• GROVETON AND RECESSION VS DEPRESSION

    On the A QUESTION FOR VDOT string Groveton said:

    โ€œLong recession / depression?

    โ€œDo any of you guys watch any of the stock market indices?

    …..

    โ€œAll US stock indices have been surging since March. They have been rocking for 6 ยฝ months.โ€

    EMR thought that it was uniformly agreed that stock and commodity markets were gambling venues, NOT indicators of economic health or investment intelligence.

    โ€œDo you guys really see a long recession / depression? If so, we can make a fortune right now. And I mean a real fortune.โ€

    IT is not about making money, IT is about achieving a sustainable trajectory for civilization.

    โ€œAny chance this is a real recovery? You know … like the last 35 recessions and recoveries. Or, is this really The Great Depression II?โ€

    Of course there is a โ€˜chanceโ€™ of a short term recovery โ€“ that is Option One of the three scenarios spelled out in the earlier post.

    The point of the โ€œQUESTION FOR VDOTโ€ post was that what ever happens, Large, Private vehicles and the roadway systems to support Autocentric settlement patterns are dinosaurs. Those who do not yet understand this probably think the Dow going over 10,000 is a good thing.

    The larger point is that NO โ€˜recoveryโ€™ can be sustained so long as โ€˜the REAL fundamentalsโ€™ โ€“ settlement patterns, per capita consumption, wealth distribution, public and private debt, population and most key resources that support human life (potable water, top soil, total energy, marine food chains, mission critical elements, etc.), ALL have unsustainable trajectories.

    Of the three scenarios outlined in the earlier post, EMR would bet on the โ€œModest Recoveryโ€ model but if not that, then The Long Depression model is more likely than The Great Depression model. This is because at the end of The Great Depression there were still abundant key resources available AND there was a population that was willing to work as opposed to one that now believes that they are owed a consumptive life style (and unsustainable individual โ€˜freedomsโ€™) and that technological miracles will solve any problems that pandering political Clans cannot patch over until after the next election.

    Was it not Groveton himself that pointed out that during The Great Depression there were four stock market rallies? EMRโ€™s maternal grandfather lost โ€˜a fortuneโ€™ in every on of those โ€˜panic booms.โ€™

    Neither irrational exuberance nor short selling will solve any known problem for society.

    EMR


  • When Crony Capitalism Meets Dysfunctional Human Settlement Patterns

    The world’s largest shopping mall/entertainment complex, in Guongzhou, China, is China’s version of “too big to fail.” The developer poured $365 million into this showcase project. It’s beautiful in an extravagant, Las Vegas kind of way. But the developers, inexperienced in running malls, gave little thought to who would shop there, and how they would get there. The place is almost a ghost town. With 7.1 million square feet, it has only 12 tenants. But the Chinese authorities keep the mall open at extraordinary expense. POV has the video story here.

    It would be a mistake to underestimate the Chinese as an economic competitor to the United States. But it would be a mistake to assume, as we did with the Japanese 20 years ago, that they can continuing growing their economy at a world-beating without ever stumbling. China is one big Enron. The only thing saving hundreds of large, speculative investments across the country is the opacity of the financial system and the willingness of the government to keep the whole thing going. When confidence in the system collapses, it will be a nuclear meltdown spewing its financial fallout all over the world.

    So, add one more unsustainable prop to the American economy. U.S. human settlement patterns are unsustainable due to peak oil. U.S. fiscal policies are unsustainable due to ever-expanding spending and entitlements. And continued bankrolling of U.S. deficits by China is unsustainable due to that own country’s misallocation of capital on a scale that rivals our residential real estate boom and bust.

    At least people are living in most of the houses U.S. home builders erected. Many of those glitzy towers on big-city Chinese skylines are empty. How do you say “Potemkin Village” in Chinese?

  • A QUESTION FOR VDOT

    EMR has sent VDOT the following question:

    Why does VDOT โ€˜assumeโ€™ there will be more Large, Private vehicles using the US Route 29 Corridor in 2017 than there were in 2007?

