Bacon's Rebellion

Upon the 4th of July, one’s thoughts naturally turn to the founders of this great country who risked everything to protect their liberties. As 21st-century Americans, we look back upon the people and events of 1776 from a vantage point that views the struggle for independence as entirely natural. Of course Americans wanted their freedom! What else would we expect?

In chronicling the American Revolution, historians tend to focus on the causes of the rift between the colonies and England. As a consequence, they dwell upon the factors that separated us. Overlooked in such a perspective are the ties that bound us to the mother country. I have a new-found sense of those links from reading “The Fabulous History of the Dismal Swamp Company.“

Author Charles Royster follows the fortunes of the men who in 1767 founded the Dismal Swamp Company. Investors included George Washington, William Byrd and several lesser-known though no less fascinating personalities. The purpose of the venture was to drain the swamp and create land that could be sold to settlers. The enterprise floundered from the lack of strong on-the-spot management and never succeeded in its primary aim, but it did manage to cut and sell a lot of timber. Tangible remains of the company can be seen in the Dismal Swamp Canal, which has since been incorporated into the Intracoastal Waterway.

The commerce between the colonies and mother country was lively. Ambitious young Englishmen came to the colonies to make their fortunes, then returned to live a more cosmopolitan life in London. English financiers and merchants extended large amounts of credit to Virginia planters. The planters, while aspiring to aristocratic lifestyles and often living beyond their means, were far a far more entrepreneurial bunch than I had imagined. Tobacco cultivation was merely a sideline for many. Investors in the Dismal Swamp company also were merchants and land speculators. (George Washington was one of the great land speculators of American history.) They would pursue profit wherever it took them, be it growing wheat and hemp, cutting timber, mining iron or shipping produce to the West Indies sugar plantations.

Business was organized around a nexus of trade and credit built upon relations of trust. Economically and financially, Virginia spun in the orbit of London. The planters, always financially overextended, were beholden to the bankers, lenders and insurers in the great metropolis. One of those described in the book was Anthony Bacon (no relation), a ship’s captain turned colonial investor and arms contractor to the English government. Just as Bacon had his agents in Virginia to look after his interests, Virginians had their agents in London. In the world of business, Virginia and England were joined at the hip.

In 1776 the Virginia signers of the Declaration of Independence risked everything. As modern-day pundits commonly observe in their obligatory July 4th columns, the revolutionaries put their property, their lives, their sacred honor, at risk. Less commonly recognized are the mundane risks they took. In war, their goods would be shut out of English markets. Their ships would be subject to seizure. Their lines of credit would be cut off. Vital business relationships would be severed. Their livelihoods would be put in jeopardy. Yet they rebelled anyway.

As we celebrate our independence with hotdogs and fireworks, we would do well to remember the men and women who, however short they fall from our 21st-century ideals, risked much so we could enjoy our freedoms.

The state Office of Telework Promotion and Broadband Assistance has published a map showing broadband penetration in Virginia. There is a broadband “gap,” as one would expect. But I would argue that it’s nothing to worry about — a gap exists only because the bar for what constitutes cutting-edge broadband service is always getting raised.

Personal cell phone coverage blankets nearly the entire state. Even the most lightly populated counties in the the Old Dominion have pockets of cell phone coverage. Broadband wireline is a little patchier but nearly every community of any size is connected. The gap today is between those who have access to “advanced” wireless mobile broadband and those who don’t. That service is still limited, for the most part, to the state’s largest metro areas. (Click on map for more legible image.)

But never fear. If the past is prologue, the telecom companies will first penetrate the densest most populated markets because that’s where the biggest revenue gains and profit margins are. Then they will move into smaller communities. To ask them to do otherwise would be foolhardy. It’s the cash generated by the early investments that make possible to make the later investments. Living in the countryside has its advantages and disadvantages. You get to see the stars at night. But, then, you have to wait for access to the latest broadband technology.

