth), the tax plan is not likely to pay for itself. Bottom line: The GOP front runner is the proverbial guy who wants to rearrange the deck chairs on the Titanic.

    I have taken a liking to the plain-talking ways of Herman Cain, and conceptually I like his 9-9-9 tax plan, which calls for a flat 9% personal income tax, a 9% corporate tax and a 9% national sales tax. I do believe it would stimulate growth and create jobs — but it would be revenue neutral only if it delivered the promised growth and counted the tax revenue generated by that growth. So, even if it works as billed, Cain’s plan would create jobs but it wouldn’t cut the deficit. I have heard Cain say very little about how he would close that $1.3 trillion budget gap through spending cuts. If he were captain of the Titanic, he’d be saying, “Let’s poke around in the engine room and see what we can do.”

    Only one candidate gets it, and that is Ron Paul. He laid out a plan yesterday that would cut federal spending by $1 trillion during his first year in office, achieved partly by eliminating the departments of Education, Commerce, Interior, Energy and Housing and Urban Development, as well as halting foreign aid, “ending foreign wars” and throwing in some tax cuts. Credit Paul for recognizing the magnitude of change that needs to be made. (As it happens, closing the budget gap by $1 trillion was the goal I set in Boomergeddon.)

    Just two problems with Paul’s plan. First, it is an outlier. No one but a tiny fringe of the electorate will take it seriously. Most people will recoil at draconian nature of the cuts. Second, there is a legitimate economic criticism that can be leveled at the plan: Whacking $1 trillion in federal spending in a single year would cause massive economic dislocation and plunge the country back into a recession. Paul would save the Titanic from the iceberg by blasting a hole in the hull and preemptively sinking it.

    Our only hope for averting fiscal catastrophe is to enact spending cuts on the $1 trillion scale that Paul proposes but easing into them over several years so as to temper the economic pain and minimize the political backlash that could lead two years later to the plan’s undoing. It wouldn’t hurt to throw in a dose of Herman Cain-style tax reform to energize the economy. U.S. businesses are sitting on $2 trillion or more in cash. If we can create the conditions to get corporations and entrepreneurs investing and hiring again — sorry, but protecting the jobs of teachers and fire fighters, as our president proposes, won’t do the trick — perhaps we can grow our way out of the doldrums.

    But anyone who tells you can we achieve fiscal sustainability on the cheap and easy is a fool. And anyone who tells you we can kick the can down the road forever is a liar.


  • Live by the Sword, Die by the Sword

    by James A. Bacon

    Northern Virginia has long been a leading center of the defense industry, a fact of which I have been aware ever since my dad transitioned out of the Navyย  by working briefly for a consulting firm in Crystal City.ย  In the defense industry, like in any other, it is critical to maintain a close relationship with the customer. Defense contractors figured out decades ago they had to have a physical presence near the Pentagon.

    Defense manufacturing is famously scattered across the country, driven not by the conventional metrics of workforce skills, wage levels, cost of real estate and transportation access but by political patronage. But defense headquarters have clustered in the Washington metropolitan area, where executives can easily access the Pentagon, Congress and, increasingly importantly, other defense contractors as partners, vendors and customers. In sum, Northern Virginia has emerged as the dominant defense-industry cluster in the world, a fact of which I was reminded by reading this article in Forbes.

    With the exception of Martin Marietta headquartered in Maryland, every major defense contractor worth noting either has a corporate headquarters in Northern Virginia or a large corporate office. Big names include General Dynamics, SAIC, Computer Sciences Corporation, DynCorp, Booz Allen Hamilton, ITT Defense, and the U.S. arm of BAE Systems. Forbes notes that Boeing will move its senior defense executives to Arlington in two years, and it’s conceivable that the rest of the defense headquarters, now in St. Louis, will follow. Now that the defense cluster has achieved critical mass, every player or would-be player needs to move to Northern Virginia just to be where the action is.

    Back in the late 1990s when I was publisher of Virginia Business magazine and paid closer attention to such things, I followed with great interest the activities of the Northern Virginia Technology Council and other groups that labored tirelessly to build Northern Virginia into a world-class center of technology innovation. During the Internet boom, for instance, Northern Virginia seemed to be on the verge of developing a self-sustaining cluster of Internet and telecommunications firms. But the Internet bubble burst, MCI went spectacularly bust and AOL, whose dial-up subscription model proved obsolete, moved its headquarters to New York. The regionย  tried, and failed, to create a venture capital-driven model of growth comparable to Silicon Valley and Boston.

