Bacon's Rebellion

From Plow Horses to Race Horses – the Equine Contribution to Virginia’s Economy
Weldon Cooper Center for Public Service
Horse racing and horse shows have spurred the revitalization of Virginia’s equine industry.

Is Policing Racially Biased? No Easy Answer
Rand Corporation
Police agencies are collecting more data than ever on the stops made by their officers. But there is still no definitive way to determine if they engage in racial profiling.

The Most Effective Schools Excel… at Recruiting Good Teachers
National Bureau of Economic Education
Want to improve educational performance at your school? Put into place personnel policies that enable you to recruit the most effective teachers.

Constraints to Increased Biomass Generation
Rand Corporation
Using biomass to generate electricity and reduce greenhouse gas emissions makes the most sense when used in conjunction with coal-fired power plants. But significant constraints limit biomass’ appeal.

Seven Questions to Ask the People Who Run Your Schools
Von Mises Institute
The mass standardization of American public education and the mass of regulation that supports it has been a miserable failure.

Jim Bacon logging in from Wilkesboro, N.C…. People in the hill country of North Carolina may be forgiven if they don’t believe that the recession is over. Omtron USA, a poultry processing plant, is shutting down its Townsends’ Crestwoods Farms division, eliminating 680 jobs in Siler City and 476 more in Mocksville, reports the Winston-Salem Journal today. That announcement comes on the heels of news that unemployment in the Winston-Salem metropolitan region remained stuck right around 10.0% in May.

The poultry industry, which has a big presence in the Shenandoah Valley and the Eastern Shore here in Virginia, is hurting right now. Pilgrim’s Pride has announced its intention to close a poultry processing plant in Dallas in September, killing another 1,000 jobs. Google “poultry layoffs” and you will find more stories of a similar nature.

To some people, the loss of jobs for blue-collar jobs like these represents a failure of the free-market economy that can be fixed only by government intervention such as tariffs, government stimulus spending or the imposition of higher tax rates on greedy “millionaires and billionaires” who “aren’t paying their fair share.” Such commentary is blind to the real causes of job destruction, which in many cases can be traced to some other government intervention designed to solve some other problem.

In the case of the poultry industry, the primary culprit is the rising price of corn, the food source for chicken, which has shot from $3.41 per barrel in June last year to $6.58 in June this year. That added $1 million a month to the Mocksville plant’s operating expenses. And why has the price of corn shot so high? Rising global demand spurred, in part, by the voracious demand for corn as a feedstock for ethanol. In other words, North Carolina poultry workers are among the victims of the rent-seeking ethanol industry which uses its clout in Washington to create a market for a fuel that cannot compete with gasoline without government support and consumes so much energy in production that environmentalists deem a detriment in the campaign against greenhouse gas emissions.

In an interesting twist, the two North Carolina plants would have closed earlier this year were it not for the intervention of Ukrainian billionaire Oleg Bakhmatyuk, who purchased the business out of bankruptcy and spent $10 million on plant upgrades. Bakhmatyuk had hoped to import corn from the Ukraine at less than half the price paid in the U.S. but regulatory changes there eliminated the price differential. Bakhmatyuk’s entrepreneurial gamble failed, but you can be sure that if it had paid off, someone would be attacking him for his profits and his greed.

If we want to jump-start the American economy and reduce the “wealth gap,” much of it caused by rampant unemployment, a good place to start would be to stop bestowing subsidies, tax credits and market preferences upon politically connected corporate interests like the ethanol lobby and stop talk of foisting higher taxes upon risk-taking millionaires and billionaires.

Mapping Released Prisoners
Urban Institute and the Providence Plan
The police map crime. Why shouldn’t probation officers map the whereabouts of released convicts?

Cut Federal Red Tape to Improve School Performance
American Enterprise Institute
Reforming federal compliance rules could lead to better educational outcomes than throwing more federal money at schools.

State Education Secretaries as Agents of Change
Center for American Progress
The heads of state education agencies have more responsibility than ever before but they are hindered by state and federal regulations. It’s time to cut them loose.

Do Gun Law Awareness Campaigns Work?
Rand Corporation
In a controlled experiment in Los Angeles gun markets, sending letters to gun purchasers resulted in an increased rate of reporting stolen guns.