    We have provided below, based on the recent work at SYNERGY, some of the reasons citizens should question ANY assumption of growth in Large, Private vehicle travel in the US Route 29 Corridor โ€“ or in any other InterRegional corridor in the Commonwealth:

    High fuel prices drive down travel demand, especially travel in Large, Private vehicles. The ONLY thing that is keeping the cost of fuel low in October of 2009 is The Great Recession.

    Going forward there appear to be three broad options with respect fuel prices and thus travel demand in Large, Private vehicles in the US Route 29 Corridor or anywhere else:

    1. The Great Recession will end soon with a return to the 2002 / 2006 economic / consumption trajectory. Not many predict this outcome but if it occurs fuel prices will go back up making Large, Private vehicles economic dinosaurs. Economic reality will reshape travel demand and functional Mobility and Access systems.

    The configuration of these transformations can be predicted by considering the impacts of high fuel / energy price events over the past four decades. All serious examinations of the growth / consumption scenario point to more compact human settlement patterns served by shared-vehicle systems and much smaller, lighter, slower and safer vehicles for IntraRegional Mobility and Access. InterRegional (and MegaRegional) Mobility and Access will depend on more efficient shared-vehicle systems.

    2. The Great Recession does not end soon. With a long recession / depression few will be able to afford a Large, Private vehicle much less the fuel to take long trips. Economists suggest that a โ€˜recoveryโ€™ from a long recession / depression may be similar to the โ€˜recoveryโ€™ following The Long Depression (1876 to 1893). That economic transformation ushered in a new settlement pattern โ€“ the rise of the Industrial Center that eclipsed the society that was 95 percent agrarian / 5 percent Urban (aka, The โ€˜Cities / Agrarian Society) that evolved over the prior 13,000 years. The Industrial Center (the settlement pattern template of the Industrial Revolution) was dependent on the evolution of railways for Mobility and Access.

    The shape of the settlement pattern that will replace the Large, Private Vehicle Settlement Pattern that has evolved since 1920 can be projected based on an understanding of economic activity and the trajectory of property values of organic components of human settlement (measured Radius Band by Radius Band) over the past three decades. This new settlement pattern must be โ€“ like the โ€˜The Great Recession Ends Soonโ€™ alternative scenario โ€“ more efficient and compact. These patterns and densities of land use will by necessity rely far less Large, Private vehicles because of economic and physical reality โ€“ high fuel costs and the space required to drive and park Large, Private vehicles.

    3. There is middle ground between these two polar options. This is often called The โ€˜Modestโ€™ Recovery. A โ€˜modestโ€™ recovery is the current Federal Reserve prediction and that of many economists. Under this scenario there will be little employment growth in the US of A or Virginia because of Global outsourcing and increased application and productivity of machines and technology. This has been the case in the โ€˜recoveriesโ€™ from the last two recessions.

    In the modest recovery scenario Enterprise โ€˜profitโ€™ will be based on cutting costs โ€“ including employment โ€“ not revenue growth. Stock and commodity markets will continue to reflect speculative activity rather than citizen prosperity. The wealth gap will continue to widen. This is not a context where there will be growth in travel demand in Large, Private vehicles. The same long term trends to more compact and efficient patterns of settlement will be evident.

    Whatever future scenario is closest to evolving reality there will be a smaller and smaller role for Large, Private vehicles to provide citizens with Mobility and Access.

    The key question is: Will there be resources left under ANY scenario to carry out the transition to a sustainable trajectory without dire, society-disrupting poverty and conflict?

    Humans will need to learn to embrace the joys of living โ€˜smallerโ€™ and living โ€˜closerโ€™ to the Jobs, Services and Recreation. They will need to live โ€˜smallerโ€™ and โ€˜closerโ€™ if they are to maintain an acceptable quality of life in a technologically based Urban society.

    As Urban society has evolved, few humans in any location on the planet find reversion to hardscrabble subsistence agriculture or hunter / gatherer existence an attractive option.

    Economic reality will force the federal, state and municipal Agencies to stop subsidizing the travel between dysfunctionally scattered origins and destinations. This means there will be less use of Large, Private vehicles for both passenger and freight. Urban dwellings in remote locations will continue to lose value.