Strap on your seat belts, folks, it’s going to be a wild ride. The condition of Virginia’s secondary road system is deteriorating. State funding available for road maintenance is shrinking. And not a single county has accepted the option to take over responsibility for their own secondary roads because they are worried that the state won’t provide them enough money to do the job.

Those are among the conclusions of a new report commissioned by Secretary of Transportation Sean T. Connaughton and authored by Jonathan L. Gifford with the George Mason University School of Public Policy, “Policy Options for Secondary Road Construction and Management in the Commonwealth of Virginia.”

A defining characteristic of Virginia’s road system is that it is overwhelmingly controlled by the state. The state owns 94.62% of all “rural” (non-urban) roads, the highest percentage in the country. Secondary roads comprise nearly four-fifths (78%) of all lane miles maintained by the Virginia Department of Transportation. Only West Virginia, Delaware and North Carolina are remotely close. By contrast, the state of New Jersey owns only 6.23% of rural roads.

There are two very big problems with the current arrangement. First, there is a disconnect between land use planning at the county/city level and transportation planning by VDOT. As Gifford writes, “There is a large and growing recognition that successful development is inextricably tied to transportation facilities and services at every spatial scale, from the parcel level, to the block level, to the neighborhood level, to the corridor level, to the regional level.”

The transportation and urban design community is increasingly focused on street design and traffic operations that accommodate a wide range of users, including not only motorists and trucks, but also pedestrians of all ages and levels of able-bodiedness, cyclists, and transit. “Complete Streets,” as they are sometimes called, involve a complex set of design elements, including pro visions for parking, bicycle lanes, transit stops and stations, sidewalks, street furniture and other appurtenances.

Legislators tried to address the disconnect during the Kaine administration through new regulations for accepting of new secondary streets into the state system, managing access (curb cuts, driveways) to state roads, and requiring VDOT review of traffic impact for major rezoning and redevelopment plans. But some local governments and developers regard the added layer of review as needlessly intrusive and time-consuming.

The second very big problem is VDOT’s inability to properly maintain the roads. With each passing year, revenue from the gasoline tax becomes less and less adequate to pay for maintenance and new construction. Although Virginia supposedly prioritizes maintenance, funding for secondary road maintenance has dropped over the past six years from $483 million in FY 2007 to $345 million in FY 2011.

The consequence has been deteriorating road conditions. Between 2007 and 2009, Gifford says, “the prevalence of deficient pavement on the secondary system increased from 25% to 31% — that’s just two years. In some districts, the pavement deficiency rate approaches 50%. VDOT estimates total needs for secondary pavements of $1.3 billion.

Now, here’s the part that should scare everyone. As the condition of roadway assets deteriorates, the cost of returning them to a state of good repair increases exponentially. “The basic science of pavement deterioration recognizes that the cost of restoring a pavement to a state of good repair rises rapidly as the pavement deteriorates,” Gifford writes. “Poor pavements also impose a social cost on users in the form of discomfort, increased vehicle operating and repair costs, and compromised safety.”

The longer we delay repairs, the more expensive they will get. One day we will rue our short-sightedness.

It makes economic sense to turn over responsibility of the secondary road system to county governments, which can then prioritize road improvements to mesh with their land use plans and supplement with local funds. But that’s a losing proposition politically. In 2007 the General Assembly passed a law that would allow several higher-density counties to establish Urban Transportation Service Districts that would allow them to assume maintenance and operation of the roadway network within the district. So far, there have been no takers. No one had faith that VDOT would be able to pay them sufficiently to offset their costs.

Clearly, the status quo is a mess. Gifford advances a range of options for rectifying these problems, which I hope to discuss in a future post.

A Decade of Change in Virginia’s Population
The Virginia Newsletter
Northern Virginia dominated state population growth in the 2000s while many non-metro localities lost population. Racial minorities, Asians and Hispanics especially, gained population share.

California Enacts “Amazon” Tax on Online Sales
Tax Foundation
California is the latest of seven states to tax sales of in-state affiliates of online retailers. If its experience follows that of the first six states, the Golden State won’t yield much gelt — just chase business away.

