Bacon's Rebellion

  • Battle over C-ville Bypass Moves to Next Phase

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    James A. Bacon

    James Utterback, Culpeper District administrator, addresses the Albemarle Supervisors. Photo credit: Charlottesville Tomorrow.

    By James A. Bacon

    The battle over the $200 million Charlottesville Bypass isn’t over, not by a long shot. The Southern Environmental Law Center (SELC) and Piedmont Environmental Council (PEC) held a press conference earlier today to “send a clear message” to the Charlottesville-Albemarle community that the U.S. 29 Bypass “has a long way to go.”

    “We want to make clear to the community that the bypass is not a done deal. There are many critical steps still to go, many questions that need to be answered, before the first shovel of dirt is turned,” said Trip Pollard, SELC Land and Community Program Director in a prepared statement. “Citizens need to demand that local and state officials provide a full accounting of the impacts and costs of this project before any further steps are taken to advance it.”

    The project received the thumbs up this summer from the Albemarle County Board of Supervisors and the Charlottesville-Albemarle County Metropolitan Planning Organization, paving the way for funding approval by the Commonwealth Transportation Board. But the Virginia Department of Transportation has to complete a number of steps before it can start moving dirt.

    “No work has been done on this project since 2002 other than administrative update,” James Utterback, Culpeper District administrator yesterday told the Albemarle supervisors yesterday. (Read the story by Charlottesville Tomorrow.)

    VDOT soon will commence with an environmental reevaluation, right-of-way acquisition and issuance of the request for proposals, with the goal of awarding a contract by the first quarter of 2012. Additionally, the Federal Highway Administration must “review” the project under the  National Environmental Policy Act (NEPA), a process that will require public input. A key question is whether the circumstances have materially changed since the previous environmental impact statement, which is now 18 years out of date. If so, the FHA could order VDOT to conduct new studies.

    “There are still a lot of unanswered questions, but it is clear that this ‘ready, fire, aim’ approach is not adequate to get the data to make an informed decision and the public involvement they suggest would be too little too late,” Pollard said. “The 29 bypass is not a NIMBY issue. Every community, every citizen in the Commonwealth should take note and be concerned about the waste of resources, the willingness to bulldoze ahead without adequate information, and the disregard for public input demonstrated here.”

  • Nice Try, Cooch

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    Peter Galuszka

    By Peter Galuszka

    Surprise, surprise, surprise.

    The Fourth Circuit Court of Appeals has tossed out a notorious challenge by Virginia Attorney General Kenneth Cuccinelli and arch-conservative Liberty University to Obamacare.

    In a surprise move, a three-judge panel at the appeals court ruled that the two plaintiffs did not have standing to bring the case and that their court had no standing to rule on it.

    The judges are all Democratic-appointees who had been expected to rule in favor of Obamacare, especially the controversial section that requires all Americans to buy health insurance in 2014. A lower court had ruled on the merits of the case, but the Fourth Circuit, in effect, punted.

    The Virginia General Assembly passed a law earlier this year nixing the forced purchase of insurance, but that put a state in conflict with federal law. Guess who usually wins?

    That should toss the issue to the Supreme Court and a ruling next summer. It should also be a lesson in constitutional law for the hard right.

    And speaking of the hard right, just for laughs I am posting part of the response of Tea Party leader Jamie Radtke who is running for the Republican nominationf or U.S. Senator:

    “The U.S. Court of Appeals in Richmond has demonstrated a shocking lack of understanding of the U.S. Constitution and the intent of the states that ratified it, by virtue of the court’s ruling today that Virginia has no standing to challenge the constitutionality of a federal law that directly conflicts with a Virginia statute.”

  • The Dulles Rail Financial Disaster Continues

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    James A. Bacon

    Will Taxpayers Bail It Out?

    A guest column by Ronald D. Utt

    Gosh, what a surprise! The yet to be completed 23-mile extension of the Metro rail line to Dulles airport is already confronting serious financial difficulties. Added to the money problems are a series of lapses in management’s performance and the revelation that flaws in the system’s design will discourage ridership and further diminish its currently projected marginal contribution to regional mobility. In response, the system’s manager – the Metropolitan Washington Airports Authority (MWAA) – is seeking bailouts from the state of Virginia and from the federal government.