    These scenarios reflect the reality that humans have come to the end of cheap energy โ€“ aka, Peak Oil. Peak Oil (aka, Hubbertโ€™s Peak) is an issue of โ€˜WHEN.โ€™ It is NOT an issue of โ€˜IFโ€™ as noted in Appendix Four of SYNERGYโ€™S study โ€œTimberfence Truth of Consequencesโ€ citing a number of recent studies including the UK Energy Research Centre.

    In fact citizens are already facing โ€œpeaklikeโ€ conditions.

    Food riots in poor nation-states, economic turmoil in nation-states with declining petroleum reserves (e.g. Mexico) and high / fluctuating fuel and energy costs are all โ€œpeaklikeโ€ conditions. These conditions will grow more sever as the Industrial Green Revolution based on cheap petroleum and abundant water exacerbates the process of shifting to more expensive energy sources.

    There is no cheap replacement for the carbon / fossil based energy โ€“ the โ€˜natural capitalโ€™ that has been accumulated over the past 4 billion years. Humans have burned through much of this natural capital in the last 200 years โ€“ and especially the last 113 years of industrial growth / Mass OverConsumption since the end of The Long Depression. Citizens must learn to live on natural (solar) โ€˜incomeโ€™ now that stored natural capital is becoming more scarce and more expensive.

    There are MANY alternative energy sources but NONE of them will be cheap compared to carbon / fossil based sources. In addition, no known energy source is as well suited as petroleum to fuel Large, Private vehicles. If there was such a source, it would be in wide-spread use now.

    There is no question that fossil sources of fuel are finite and becoming more and more costly to bring to market. The same is true for petroleum substitutes.

    The Energy Return On Energy Invested (EROEI) for ethanol is at or below one when all the costs and subsidies are considered. The same will be true for all petroleum substitutes that rely on irrigation for growth and / or water for processing. It is also true for hydrogen, โ€˜safeโ€™ nuclear, ultra-deep geothermal, direct and indirect solar conversion as well as recent deep off-shore and ultra-deep terrestrial petroleum discoveries.

    VDOT and its consultants should have been preparing for the advent of Peak Oil since at least 1973. Instead they have been blindly continuing the subsidy of travel in Large, Private vehicles.

    As a result of Business-As-Usual, there has evolved a Perfect Storm of dysfunctional and untransportable human settlement patterns. State Agencies say municipalities are responsible of โ€˜land useโ€™ (aka, human settlement patterns) and municipal Agencies say the Commonwealth is responsible for Mobility and Access.

    If VDOT was not preparing for Peak Oil and the decline of Large, Private vehicles, then the Governor, the legislature, the Commonwealth Transportation Board and concerned citizens should have required that they prepare. They did not and now the price must be paid.

    Back to the US Route 29 Corridor: Can VDOT or its consultants name ANY growth curve which is dependent upon a finite resource that has continued to grow geometrically? SYNERGY has identified no scientifically verified example of a sustainable growth curve with the configuration similar to the growth in vehicle miles traveled by Large, Private vehicles over the past 50 in the Commonwealth. Why is VDOT relying on an unprecedented condition as the basis for public action in the US Route 29 Corridor?

    EMR


  • What Is the “Business Community” Anyway?

    In Virginia, it is always surprising that the talking heads, lobbyists, politicians and others always regard the “Business Community” as a monolith that thinks and speaks with one voice and must be protected because of the Old Dominion’s coveted status as being “business friendly.”