    Why, despite its awesomely educated and tech-savvy workforce and its entrepreneurial energy, has NoVa remained an innovation also-ran? What has held it back from making the leap to the big time?

    The dominance of the defense industry is the region’s greatest strength and greatest weakness. On the one hand, the military-intelligence-homeland security complex of industries is incredibly information intensive. Consequently, the players in this sector are savvy users of technology. That’s why the concentration of technology skills in Northern Virginia is one of the greatest in the world. On the other hand, the culture of defense procurement is extraordinarily rules driven, and its complexity has only gotten worse every time someone tries to reform it. The procurement process favors incremental innovation over the kind of disruptive innovation that emerges from Silicon Valley.

    Northern Virginia’s competitive advantage in defense contracting is difficult to transfer to other industries. Thus, what’s good for defense is not necessarily good for technology companies whose customer isn’t the federal government. The defense-fueled prosperity of Northern Virginia sends rents and other business costs higher, mires the region in traffic jams, and skews technology talent toward systems-integration rather than product development. In effect, I would argue, the defense sector is crowding out small, non-defense technology companies for whom it would be senseless to pay a premium to locate in Northern Virginia.

    It’s been invigorating for Virginia to ride the defense boom of the past decade, which has experienced extraordinary growth in spending on defense, intelligence and homeland security. But the nation has reached a tipping point. Defense spending, like all federal spending, will slow — if not go into reverse. The defense sector will experience hard times. The great question is whether, given the fact that the region’s competitive advantage lies in its mastery of the arcane federal procurement process, Northern Virginia can reinvent itself. Let us hope that it can.


  • Virginia’s Brain Drain

    by James A. Bacon

    California has a lot of problems, including a dysfunctional political system, structural budget deficits and a lousy business climate. But it’s still a magnet for some of the world’s most talented scientists and engineers. According to a new Milken Institute study, “What Brain Drain? California among the Best in the U.S. at Retaining Skilled Workers,” the Golden State had nearly the best record among the 50 states for retaining skilled workers. Between 2000 and 2009, roughly 35% of skilled (college educated), native-born Californians lived outside the state, compared to 50% for the average state.

    And how did Virginia fare? Not very well. Roughly 53% of skilled native-born Virginians lived outside the state during the same decade. Bottom line: Skilled Virginians are more likely to leave their home state in search of opportunity and a better life than other Americans are.

    California’s Achilles heel has been its ability to lure skilled, native-born Americans into the state. But it has more than compensated by its ability to attract skilled, foreign-born workers — and to retain them at a much higher rate than the national average. (It’s not clear from the numbers how many move back to their own countries, as opposed to other states in the U.S.) Virginia, conversely…. not so good. We retain skilled, foreign-born workers at a lower level than the national average.

    The Milken study warns that California must avoid complacency. Technology clusters are developing in other regions of the country — Texas, in particular, has an even better track record of attracting and retaining skilled workers.

    Californians also should be alarmed by the mounting dissatisfaction of many businesses, a problem highlighted in a Wall Street Journal op-ed published today by Steve Malanga. California perennially ranks near the bottom of “business climate” surveys, and nobody’s perceptions seem more negative than those of California businesses themselves. He writes:

    According to a poll by a California coalition of businesses and industries, 84% of executives and owners said that if they weren’t already in the state, they wouldn’t consider starting up there, while 64% said the main reason they stayed was the difficulty of relocating their particular kind of business. For several years in a row, California has ranked dead last in Chief Executive magazine’s poll about states’ business environments.

    Despite their unhappiness, most businesses stay. And the access to human capital is undoubtedly a major reason why.

    Meanwhile, Virginia may revel in its “best state for business” awards but outside of Northern Virginia, the state’s economic performance plods ahead roughly in line with the national averages. We may excel at traditional, ’70s-era corporate recruitment, which may account for 20% or so of new job creation, but Virginia still has no coherent policy to recruit and retain top scientific, technical and entrepreneurial talent — the so-called creative class so critical to economic growth.

    At least we can look forward to the completion of the Longitudinal Data System that will allow researchers to track the movement of Virginians of varying levels of educational achievement into the workforce and in/out of the state. One day we’ll be able to routinely conduct the same kind of analysis as the Milken Institute, though at a far greater level of detail.ย  Maybe we can start thinking seriously then about our own Brain Drain.