    A Project Doomed to Fail. The only surprise in all of this is that the many people in charge of overseeing the project are surprised and disappointed by these revelations: As the record reveals, the mediocre performance of the system was predicted by the project’s own justification report submitted to the federal government in 20041, and recognized by the leadership of the United States Department of Transportation (USDOT) during the Bush Administration who refused to fund the project until beaten into submission by Congress.

    Consider the key findings of WMAA’s 2004 report to USDOT:

    • By the project’s completion in 2025, traffic volumes on the ten highway links in the corridor would be reduced by only 1.5 percent compared to levels that would occur without the extension.
    • This negligible gain in traffic relief would be erased by 2027, given projected trafficgrowth rates. In effect, an estimated $6 billion (in current dollars) would be spent for two years of trivial traffic relief.
    • As a consequence, net energy saving by 2025 (measured in energy saver per BTU, as car usage declines and transit usage rises) would be 0.5 percent for the full 23 mile project,while the Phase I (to Reston’s Wiehle Avenue) link of 11.7 miles of track would actually increase energy usage.

    Importantly, given the new automobile mileage standards since adopted, and the proposed 54.5-mpg requirement, this projected energy savings may already have turned into a loss. Again, keep in mind that the data in the above three bullet points were provided by consultants to MWAA and submitted by them to the Federal Transit Administration (FTA). To put this in perspective, the Heritage Foundation estimated that the cost per new rider attracted from a car
    (daily rider annualized) exceeds $15,000. That is enough to lease each new Dulles rail transit rider two BMW 328i convertibles for life and still return a few thousand dollars back to the taxpayer. By this measure, the Dulles extension would be one of the most expensive new transit projects ever conceived. Read full essay.

    Ronald D. Utt is the Herbert and Joyce Morgan Senior Research Fellow at the Heritage Foundation. This essay is being published simultaneously by Bacon’s Rebellion and The Score Radio Network.

  • The Wonk Salon, September 8, 2011

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    James A. Bacon

    Saving Southern Forests with Carbon Offsets
    World Resources Institute
    Forest carbon offsets can create a non-trivial incentive for southern woodland owners to engage retain or restore forests instead of selling out to real estate developers.

    Measuring Teacher Effectiveness: Ignore Credentials and Seniority
    Manhattan Institute
    Traditional criteria for evaluating teachers — certification, advanced degrees and seniority — reveal next to nothing about how well teachers perform in the classroom. Debate over. Time to devise new metrics.

  • Notes on the Wealth Gap: The Role of Health Care

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    James A. Bacon

    by James A. Bacon

    Stagnating incomes for middle Americans are a significant driver of the increasing income and wealth gap with top-earning Americans. Why have middle-class incomes stagnated? There are lots of theories — globalization, automation and (my favorite) rent-seeking by the rich and powerful. But a new report by the Rand Corporation identifies the real culprit: health care.

    In “How Does Growth in Health Care Costs Affect the American Family?,” the Rand Corporation depicted the effects of rising health care costs on a median-income married couple with two children covered by employer-sponsored insurance between 1999 and 2009. The main findings: (1) Health care expenditures, including insurance premiums, out-of-pocket expenditures, and taxes devoted to health care, nearly doubled between 1999 and 2009; (2) this increase substantially eroded what an average family had left to spend on everything else, leaving them with only $95 more per month than in 1999; (3) had health care costs tracked the rise in the Consumer Price Index, rather than outpacing it, an average American family would have had an additional $450 per month —more than $5,000 per year — to spend on other priorities.

    Total compensation for Americans increased over the decade. The compensation just didn’t make it into peoples’ paychecks. When you consider that the median household income in the U.S. is a little more than $50,000, that $5,000 represents about 10% of the average family’s income. As a percentage of income, the impact on upper-incomes was proportionately smaller.

    The inflation in health care costs probably doesn’t explain all of the income gap, but it would seen to explain a lot of it.

  • Virginia Reform, Kremlin-style

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    Peter Galuszka

    By Peter Galuszka

    What is it about Virginia’s Republicans and secrecy?

    Gov. Bob McDonnell has stirred the cackles of open government advocates and Democrats by keeping private “working groups” of his Governor’s Commission on Government Reform, one of his signature programs.