    Gubernatorial candidate Bob McDonnell, for instance, is running a campaign that espouses this unilateral view. If it’s not “Drill Baby Drill” for oil and gas off the coast it’s nip carbon dioxide cap and trade in the bud because it will cost jobs, such as the few remaining in the state’s dwindling coal industry and threaten paper company MeadWestvaco’s huge, 100-year-old paper mill in Covington. Opponent Creigh Deeds takes a more moderate stance.
    But what is the “Business Community,” anyway?
    A few weeks ago, for reasons that are unclear, I was asked to participate in a background briefing hosted by a powerful Richmond law and advocacy firm on behalf of the U.S. Chamber of Commerce. That’s a body I know well from previous journalism work.
    Headquartered in a grand old building steps from the White House with imposing marble hallways, the U.S. Chamber revels as being THE most prominent spokesman for U.S. business. I have interviewed the chamber’s combative president Thomas J. Donohue who is never afraid of taking his Irish temper out on anyone who goes against what he considers America’s, and the Chamber’s, business interests.
    Somehow, I got mixed in for a phone chat with a bunch of bloggers who are conservative and reliable, which I am neither. Their mistake. The point of the meeting was to marshal blogger support for an attack on the Obama Administration’s efforts to create a new agency to protect consumers. The Chamber hates the idea. I kind of like it.
    But the Chamber is getting itself into deep trouble as it takes a monolithic position against cap and trade and greenhouse gases and global warming. Like many right wingers, Donohue seems to doubt the veracity of the threat and says that any efforts to stem carbon dioxide are exorbitantly expensive and pointless.
    As dying BusinessWeek magazine, my old employer, points out, Donohue has the gumption to lecture Apple’s Steve Jobs on the issue and even on technology. Jobs and Apple, by the way, back cap and trade and are fearful of climate change.
    Donohue’s feisty views are costing him and his organization. Apple has since toned down its support of the Chamber. Electric utilities PG&E, Exelon and PNM Resources have quit the chamber since they back cap and trade. Duke down in Charlotte, backs cap and trade even though it has a fair number of coal-fired generating plants as does Richmond-based Dominion whose position isn’t clear. Most of these utilities have something in common, they have nuclear power stations which don’t affect global warming.
    True, lots of companies back the U.S. Chamber. But as the media, notably the Richmond Times-Dispatch, continue to dumb themselves down as they lay off experienced reporters, we’re served up a bunch of simplistic slop that business always speaks with one voice.
    Doing so isn’t new. Thirty plus years ago when I was a cub reporter on The Virginian’Pilot covering efforts to build an oil refinery in Portsmouth. Proponents such as the late Portsmouth major Richard J. Davis pretended that all of business backed the refinery, when in fact, the state’s entire seafood industry, also a business, fought it tooth and nail.
    The refinery was never built, which makes McDonnell’s cheerleading for offshore drilling so curious. If there really were lots of profitable oil and gas off the Virginia coast, why hasn’t it been drilled by now? How come the Portsmouth refinery was never built? In the late 1970s, Texas leviathan Brown & Root bought hundreds of acres of land near Cape Charles at the tip of the Eastern Shore as a potential staging area for offshore rigs. The facility was never built and is now an upscale residential community with two expensive golf courses. Should we blame government intrusion. Or could it be that global market forces make drilling in other countries the way to go. Maybe similar market forces are telling us there’s more profit in pricey condos for seniors on the Eastern Shore than steelworks for rigs.
    And who would you rather have provide leadership for Virginia’s economic future? Some coal company executive? Or someone such as Steve Jobs whose phenomenal success has changed the world?
    Peter Galuszka

  • Health Reform and the Dartmouth Atlas

    One of my problems with the whole health care debate is that, for the most part, it has focused on the redistribution of wealth. One reason the Donkey Clansmen have had such a hard time getting a health care “reform” passed is that they offer a zero sum game. For every winner, there is a loser. There is no “win-win.” There is only “I win-you lose.” That’s tough to ram through Congress.

    The health care debate would be far more enlightening if we reframed the debate to discuss root causes: lagging productivity and quality of the health care system. The Obama administration, to its credit, does include productivity- and quality-enhancing measures in its legislative package, but the Obaminators seem far more preoccupied in extending health care to the uninsured than figuring out how to make the system more efficent. If the Elephant Clan wanted to gain more traction with the American people, it would pick up the productivity and quality theme, but it done so only intermittently, much to its misfortune.
    The beauty of building reform around productivity and quality is that it allows win-win solutions in which everyone can share. There are two institutional thought leaders — largely ignored, sadly — that have thoroughly explored this theme. One is the Institute for Strategy and Competitiveness, at Harvard University; in particular professors Michael Porter and Elizabeth Olmsted Teisberg (a faculty member of the Darden School). Their analysis focuses on the failure of the structure of the health care delivery system and how incentives need to be changed. I hope to write more about them in the future.