Toward Data-Driven Pediatric Care in Washington, D.C.
National Academy for State Health Policy
The District of Columbia medical establishment has an opportunity to improve the quality of pediatric care by adopting electronic health records and the measurement of quality data.

Impact of School Improvement Grants Uneven
Government Accountability Office
The federal School Improvements Grants (SIG) program spent $3.5 billion in the 2010-2011 school year.  Short time-frames and differences in local administrative capacity meant that states varied in their ability to implement the program.

States’ Budget Cuts Harm Education, Health Care, Economy
Center for Budget and Policy Priorities
Cumulative state budget cuts over four years have devastated funding for schools and health care, and have harmed state economies.

By Peter Galuszka

As minutes tick by, the behavior of Republicans in Congress, especially Virginia’s ultra-rogue junior elephant, Eric Cantor, becomes increasingly fascinating.

They have become, suggests  David P. Barash, psychology professor at the University of Washington, elephants in “must,” meaning that the usual rules of rationality and brinksmanship have become moot. Mind you, the elephant has long been extremely accurate symbol of the GOP (I don’t go for the “clan” nonsense Risse dishes out any more than I respect his “vocabulary,” hah!)

It does seem that elephants fit the bill. They are big, ungainly and overfed. They like tax breaks, especially for the fatter elephants. And, from time to time, they get a little ditzy and when they do, brother, watch out!

This is what has happened. After years of blowing out the federal budget under their Chief Elephant George W. Bush, the herd went nutzy in January 2009 when Barack Obama was inaugurated. We were entering a terrible recession and suddenly, overnight, the elephants got the religion of fiscal discipline. It all became Obama’s fault, the elephants agreed.

So now comes the debt ceiling. The Elephants want to link that to all kinds of spending cuts. They do not care that by doing so they may well crash our anemic economy back into recession. They forget that the late King of Elephants, Ronald Reagan, raised the debt ceiling 18 times.

Oh no. They want to stampede. Rationality doesn’t apply. And here’s what psychologist Barash reports will happen. The elephants have reached a state of “must.” It isn’t a pretty picture:

“It’s a tactic that works surprisingly well, because male elephants can be in fact temporarily “crazy.” One of the most terrifying sights in the animal world is an elephant in a state of must: Huge bulls, oozing a weird, foul-smelling greenish glop from glands near their eyes, behave with violent abandon, taking risks, and defying the basic rules of pachyderm propriety(and also giving rise to the term “rogue elephant”). Facing an elephant in must, other elephants  –not to mention people — are well advised to get out of the way. ”

So you have it from the animal world.

by James A. Bacon

The Commonwealth Institute has peered into Virginia’s fiscal future and doesn’t like what it sees. The state faces another $500 million budget gap next year, and a $300 million gap the year after that, meaning that the prospects of restoring cuts to education, health care and public safety are bleak.

Although tax revenues are recovering, they remain below pre-recession levels, write Sara Okos, Laura Goren, and Michael Cassidy in “In the Red: Early Warnings About Virginia’s Fiscal Outlook.” (Click chart for more legible image.) Meanwhile, prolonged joblessness and poverty require more spending on social services such as food stamps, Medicaid and Temporary Assistance for Needy Families (TANF).

Not only is the economic recovery anemic, the state has significant obligations like replenishing the Rainy Day Fund, repaying the Virginia Retirement System funds it borrowed, and repaying the federal government for unemployment-insurance money it borrowed. Also, funds from the federal stimulus package (the American Recovery and Reinvestment Act) will have expired. Write the authors:

Inadequate revenue growth, coupled with the loss of Recovery Act funds, and increasing other demands on state resources will likely place Virginia on red alert unless action is taken. This could hinder much-needed investments and innovation in public education, health care, public safety, and economic and workforce development.

I share the Commonwealth Institute that Virginia’s conviction that the fiscal situation looks dire, and I believe the think tank deserves credit for bringing the issue to the public’s attention in a more authoritative way than I have been able to do. However, I do take issue with conclusions it draws from its fiscal analysis.