    Meanwhile, U.S. Rep Eric Cantor, House Majority Leader and overnight budget hawk, has raised eyebrows by holding a meeting of his “advisory council” of supposedly ordinary constituents while keeping the media and possible critics out.

    Anita Kumar broke the story about McDonnell’s shenanigans, noting that the Virginia Freedom of Information Advisory Council believes the governor is breaking the law by holding closed meetings among his commission members who are supposed to hack out ideas on how to “streamline” government.

    McDonnell’s people claim that the closed meetings are kosher because they are “working groups.” Another curiosity is that none of the four elected Democrats appointed by McDonnell to the commission are on any of the work groups.

    Tucker Martin, McDonnell’s spokesman, has been quoted in a kind of New Orwellian Language that the meetings are private since: “More voices are being heard. More opinions are being considered. That kind of transparency can be difficult for some to properly conceptualize, as it is a relatively new way of doing business at the government level.”

    What level of government is that anyway? The Kremlin level?

    Megan Rhyne, writing in today’s op ed page of the Richmond Times-Dispatch, has similar concerns. The executive director of the Virginia Coalition for Open Government wrote that this “new way” of doing things might not be new at all but “instead is the very smoky, back-room dealing transparency in general, and FOIA in particular, seeks to eliminate.”

    Maria Everett, executive director of the FOIA Council, says flatly that McDonnell is in violation of the law. Bob Edgar, president of Common Cause, says the modus operandi is anything but reform.

    Yes, you have to wonder what the buzz is about government “reform.” It seems to be a right wing code word for limiting the input of ordinary citizens in favor of big business and big Republican campaign contributors. It also smells of chopping government for the sake of chopping, ridding checks and balances and using the closed door to get rid of nettlesome regulations that may annoy business but may actuallyprovide safeguards for ordinary folk. In other words, it’s the kind of thing that goes down well with the lobbyists who run the Thomas Jefferson Institute for Public Policy.

    The Cantor story is similar. He rented a conference room on Midlothian Turnpike in Chesterfield recently where he met with constituents who were on his so-called “advisory council.” Meeting with constituents is always a good idea, but Cantor has shut out the media. Why? Are they enemies? Ditto protestors from a liberal group, about 200 strong, who demonstrated against Cantor’s rampant budget cutting policies.And while anyone supposedly can sign up to be on a Cantor advisory council, some have said they weren’t allowed to participate.

    Odd, then, that the very Republicans who are limiting basic American freedoms are the ones who so often wrap themselves up in the American flag.

    What’s even sadder is that there isn’t an even stronger outcry.

  • Map of the Day: Income Gained, Lost from Migration

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    James A. Bacon

    This map from the Tax Foundation shows the annual income gained or lost due to interstate migration between 1999 and 2009. The biggest winner was Florida by a country mile, followed by Arizona, Texas and North Carolina. Bottom line: If your state was attractive to retirees, you bolstered your income. The big losers: New York, California and Illinois.

    Virginia ranked among the “stable” states, showing a modest $1.4 billion gain in income over the decade. (Click on map for more legible image.)

  • The Wonk Salon, September 7, 2011

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    James A. Bacon

    Phew, Rest Easy, Teacher Evaluation Models Still Valid after Adjusting for Missing Data
    Rand Corporation
    Educational evaluation models for evaluating teachers on the basis of student performance still stand up after accounting for the fact that the data for some students is incomplete.

    NYC’s Elite Exam Schools: Little Long-Term Impact
    National Bureau of Economic Research
    Everyone wants to get into NYC’s elite exam schools with their rigorous academic programs. But attendance has little impact on SAT scores, college enrollment or college graduation rates.

    Race, Gender, Test Scores and Downward Mobility
    Pew Charitable Trusts
    One third of all children raised in the middle class will fall out of the middle class as adults. Crack and heroin use are major downers. Downward mobility also associated with lower test scores.

    Redesigning State Government
    National Governors Association
    Hot trends in the states include closing prisons, changing teacher compensation and tenure, downsizing state workforces, reforming pension plans, and reviewing tax expenditures.

  • Discrimination at Cardinal Financial? Or Race Hustling at Obama’s DOJ?