  • Budget Busters Thrown Again

    While the budget busters in Washington struggle to tame trillion-dollar deficits for years to come, they keep getting thrown. The Obama administration took a particularly nasty spill yesterday, announcing that the Community Living Assistance Services and Supports (CLASS) program, a long-term care initiative embedded in Obamacare, is beyond salvage. “Despite our best analytical efforts, I do not see a viable path forward for CLASS implementation at this time,” Kathleen Sebelius, secretary of health and human services, said in a letter to congressional leaders.

    As AP reports, CLASS was supposed to function as a voluntary and self-sustaining long-term care health plan. But the program was fatally flawed: Unless large numbers of healthy people willingly sign up during their working years, soaring premiums driven by the needs of disabled beneficiaries would destabilize it, eventually requiring a taxpayer bailout.

    Now the O Team has to write off $80 billion of the “deficit reduction” it expected from Obamacare over the next 10 years. During the early years, when far more people were paying into the program than taking benefits from it, CLASS would have run a positive cash flow. Those revenues were credited for purposes of calculating the fiscal impact of Obamacare. As enrollees aged and started availing themselves of the service, the program would have cost the government money. But the impact wouldn’t felt until after the 10-year budget scoring, so no one but anal-compulsive CPAs and Republicans cared.

    Now that the O Team has abandoned the fiction that the CLASS program is financially sustainable, it will have to delete the $80 billion net revenue from its 10-year budget forecasts.ย  That may not seem like much in comparison to the $7.2 billion in projected deficits, but it will make the job of closing the gap that much harder. Boomergeddon looms a little bit closer.

    — JAB


  • Can Japan Keep Pitching?

    By Peter Galuszka

    (Last of a series)

    TOKYO, Japan — “Technology is like water, it runs down hill.”

    My old Japanese friend and I are chowing down on delicious fried oysters and sashimi in a downtown Tokyo restaurant. We had just had drinks at the Foreign Correspondents Club Of Japan which offers a spectacular, 20th floor view ofย  the city, including parts of the Ginza shopping district.

    My journalist friend’s comment is at once wistful and annoyed. He’s sick and tired of hearing about the Chinese “miracle” when much of the technology that the Chinese have used isย  from Japan, the U.S., Germany or other more advanced nations.

    I agree with him. I have been skeptical hearing about the wonders of the Middle Kingdom since it became fashionable when I was a middle-ranking editor on the international desk of a business magazine in New York back in the late 1980s and early 1990s. Although I am not a China hand and know little about the country, I keep noting that for every high speed train, there’s a high speed train crash that the government wants to cover up. Many Chinese products have the taint of intellectual property or brand theft. The miracle of millions of skillful, hard-working laborers churning out products for export doesn’t shed light on one-sided currency exchange rates or the labor conditions in which those products were made.

    Not that long ago, Japan seemed to be where it was happening. Back in the 1980s, the buzz was that the Nipponese onslaught was moving from cars and consumer electronics to snapping up choice Manhattan real estate and buying big movie houses, controlling our media.

    Alas, the real estate bubble in Japan hit and a “lost decade” of deflation followed. Japan is still staggering from it. Economists faulted the country for not taking enough steps to reconfigure the old “keiretsu” structure of big banks, government organizations and trading agencies all working towards common industrial policy and trade goals. Too slow to change, Japan was trapped and paid the price.

    China faces the same pressures. It is, after all, a communist dictatorship that has ultimate say on all political, economic or civil rights issues. The plus is that it can make decisions quickly at least big decisions. It has the finances to build quickly and invest heavily in the U.S. This is an irony for conservative Americans who tout China because theyย  want to make money from it, but somehow forget that it stands for all of the things they loathe, such as big regulation, government oversight and spending.

    My friend and I would like to see a return to the old days when Japan led Asia with close cooperation from Washington. Despite the horrors of World War II, it seemed a natural fit.

    That idea, however, unravels the minute I step into a taxi. The drivers are invariably grandfatherly men in black suits and white shirts. They will take credit cards for the ridiculously expensive rides to the hotel. They must bow and hand you scrap after scrap of paper. Ditto trying to find an ATM that will issue a foreigner cash. Most ATMs work only with Japanese banks. And while the subway and train systems are fast and efficient with extremely courteous staff, they seem unnecessarily complex and old. At my mostly-Japanese hotel, when they serve a tasty breakfast buffet, they actually play elevator music from the 1960s, including (believe it or not), Mantovani. I sip my soup listening to “Born Free.”

    Indeed, Japan’s biggest problem is not spirit or smarts. It is age. Demographics are against it. Japan has the largest percentage of elderly of any advanced country. About 21 percent of the population is older than 65 years old. It has always been hard for foreign firms to crack the Japanese market, but some now shun it because the population is getting too old. Meanwhile, national champions such as Sony or Toyota seem as ancient as a Madonna CD. In the latter case, a shameful breakdown in quality tarred the once-popular car maker.