The Institute contends that state and local spending cuts and accompanying layoff of 6,000 employees have “impeded” the economic recovery. Not so. Given the reality that state and local governments must balance their budgets, the only alternative to layoffs would have been increasing taxes. Higher taxes would have killed jobs. Moreover, higher taxes kill private-sector jobs, not public jobs. As some commentators on this blog need reminding, private-sector jobs are more valuable fiscally than public-sector jobs because private-sector employers pay taxes — property taxes, BPOL taxes and corporate income taxes — that governments do not. Offsetting the loss of private-sector jobs with public jobs is a sure-fire way to erode the tax base.

Likewise, the Institute argues that a “cuts-only approach” to balancing the budget will hurt economic recovery. Maybe, but it would hurt less than raising taxes a like amount. The fact is, Virginia is in a fiscal jam and there is no easy way out. Instead of adopting a strategy of spending more money to meet core responsibilities, we should prioritize spending on programs that offer the greatest economic, fiscal and social return on investment.

How to Hold Higher Ed More Accountable
National Governors Association
States need to insist  upon greater productivity at public colleges. A starting point is to track basic data like how many students are graduating, and how well are colleges meeting industry’s needs for an educated workforce?

How Much Is that College Degree Really Worth?
National Bureau of Economic Research
Parents would like to know, and policy makers should know, how much a college education contributes to a students’ future earnings. This study finds that the earnings premium of prestigious state universities is close to zero.

How Community Colleges Can Help Build a STEM-Savvy Workforce
National Governors Association
At least eight million of the jobs available to college graduates in 2018 will be in the science, technology, engineering and mathematics (STEM) professions. States should look to community to colleges to help build that workforce.

Reengaging College Dropouts
National Governors Association
Nearly 400,000 kids drop out of school every year. States need to set goals to reduce the dropout rate, track the data and provide more options for recovered dropouts.

A Demographic Portrait of Charlottesville
Weldon Cooper Center for Public Service
The Demographics and Workforce Group at the Weldon Cooper Center has published a demographic profile of Charlottesville. It’s worth a look to see the analysis of rising housing prices and gentrification.

The Latest Effort by Wine Wholesalers to Thwart Competition
Competitive Enterprise Institute
Recent court rulings have challenged anti-competitive state laws regulating alcohol wholesalers. Now wholesalers are trying are lobbying Congress to allow states to discriminate against out-of-state wineries.

Tax Holidays Are Poor Public Policy
Tax Foundation
Tax holidays like Virginia’s yearly sales tax exemptions for the purchase of back-to-school and hurricane supplies are an ineffective gimmick that distracts lawmakers from fundamental tax reform.

Should States Exempt Groceries from the Sales Tax?
American Enterprise Institute
Virginia is one of 43 states that provides a full or partial exemption for groceries from the sales tax. There are more efficient ways to help the poor.

Local Law Enforcement Needs to Do a Better Job of Reporting Missing Children
Government Accountability Office
Missing children who are not found quickly are at increased risk of victimization. Local law enforcement efforts to report missing children to the national database are patchy.

By Peter Galuszka

Moody’s Investor’s Service has rained on Virginia Gov. Robert F.
McDonnell’s parade.

On the day the Republican governor was proudly announcing a $311 million budget surplus with the prospect of being even $40 million more in the black, the ratings service announced that Virginia could be one of five states to see its pristine AAA credit rating tarnished if Congress and President Obama don’t reach a budget deal and raise the federal debt limit by Aug. 3. The news came just as McDonnell was beaming about the surplus, some of which comes such schemes from deferring payments to the state pension system.

“I’m very unhappy. In fact, we’re furious” about the ratings problem, he said at a news conference. I guess I can understand why. Virginia has had the best possible credit since 1938. McDonnell has come on strong, rightly or wrongly, as a paragon of fiscal responsibility. This is his party credo and raison d’être. If he goes down in history as the governor on whose watch the state’s credit rating was downgraded, despite plenty of Democrats having been in the governor’s mansion over the years, well, it won’t look good.

Another issue is McDonnell’s stubborn refusal to acknowledge that, whether he likes it or not, Virginia is a major locus of federal jobs. The Old Dominion is chock-a-block with defense and intelligence installations, along with other units such as the Federal Aviation Administration, and so on. This is one of the reasons Moody’s served notice on such high-government-worker states as Maryland, South Carolina and Tennessee. If the feds lose their AAA credit rating, so, too, will the places where they employ a lot of people.