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    James A. Bacon

    by James A. Bacon

    In 2004, Cardinal Financial Corp., a regional bank based in Tysons Corner, purchased George Mason Mortgage, which originated mortgage loans in the Washington metropolitan region, predominantly in Northern Virginia. Seven years later, in a July 1 letter to Cardinal Financial Corp., the U.S. Department of Justice (DOJ) accused the $2 billion regional financial institution of failing to “serve predominantly black areas on an equal basis with predominantly white areas.”

    For specifics, the letter noted that the financial corporation had not opened branches in majority-black areas or engaged in “effective outreach activities.”

    To remedy this deficiency, DOJ wanted the bank to add nine counties to the Federal Deposit Insurance Corp.-approved geographic area where Cardinal does business, wrote Mary Kissel in a Wall Street Journal opinion piece last week. “Never mind that the FDIC in the past gave kudos to Cardinal for its lending practices. Justice is now accusing Cardinal of failing to open branches and achieve racial loan quotas in counties that its federal regulator never before contended should be the focus of its lending.”

    (I have placed calls to both Cardinal Bank and the DOJ to see if I can find additional details on this case.)

    The Cardinal action is part of a larger pattern in which Obama’s DOJ has moved from enforcing the law to coercing banks into lending more money to minorities. Please note: No one is accusing Cardinal of discriminating against African-Americans who apply for loans. No one is accusing Cardinal of “red lining,”  or refusing to lend to particular minority neighborhoods in communities it otherwise serves. If Kissel’s representation of the letter is accurate, DOJ wants Cardinal, in effect, to change its business model and to expand into municipal jurisdictions where it does not now have a presence.

    In a wrap-up of similar cases, American Banker wrote that the Obama administration has targeted banks for alleged redlining and other fair-lending violations to an extent not seen since the Clinton administration. “Critics charge the effort has gone too far, claiming Justice has misused legal interpretations to bring complaints to court, alleged redlining in areas outside a bank’s market area and encouraged loans to unqualified borrowers as part of expensive settlements.”

    American Banker quotes Paul Hancock, who once ran the fair lending unit for Justice under former Attorney General Janet Reno and now defends banks against prosecution as a partner at K&L Gates:

    These types of enforcement efforts are results‐oriented and tantamount to demands for racial loan quotas. Such extremism has always been harmful to civil rights enforcement because of the backlash that it causes. It is more akin to social engineering than fair civil rights enforcement, and that simply doesn’t work.

    This Obama administration initiative bolsters two important narratives I have been building on this blog.

    First, it is one more intrusion in the marketplace that chills business confidence and discourages investment and job creation. Robert Rowe, a vice president and senior counsel at the American Bankers Association, told American Banker that an overly aggressive-regime could make banks — nervous about committing fair-lending violations — even more reticent to lend to anyone, although he added that it is “too soon to say” if the current enforcement cycle has reached that point. It’s a lot easier and less risky for banks to invest their capital in Treasury bills.

    Second, this is a replay of the Community Reinvestment Act that pushed banks into the sub-prime mortgage market during the run-up to the real estate crash and financial collapse. Government policy encouraged banks to abandon lending standards then, and the Justice Department is, in effect, pushing banks to do so again. The bottom line: Don’t lend on the basis of an individual’s credit-worthiness — shovel loans into minority communities already plagued by high unemployment, foreclosures and over-indebtedness.

    So what if African-Americans are suffering foreclosures at a rate far higher than other racial groups? Blame it on “predatory lending” practices instead of the lowering of lending standards and the giving of mortgages to individuals who were in no way equipped financially to handle them. So what if African-Americans have seen their net worth nearly wiped out in the housing bust (see the Economic Policy Institute report on how bad the sitution is). Blame discrimination and racism instead of self-defeating public policy.

    In the war against ever more rarefied forms of “discrimination,” the race hustlers have done, and continue to do, more to sabotage the economic well being of African-Americans than all the grand wizards, dragons and poobahs of the Ku Klux Klan could have devised in their most fevered imaginations. While Martin Luther King broke the shackles of Jim Crow and racial segregation, Barack Obama is binding African-Americans with the manacles of MassOverconsumption and excess indebtedness.

  • The Wonk Salon, September 6, 2011

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    James A. Bacon

    Helping Foster Kids Find Jobs
    Center for an Urban Future
    Half the children aging out of NYC’s foster care system don’t have jobs. The city can do more to ensure that minor wards of the state don’t become adult wards of the state.