Anyone who still equates economic development with recruitment of manufacturing investment ought to read a new report by the Brookings Institution, “Responding to Manufacturing Job Less: What Can Economic Development Policy Do?”

The report takes a close-up look at eight metropolitan areas — Charlotte, Cleveland, Grand Rapids, Hartford, Indianapolis, Louisville, Rochester and Scranton — over the period of 1980 to 2005 to see what policies and strategies the regional leaderships adopted in the wake of manufacturing job loss. The conclusion is not terribly comforting. While some initiatives might have perked up investment in particular manufacturing sectors, few of the policies pursued appeared to change a region’s economic trajectory.

Louisville’s airport expansion in the 1980s and Indianapolis’ strategy to boost amateur athletics did shape economic growth in those two regions but the impact of most other initiatives was too limited to affect metropolitan regional economies. What seemed to have the most impact was (a) successful business strategies of major corporations and (b) basic economic characteristics of the region, such as access to transportation, quality of the labor force, state business regulations and the like.

A logical conclusion of the Brookings report is that regional civic and political leaders are better off focusing on economic fundamentals than pursuing the economic development chimera of the day, be it semiconductors (the 1990s), biotech (the 2000s) or green energy (the 2010s). Local leaders are not very good at predicting what hot company in their region will take off, creating a new ecosystem of vendors, partners and buyers in its orbit. Rather than picking winners and losers, they should create an all-around business climate in which a wide array of industries can succeed.

That happens to be something that Virginia is good at. In the latest CNBC ranking of the Top States for Business, the Old Dominion scored No. 1, edging out Texas, which had snagged the top spot last year. CNBC bases its rankings on the basis of cost of doing business, workforce, quality of life, infrastructure, economy, education, technology and innovation, business friendliness, access to capital and cost of living. Virginia moved up this year thanks to improvements in the tax burden, education and cost of doing business. (It lost ground in quality of life, due mainly to an increase in the percentage of uninsured.)

States CNBC: “Virginia did what it does best — and has done in each year of our study: It turned in a solid all-around performance, with top ten finishes in five categories.” Virginia’s metropolitan regions could benefit from the same philosophy.

Time for the MWATA Board to Look in the Mirror
Government Accountability Office
The Metropolitan Washington Area Transit Authority needs to proceed with its proposed self-evaluation. The hoped-for result: A stronger focus on strategic planning and less time spent micro-managing the organization.

New York’s Middle Class Under Attack
Demos, Drum Major Institute
New York’s rich are getting richer. The middle class is shrinking. Mind-blowing statistic: The top 1% of New York City’s income earners make 44% of the income.

CHIP Children Have Hard Time Getting Physician Referrals
Government Accountability Office
Eighty-three percent of primary care physicians have CHIP-funded children enrolled as patients. But only 78% accept new CHIP patients. And only 47% of specialists take new CHIP patients.

Minority Districts Make Congress More Liberal, Not Less
National Bureau of Economic Research
Forget the conventional wisdom: Creating majority-minority districts, both for blacks and Hispanics, makes states’ congressional districts more liberal.

Race to the Top Needs to Share Best Practices
Government Accountability Office
The Obama administration invested $4 billion in 12 Race-to-the-Top initiatives. It would be a good idea for participating states to share best practices with each other and non-participating states as well.

U.S. Needs to Train More Electrical Workers
National Commission on Energy Policy
An estimated one-third of the 400,000 employees of the nation’s electric power sector will retire in the next 10 years, and another 60,000 will be needed for renewable energy sources. A concerted effort is required to educate and train the workforce of the future.

New Jersey Wind Initiative Will Cost Billions
Beacon Hill Institute
New Jersey’s Offshore Wind Economic Development Act aims to build 1,100 MW of generating capacity from offshore wind power. This study concludes that the net cost (cost, not benefit) to New Jersey will be $3.2 billion.

How do you make a company seem more “Virginian?” One way could be to hire an old-school, molasses-voiced, aristocracy wannabee who likes to wear bow ties and runs a Richmond brokerage.