In his quest for jobs, McDonnell always puts special emphasis that the ones he’s helped create are “private,” as if that’s somehow more politically correct than having more public-sector jobs. Government work doesn’t fit with current GOP dogma. Apparently, federal workers are less desirable and certainly greedier than their private-sector counterparts.

Of course, that’s nonsense, and McDonnell ought of to know it. He grew up in Northern Virginia, a haven for the civil service, and was educated in defense-saturated Hampton Roads. Federal money has saved Virginia from having a much higher unemployment rate than it does.

If McDonnell is worried about what Moody’s might do, he does have a
remedy at hand, though. It’s simple. Call up his fellow Republican,
House Majority Leader Eric Cantor, and tell him to stop acting like a
spoiled kid and work for a bipartisan way out of the federal budget
mess. It’s a win-win thing they both should understand.

(Previously posted and printed in The Washington Post)

by James A. Bacon

Gov. Bob McDonnell is chapped that the inability of the buffoons in the nation’s capital to reach a budget deal and raise the debt ceiling could impact negatively on Virginia’s AAA credit rating. He made the comments last week in response to news that Moody’s Investor Service had put the state rating on a review downgrade list because of its reliance on federal funding. (See the Times-Dispatch article.)

I am sympathetic to a degree. Democrats and Republicans in Washington, D.C., are playing a game of chicken — the car is heading toward a precipice and the first guy to take his hand off the wheel loses. Unfortunately, the American economy is in the back seat. There could be a lot of collateral damage, including Virginia’s AAA rating.

On the other hand, Virginia’s dependence upon the federal government is no secret. I’ve been harping upon it for a long time on this blog. I’ve also argued, on the grounds that federal default on its debt is highly likely within the next 15 to 20 years as I explained in my book Boomergeddon, we need to get our fiscal house in order while we still can. The first order of business is increasing the strength of the commonwealth’s balance sheet — paying down long-term debt, not adding to it. The second order of business is de-coupling the Virginia economy from its excessive reliance upon federal spending for economic growth.

What has McDonnell done? Well, he championed a transportation-funding plan built around the borrowing of $3 billion, thus pushing state indebtedness to the limit of what it can handle without jeopardizing its AAA rating. Also, his economic development strategy has emphasized attracting more federal investment in the state, thus making our economy even more dependent upon the fiscal health of the federal government.

It’s fine to lecture Congress — we all do it! But that’s no substitute for crafting sound fiscal and economic development policy. If the debt ceiling talks do crash, pointing a finger of blame at Congress won’t cut it. Moody’s won’t be impressed. One thing Moody’s will want to know is what contingency plan the governor is developing in case Uncle Sam does run off the cliff. Do we have a plan? If we do, the governor hasn’t made it public. I have submitted an email request to McDonnell spokesman Jeff Caldwell for details.

Here is Caldwell’s response: “Because we do not know a) if a deal will come together to mitigate the impact, b) what that plan would entail or c) what cuts will be made and how they will be made if no deal is reached, we really cannot ascertain the size or scope of any impact to Virginia. We have been examining areas where we think there could be impacts, but cannot make any firm contingency plans because of the uncertainty of what impacts we may see from the federal government.”

Fair enough. The uncertainties are massive.

A couple of days ago I caught some flak for daring to suggest that some Virginians drawing public benefits might be committing fraud — failing to report under-the-table income in order to qualify for food snaps, Medicaid, rental assistance or whatever. How beastly of me to cast such aspersions! What proof did I have? (See “Poverty Does Not Mean Destitution.”)

Heh! The timing couldn’t be better. James O’Keefe, the conservative investigator of ACORN-busting fame, has released a video of one of his accomplices posing as a Russian drug dealer filing for Medicaid benefits for his sister and father. When he asked if he would get in trouble for reporting income from his illegal drug and prostitution businesses, he was instructed, “Just leave that off your application.”

The fact that an undercover investigator with a preposterous story is given license to cheat doesn’t prove that other people cheat. But the incident certainly does raise issues about how effectively the Medicaid eligibility rules are enforced. Do Medicaid case workers see themselves as advocates for applicants, or as stewards of the taxpayer’s dollar? In this one case, at least, the answer is very clear.