  • The Over-Regulation Hoax

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    Peter Galuszka

    By Peter Galuszka

    “They’re coming out with multiple, onerous regulations,” says Mike Bucci, a small business owner in Richmond, according to a visual runby Chief Baconaut James A. Bacon Jr., as part of a blog posting titled”Paperwork, Solar Panels, and Job Creation.”

    Mr. Bucci complains that his small business, which comes up with business solutions, was stymied because he had to go through a lot of paperwork to export some products. He did not, however, go into details and didn’t say, for instance, if it was the U.S. government that was requiring the paperwork or perhaps the customs people of the nation where he was shipping. It apparently didn’t matter, because accouding to those mantras that our James A. Bacon Jr. so likes, it shows over-regulation and the big, bad government.

    So, it was with considerable curiousity that I noticed a report by McClatchy publications, prepared by reporters from the Charlotte Observer, The Kansas City Star, The Miami Herald and the Sacramento Bee, among others, stating that their survey of small business owners had no particular problems with government regulations.

    On the contrary.”Govenment regulations are not ‘choking’ our business, the hospitality business,” says Bernard Wolfson, president of Hospitality Operations in Miami.

    In Charlotte, Rick Douglas, owner of Minit Maids, likewise saw no deluge of regulations although he did complain about workers’ compensation claims. In Gulfport, Miss., small business woner Rip Daniels says his problem is not regulations but the difficulty of getting business insurance. He credits Washington’s stiumulus with keeping small business afloat.

    So, we have a very different perspective than that promoted by The U.S. Chamber of Commerce which tends to represent big corporations capable of helping pay for the Chamber’s ornate and museum-like headquarters just across a square from the White House in Washington.

    Besides getting insurance from private carrier, a huge problem for small business is getting capital to expand. Crushed by their excesses in subprime mortgage lending, many big banks are protecting their loan-making ability like jealous mother hens. They have been taking a beating for years and are making lenders pay. Bank of America, which had to absorb Merrill Lynch and Countrywide, a major subprime lender, is about the lay off 30,000 people.

    They are not really all that interested in lending money to small operations. Curiously, under Obama, the U.S. Small Business Administration has doubled its lending through a program that helps small businesses find loans with reasonable interest rates that are backed by the U.S. government.

    Why are they doing this? Presumably because private lenders are not doing it.

  • Federal Flood Insurance: Primed for Disaster

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    James A. Bacon

    With Virginia still recovering from the after-effects of Hurricane Irene, the Government Accountability Office posted a new study on its website, “Action Needed to Improve Administration of the National Flood Insurance Program,” along with congressional testimony by Orice Williams Brown, managing director of financial markets and community investment.

    The story was a dismal one. The National Flood Insurance Program has accumulated $17.8 billion in debt and its continued need to borrow to cover flooding claims has “raised concerns about the program’s long-term fiscal solvency.”

    The program suffers from a number of problems, not the least of which is the Federal Emergency Management Administration’s lack of goals, objectives or performance measures for the program, and the abandonment after seven years and $40 million of the program’s inefficient, 30-year-old claims management system. But the biggest problem is the insanity of NFIP’s ongoing subsidy of flood insurance. Average 2o1o premiums of $1,121 were discounted from the true cost of $2,500 to $2,800.

    Not all problems are of NFIP’s own making. The program works within rules that make it impossible to run a fiscally solvent operation, no matter how efficient the administration. Says the GAO report:

    NFIP is also required to accept virtually all applications for insurance and cannot deny coverage or increase premium rates based on the frequency of losses. Private insurers, on the other hand, may reject applicants or increase rates if they believe the risk of loss is too high. As a result, NFIP is less able to offset the effects of adverse selection—the phenomenon that those who are most likely to purchase insurance are also the most likely to experience losses. Adverse selection may also lead to a concentration of policyholders in the riskiest areas. This problem is further compounded by the fact that those at greatest risk are required to purchase insurance from NFIP if they have a mortgage from a federally regulated or insured lender. … Finally, by law, FEMA is prevented from raising rates on each flood zone by more than 10 percent each year.

    Local governments are of little help.