    Can Japan keep pitching? Can the U.S.? Both long-time allies face similar challenges. My guess is yes, but not until the current Asia set-up
    changes once more.


  • And the Band Played On

    By Peter Galuszka

    (Fourth of a series)

    FUKUSHIMA, Japan — About an hour and a half north of Tokyo by bullet train, ย the city of Fukushima is enjoying a fall festival. A brass band (see photo) belts out tunes while two young policewomen in sky blue uniforms have their pictures taken with children sitting atop their white Honda motorcycles. Jack-o-lanterns, Japanese-style, dot posters. Doting grandparents shoot pictures of their grandchildren riding a miniature steam train.

    There’s little evidence that one of the worst nuclear disasters ever occurred last March 11 not 36 miles away on a rocky stretch of Pacific coastline. The meltdown of three nuclear reactors at the Daiichi power plant was the worst accident since Chernobyl and caused the deaths of more than 45 people, the evacuations of 130,000 and may cause untold future cancer illnesses and fatalities.

    The only new information, as a friendly Fukushima resident shows me, is a newspaper article showing the radiation zones in a newspaper article. The most intense zone runs about 20 kilometers from the power station, including parts out to sea.

    It is the worst zone. Gamma rays, that can penetrate anything except lead, are prevalent. Theย zoneย includes all or part of eight local jurisdictions. Extending another 10 kilometers out in another zone, land and buildings are somewhat less irradiated but still cannot be occupied. There are roadblocks on all roads leading into these zones.

    The newspaper articles purports to outline just how many houses and other properties there are in these restricted zones and howย  much people can expect to be compensated for them. I haven’t done an exact count but they appear to be between 5,000 and 10,000. People from the houses are living in temporary shelters with with families or friends elsewhere.

    One would never know it from the pleasantries in the downtown of Fukushima city, but the nuclear disaster has serious implications on a global, as well as local, basis. Concerns about global warming had been pushing sentiment in favor of nuclear power as opposed to coal, but that’s shifted back again. The United Bank of Switzerland says that the Japanese mess may result in the closing of 30 other nuclear reactors around the world. In Germany, Chancellor Angela Markel said her country would shut down its reactors. German engineering conglomerate Siemens announced it was getting out of the nuclear business. China, on the other hand, intends to expand its nuclear generation capacity to offset its 70 perent reliance on coal.

    Back in Virginia,ย ย the region got a taste of Fukushima on Aug. 23 when a 5.8 Richter scale earthquake, much smaller thanย  the tsunami that touched off Fukushima’s nuke disaster but still unexpectedly strong, jarred the North Anna nuclear plant operated by Dominion Virginia Power. It forced a shutdown of two reactors while heavy casks of spent nuclear where shaken loose. A review by the Nuclear Regulatory Commission shows that perhaps 25 other nuclear reactors may need new earthquake safety upgrades.

    If you get a map of Virginia and plot the same evacuations zones as at Fukushima, you likely would see the evacuations for weeks, months or years of all or parts of Fredericksburg, Culpeper, Charlottesville and the far western Virginia suburbs of Richmond near Manakin Sabot. These would be roughly a 30 kilometer zone — not the very worst, but still requiring evacuation.

    Fukushima and North Anna also raise serious questions about another Old Dominion project realted to nuclear power. A small group of investors and Canadians called Virginia Uranium plans on mining reserves near Chatham. But if the mood is so against nuclear power, one wonders just how demanding the market for yellowcake is.

    It is anyone’s guess who would pay for the irradiated property in Japan although Munich Re, the reinsurer in the case of Fukushima, says that covering the disaster can be done successfully.

    Costs such as these, whoever, must be kept in mind should nuclear power still proceed. Financial discipline, naturally is the flavor of the times given the currentย  backlash against government spending. Yet that also dooms nukes. Dominion, for instance, requires federal loan guarantees if it wants to proceed with a third unit at North Anna which is likely to cost more than $10 billion. Fat chance of getting it, at least now.

    Meanwhile, on Oct. 15, the New York Times reportedย that about 20 “hot spots” of radioactivity, some withย Chernobyl-level amounts, had been found in Tokyo, 160 miles to the south of Fukushima. Government officials had stubbornly claimed that the contamination was limited to the zone near the stricken plant, but now it seems that the situation is much worse than thought.