Given all the bad news about safety problems with the Chinatown buses and all the billions of dollars being pumped into high-speed rail projects, you might be tempted to conclude that it’s just a matter of time before inter-city buses become as extinct as chariots. And you’d be wrong. Inter-city buses are undergoing a renaissance — and with virtually no assistance from the government. Indeed, one gets the impression from reading Randal O’Toole’s new paper, “Inter-city Buses: The Forgotten Mode,” that they represent the future of inter-city transport.

Until 2006, it did appear that inter-city buses were going the way of the stage coach. That year, scheduled, inter-city traffic reached a nadir not seen in decades. Transportation planners had all but written off inter-city bus travel as a viable transportation mode.

Then something remarkable happened: an entrepreneurial revolution transformed the stodgy old business. The old inter-city bus model, epitomized by Greyhound and Trailways, required people to visit central bus “stations,” akin to train stations, where they would buy a ticket and wait for their bus. The system required a lot of overhead. Today, upstart bus lines allow passengers to book and pay over the Internet, and they provide curbside loading and unloading. Furthermore, bus lines differentiate themselves by price: If you want cheap transportation with no frills, you can get it. If you are willing to pay more for bigger seats, leather upholstery, Internet connectivity and even meals and drinks, you can get it. Inter-city buses now appeal to a broader audience than ever before.

As O’Toole describes it, the entrepreneurial vitality came from two sources, both from abroad. In 1998, a Chinese immigrant named Pei Lin Liang began offering bus rides between the Chinatowns in Boston and New York for $25. The business boomed and before long the Fung Wah (Magnificent Wind) bus line was providing seven trips daily. Competition grew as tour bus operators, many of Chinese heritage, crowded into the business. The rivalry got so fierce that a Chinatown bus war, complete with vandalism and two deaths, broke out.

Meanwhile, across the pond, the United Kingdom had privatized and deregulated the government-owned bus service. Those moves lead to the creation of dozens of bus companies, which consolidated under the names of FirstGroup and Stagecoach. In 2006, Stagecoach established a U.S. presence and began expanding service.

Buses have no trouble competing with government-subsidized Amtrak. Many bus lines charge lower fares (although those that provide superior comfort and service might charge more), their trips take no longer than high-speed rail for the most part, and bus lines offer a wide variety of pick-up and drop-off points. Between 2007 and 2010, inter-city bus travel increased by 27%.

I would like to report that bus entrepreneurs accomplished all this with no government assistance whatsoever. That’s not quite true. Bus lines benefit from a lower fuel tax than automobiles (which means they still pay more taxes than Amtrak) as well as federal grants to help them comply with the Americans with Disabilities Act — equivalent to about $17 million a year. But that’s about one one-hundredth of the money dumped into Amtrak, O’Toole says.

The one downside of the buses is safety. Most bus companies have an exemplary safety record, and inter-city bus travel compares favorably with automobile and rail traffic. But a number of high-profile crashes involving the Chinatown buses — see the Gooze’s treatment of this issue in an earlier post — suggest that tighter enforcement of existing safety rules is in order.

If state, local and federal government wanted to help this transportation mode, which pays its own way and contributes less per passenger-mile to greenhouse gas emissions than either automobiles or trains, they don’t need to throw around a lot of money. What they need to do is get out of the way. O’Toole suggests ending Amtrak and high-speed rail subsidies. He also suggests that cities could encourage more bus competition by leasing curbside locations for loading and unloading passengers. (As much as I would like to see inter-city buses flourish, I would end the gasoline tax break. Put all transportation modes on a level playing field!!)

The big takeaway here is what an entrepreneurial revolution can accomplish. If we want to end the dominance of what EMR calls the “autonomobile,” we need to systematically evict government from the shared ridership business, chase out the social engineers, end monopolies and franchises, and turn the entrepreneurs loose. If governments would only stick to the one thing it does well, setting and enforcing safety standards, shared ridership in Virginia, and America, would flourish.