    FEMA relies on state and local governments and communities to implement parts of the program, which can limit the effectiveness of some of FEMA’s efforts. For example, communities enforce building codes and other floodplain management regulations in an effort to reduce the flood risk that insured structures face, but some communities may not have sufficient resources to enforce existing regulations. FEMA also relies on communities to administer grant funds that are intended to mitigate high-risk properties. However certain types of mitigation, such as relocation or demolition, might be met with resistance by communities that rely on those properties for tax revenues, such as coastal communities with significant development in areas prone to flooding. Finally, communities and individuals have sometimes mounted challenges to and resisted flood map revisions that place homes in higher-risk flood zones and would thus raise premium rates.

    The GAO recommends a variety of congressional reforms, including the obvious, if politically unpopular one of raising insurance rates. The problem, authors suggest, is that many property owners will simply refuse to buy insurance of any kind, exposing FEMA to greater damage liability in the event of a disaster.

    Here’s a solution that GAO didn’t recommend: Raise the insurance rates to a level consistent with sound actuarial principles, tell people they are not eligible for FEMA aid for flood damage in a disaster, and then let nature take its course. I can guarantee one thing: There will be a lot less building of multimillion-dollar houses on Atlantic coast beach front or other flood-prone areas. I cannot think of a single reason why that would be a a bad thing.

  • The Wonk Salon, September 3, 2011

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    James A. Bacon

    Poverty Not Incompatible with Saving
    Urban institute
    The conventional wisdom says that income-poor people can’t save. This study concludes that poverty is not incompatible with saving.

  • The Ghost of June Allen

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    Peter Galuszka

    By Peter Galuszka

    The ghost of a classical piano player with a knack for penetrating huge engineering reports is watching over the latest problems at Dominion Virginia Power’s North Anna nuclear power station.

    Throughout the 1970s, June Allen, who headed the North Anna Environmental Coalition and died of breast cancer in 2010, fought Virginia Electric & Power co., Dominion’s predecessor, over what her group claimed was a massive coverup of the dangers presented by building North Anna near a geological fault line.

    Her fears seemed to be held true on Aug. 23 when a rare, 5.8 level earthquake with an epicenter a few miles from North Anna shook the area for hundreds of miles. North Anna shut down instantly, but the quake was strong enough to move 25 huge casks used to hold spent nuclear fuel at the site. Each cask weighs 115 tons.

    Now, according to an Associated Press investigation, the earthquake dangers faced at North Anna are 38 percent more likely to cause damage to the cores of the two nuclear reactors at the plant than believed 20 years ago. The U.S. Nuclear Regulatory Commission believes that a quarter of the commercial reactors in the U.S. may need new modifications to help them withstand earthquakes.

    Allen, who graduated from the University of Vermont in 1950 with degrees in music and English and later moved to Virginia, knew of the dangers in the early 1970s. She was instrumental in cutting through Vepco’s corporate jargon and dense and voluminous reports from the utility and federal regulators to raise serious questions about the reactors.

    In 1967, when North Anna was on the drawing boards, an environmental consulting firm found there may be fault lines near the planned nuclear site. In 1970, a construction excavation wall collapsed and inspecting geologists reported finding a major fault line. Vepco did not report the fault to federal regulators for three years. Vepco got its license to proceed with the plant.

    Allen and other grass roots activists smelled something rotten. In 1973, they formed their coalition and sued, claiming Vepco was lying about the fault lines. In 1975, the NRC accused Vepco of deleting files listing the fault lines in its reactor applications. The following year, Vepco was fined $32,000 for making materially false statements in its North Anna application.

    At the time, Vepco was a very different company. It was a good-ole-boy outfit with close ties to Richmond’s business elite. To fight the coalition lawsuit and appeal the NRC’s fines, Vepco hired Hunton & Williams, Richmond’s most prominent law firm. In the same decade of th 1970s, Vepco’s management was so lax that its other nuclear power station, Surry, built a record as being the most-fined by the NRC.
    Yet, the power brokers didn’t seem to know what to do with June Allen. They seemed flabbergasted with the soft-spoken woman showed up at hearings and asked penetrating questions. Vepco’s chairman is said to have stopped a proceeding, pointed his finger, and proclaimed with indignation, “There is Mrs. Allen.”

    Sadly, June Allen has been proved clairvoyant. The unusual 5.8 level quake approaches the level that North Anna was built to withstand. Dominion is considering adding a third unit at North Anna. As they proceed with their plans, and worry about upgrades at the two older units, Mrs. Allen’s ghost will be somewhere in the hearing rooms.