State Budget Cuts Slow Economic Recovery
Center on Budget and Policy Priorities
State and local governments have slashed payroll by 535,000 since the beginning of the recession. The loss of jobs, combined with cuts to vendors and nonprofits, has slowed the economic recovery.

The Lake Wobegon Effect: All Schools Are Above Average
Demos
Americans have a dim view of the quality of the nation’s schools. But more than three out of four think that their child’s school is just dandy.

Teacher Bonuses Work in North Carolina
American Enterprise Institute
North Carolina’s teacher work-for-performance program delivers more bang for the buck than reduced class sizes and most other nostrums for improving education.

The nation’s population is aging, as everyone knows. But it is aging at an uneven pace, reports a new Brookings Institution study, “The Uneven Aging and ‘Younging’ of America.” In 36 of the 100 largest metro areas the population below the age of 45 declined between 2000 and 2010. But in 29 metro areas, the under-45 population grew by 10% or more.

Even though retirees continue to migrate in large numbers to the Sunbelt, most prefer to “age in place,” meaning that they don’t move anywhere. The people most likely to move are young. As a result, the areas areas with the greatest concentration of seniors are located primarily in Florida, the Northeast and the Midwest. The areas most likely to see gains in the number of young people are in the South (including Florida) and the West.

Virginia saw fairly rapid growth in the over-45 population — in the 25% to 33% range. And it saw modest growth in the under-45 population, in the 0% to 5% range. (Click on map to see a national comparison.)

As my former colleagues at the Boomer Project like to remind us, the age wave is coming — and Virginia is ill prepared. Unless the topic is pensions or entitlements, there is zero discussion of age wave-related issues in Virginia political campaigns. Fortunately, the Older Dominion Project, a public-private consortium, is doing yeoman’s work to highlight the issues.

One of the questions asked in a recent statewide survey is whether Virginia’s transportation systems will become “age ready.” Currently, one in seven drivers is 65 or older. By 2030, the number will be one in four. As people age, their sight and hearing increasingly fail them and they process information more slowly. Safety analysts predict that by 2030, when all Boomers have turned 65, they could be responsible for 25% of all fatal crashes. What will seniors do when the keys are taken away?

About 10% of the 65-and-over population, or 90,000 Virginians, report that lack of transportation made it difficult or impossible to conduct one or more daily tasks listed to the left during the past month.

How will seniors get around? Will we have made our roads easier for seniors to navigate? Will we have built more walkable communities? Or will seniors have to depend increasingly upon neighbors, churches and social services to perform basic daily tasks?

As a follow-up to EMR’s post, “Job Creation in the Countryside,” which highlighted how German villages are adapting to contemporary economic challenges, I would point readers to a Wall Street Journal article, “In Bioenergy Villages, Power to the People.”

Dozens of villages across Germany have begun generating their own heat and electricity from biofuels such as liquid manure, wood and locally grown energy crops. “We don’t want to be getting 3,050 liters of oil off some ship from Saudi Arabia,” one villager told the Journal. This way, “the money stays here in the community.”

In Oberrosphe, villagers voted that residents would pay a flat rate of €6,000 (about $8,500) to link to the new heating grid. While the central government did subsidize the project by €1 million, the villagers came up with the rest. They estimate they will save €400 to €500 annually on heating costs, and even more when oil-heater maintenance costs are included. As a bonus, the village makes €1.1 million annually by selling electricity from the solar panels atop the wood-chip burner back to the local power grid.

Buried in the article is a key point: German villages can consider communal projects like this because the buildings are clustered close together. Thanks to the density and compactness of development within a clear edge, these urban enclaves (to borrow EMR terminology) can connect every residence to the heating system at relatively modest expense.

Given differentials in energy costs, it’s not clear that small bioenergy plants would make sense in the United States. Unfortunately, Virginians in the countryside will never get a chance to evaluate the potential. Because they live in scattered residences with nothing resembling a clear edge, the high cost of creating a collective bioenergy facility is a non-starter.

Likewise, scattered, low-density human settlement patterns in the Virginia countryside make it exceedingly expensive to install and upgrade high-bandwidth Internet connections. And don’t get me started about the cost of driving between scattered U.S. countryside locations as opposed to the cost of walking around in compact German villages.

I don’t credit the Germans with any special prescience when it comes to their preference for clustering in villages (although I’m guessing that EMR will tell me otherwise), but there can be little doubt that the village form of human habitation, however it arose historically, is superior to the scattered, frontier-farm form of human habitation for purposes of leap-frogging into a globally connected economy. When Virginians think about economic development in the countryside, they need to think about fundamentals like human settlement patterns. If they are unwilling to evolve, I cannot see how they can create viable communities.

(Photo credit: Wall Street Journal.)

Wonders never cease. The Washington Post editorial board and I agree on the propriety of mandating a Project Labor Agreement (PLA) for Phase 2 construction of the $3 billion+ Rail-to-Dulles project. In a recent editorial, the WaPo said it was imperative to reign in costs on the heavy rail project, even if that meant constructing and above-ground station at Dulles airport and scrapping the mandatory PLA.

The airports board was pushed to adopt the “project labor agreement” by board member Dennis Martire, who, in his day job, is a senior official in the Laborers’ International Union of North America, which represents hundreds of thousands of construction workers. Mr. Martire had an obvious conflict of interest, as his union would be a direct and major beneficiary from a labor deal. He should have had the common sense to recuse himself from the decision, even if his vote did not technically violate the board’s narrowly drawn ethics policy.

There is serious debate about whether a labor pact would drive up expenses. The airports authority says a similar pact for the project’s first phase, under construction from Falls Church to Reston, has helped contain costs and enhance efficiency by ensuring a steady supply of workers and avoiding labor trouble. But that agreement was adopted voluntarily by the contractor. There are concerns that a mandatory labor agreement for the second phase could dampen competition and drive up costs by discouraging bids from some large contractors, and by imposing cumbersome union rules. In an era of belt-tightening, the airports authority must go the extra mile to ensure that the Silver Line’s construction is managed as frugally as possible.

Now, if we could get the WaPo editorial board to see the light on human settlement patterns, we’d be making real progress!

Drug Courts Do Prevent Crime and Substance Abuse
Urban Institute
Drug courts are effective at reducing substance abuse and preventing crime. They work equally well for most subgroups of the population. Adoption of best practices can make them work even better.

Why Oregon Should Not Cut Its Capital Gains Tax
Oregon Center for Public Policy
The capital gains tax proposed for Oregon is unfair — the richest 1% would get 65% of the benefit. It wouldn’t attract significant capital investment, and Oregon’s economy out-performs the nation’s anyway. And the state needs the tax revenue.

Wisconsin’s Middle Class Under Attack
Demos
As the rich get richer, Wisconsin’s middle class is shrinking. Earnings are stagnant and public benefits are threatened. The peoples’ strong work ethic and union militancy are signs of hope.

The High Price of Romneycare
Beacon Hill Institute
Five years after Massachusetts passed health reform, it can now be evaluated. The verdict: Health coverage has expanded, costs have shot up by $8.6 billion over the period.

The Decline of Michigan’s Middle Class
Demos
Michigan once had a prosperous middle class, now it doesn’t. Middle-income workers aren’t getting their “fair share” of the income pie. The Top 1% of earner take home more pay than the entire middle class combined.

Gearing up for 21st-Century Law Enforcement Threats
Heritage Foundation
Coping with the rise of the lone-wolf terrorist and other home-grown terrorist threats require a cultural shift among federal and local law enforcement authorities across the country.

How to Make Work Sharing Work
Center for Economic and Policy Research
Instead of laying people off, let’s share jobs. The idea has worked well in Germany, and it could work in the United States, too, if the states made a few tweaks to their unemployment compensation programs.

Salvaging the Federal Flood Insurance Program
Government Accountability Office
The National Flood Insurance Program is $17.8 billion in debt to the U.S. Treasury. A string of disasters could push it into insolvency. The solution: Charge premiums that fully reflect the risks of building in flood-prone areas.