  • Killing Virginia’s Golden Goose

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    Peter Galuszka

    By Peter Galuszka

    Will Virginia end up killing the goose that has laid its golden egg?

    With apologies to Aesop, it is the most pressing economic question the Old Dominion faces. The golden egg, of course, is the federal government whose jobs continually prop up the state work rolls and help the flow of state and local taxes.

    Chock-a-block with military bases from Virginia Beach to the Pentagon,   the CIA, civil servants galore and the headquarters of the Federal Aviation Administration, Virginia ranks No. 3 after the District of Columbia and Alaska in the percentage of workers who get their paychecks from government. That’s just direct employment. The state also is the No. 2 defense contractor after California. Newport News Shipbuilding, the only shipyard capable of building nuclear-powered surface vessels, is a big Navy contractor, employing 19,000 workers,  the most of any company in the state. Northern Virginia is dotted with information technology firms feeding off the federal government that helped give us such useful things as the Internet.

    Taken together, federal jobs have helped the state weather the worst recession since the 1930s. Federal work is the biggest factor in helping the state maintain an unemployment rate of 6.1 percent, far better than its southern sisters and among the top ten lowest in the U.S.

    There’s one big problem with this miraculous goose and its golden egg, however. Some folks want to kill it in the name of fiscal austerity, which is Tea Party-driven fad of the moment. Pushed by the Tea Party, the state’s top Republicans such as U.S. Rep. Eric Cantor are on a cutting spree. They love the attention they got playing a perilous game of chicken over adopting federal budget ceilings that resulted partly in the U.S. losing  its pristine credit rating from a major ratings agency.

    Gov. Robert F. McDonnell also wants to get on board with federal job cuts. He’s already sliced the state budget by increasing school class sizes and stopping payments to hospitals, nursing homes and assistants who help sick people on Medicaid. By also deferring payments to the state pension fund, McDonnell has claimed a budget surplus in horrific times, setting himself up for a possible run as a Republican vice presidential candidate in 2012. The new chairman of the Republican Governor’s Association is now lecturing President Barack Obama to follow his tight-wad example.

    “The Governor does believe we must cut spending in Washington, D.C. and we need to do it in a significant and serious manner,” McDonnell spokesman J. Martin Tucker told me, adding that McDonnell knows that such cuts could “have a significant impact” on the state. To ease the pain, McDonnell is proposing putting $30 million from his upcoming budget “surplus” into a special fund that could be used to replace some of the lost state tax revenue if federal jobs take hits. Another step is to expand the role of “Jobs Guy” Lt. Gov. Bill Bolling and his employment commission to create even more jobs to make up for federal cuts.

    There are a few problems with the approach. For one, $30 million is chicken feed to replace a golden egg. It’s pin money in an $80 billion budget and a $545 million surplus — a point even McDonnell acknowledges. Secondly, there are serious questions about how successful McDonnell has actually been in creating jobs.

    The McDonnell Administration claims it has created 45,600 net new jobs since it took office in 2010. The state Democratic Party has claimed that the actual number of jobs the state — 3.6 million or so — is the same as it was when the recession supposedly ended in June 2009. Brian Coy, Democratic Party spokesman, has said that the number of Virginians with a job was 3.8 million. In June of this year, it was 3.9 million, but when population growth in the state is factored, the percentage of its working population employed, 64.3 percent, is about the same when McDonnell took office. Also problematic is the fact that the state lost 14,600 jobs in June, according to the U.S. Dept. of Labor, and 47,800 jobs in July, according to the Virginia Employment Commission.

    Such data trip wires make McDonnell’s job growth claims more modest than he wants you to believe. Even if the administration’s claims are true that it saw an overall increase of 53,784 jobs since it took office, that’s far shy of the nearly 1 million jobs directly related to government work in the state. It doesn’t include the labor forces of private contractors under government contract that could be cut, especially in defense.

    Even “Jobs Guy” Bill Bolling’s magic can’t come anywhere close to replacing numbers like those. The bitter truth is that if the budget hawks get their way, Virginia is in for a much rougher time, and will be a much tougher place to live in, than any politician is willing to admit.

    First published in Style Weekly

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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Protecting Thomas Jefferson’s Legacy at the University of Virginia

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