    The other thought leader is the Dartmouth Institute, publisher of the Dartmouth Atlas. The Atlas project notes that the cost of providing health care to Medicare patients varies enormously across the United States — from more than $14,000 per Medicare enrollee in Miami, Fla., to $5,300 per Medicare enrollee in Honolulu. States the Dartmouth Atlas website:

    Patients in high-cost regions have access to the same technology as those in low-cost regions, and those in low-cost regions are not deprived of needed care. On the contrary, the researchers note that care is often better in low-cost areas. The authors argue that the differences in growth are largely due to discretionary decisions by physicians that are influenced by the local availability of hospital beds, imaging centers and other resources-and a payment system that rewards growth and higher utilization.

    Virginians can take some pride in the fact that the Old Dominion is one of the lowest-cost pockets of health care in the eastern U.S. Take a look at the map above: Wisconsin and upstate New York are the only comparable zones of low health care costs east of the Mississippi. (To see how individual Hospital Referral Regions in Virginia perform compared to others in the nation, view the interactive map.) The cost of Medicare per enrollee is less than $7,000 across most of the state. Even in the Arlington region, with its high wage and salary levels, the cost edges up to $7,200 — far lower than the cost up a few miles north in Baltimore.

    Clearly, Virginia hospitals and physicians are doing something right. And just as clearly, Virginians should not be made to suffer for the sins of health care delivery in other states.

    The Dartmouth Atlas supports the claims of those who contend that much of American health care spending is wasted. How do we reform the system to bring down soaring costs? “An Agenda for Change” proposes the following:

    • Promote the growth of organized systems of care.
    • Require informed patient choice and informed decision making.
    • Promote the training of primary care physicians and fund training programs that teach community-based care in treating chronic illness.
    • Fund a federal science policy that builds the scientific basis for cost-effective care.

    The Dartmouth Institute bases its recommendations on hard empirical data, not ideology. I’m not persuaded that the atlas afficianados have the full answer, but they have a very big piece of the answer. I only wish that someone in Washington were listening.


  • The Ghost of Harry F. Byrd

    In a few weeks there will be yet another off-year Virginia election, making one wonder why the Old Dominion does it this way.
    And if you think about it more than a few seconds, you’ll conclude that this has everything to do with Harry F. Byrd, the governor and U.S. senator whose one-party machine ran the state for 50 years.
    There are a lot of eerie connections between Byrd and what some find popular today, such as tight-fisted state spending, toll roads, public private partnerships, a suspicion of education, anti-labor fervor and kind of duplicitous way of promoting feudalism if not dictatorship while all the while extolling the supposed values of freedom and integrity of Old Virginians George Washington, Tom Jefferson, James Madison, and so forth and so on.
    Which is why, dear readers, we have off-year elections. One reason for them is that the Byrd Organization, dominated by Byrd who approved all candidates with a nod (sort of like Stalin), wanted very frequent elections do dull the electorate’s appetite for them.
    The weird flip side of this is another Byrd-centered policy — that of not allowing governors to serve more than one term. The policy was a backlash against the Byrd machine. But it means that state governors never have enough time to accomplish much.
    A few other Byrd leftovers:
    • Rapid anti-unionism. Back in Byrd’s day, there were few labor unions in Virginia, save for some urban areas the Southwestern coal fields. There were a few strikes, such as a five-month-long one by the United Textile Workers at Dan River Cotton Mills in 1930-1931 along with later ones by car ferry and Vepco workers. Byrd used these strikes to push an extreme anti–labor line that is echoed today by conservatives who scream about the chance of workers using a check-off method to vote for or against union membership that is cheaper and more efficient than holding old-style elections that management types can more easily target.
    • Byrd loved pay-go and was an early proponent of it. That, too, is echoed through the General Assembly today albeit it is a lot harder to maintain discipline for it.
    • One of Byrd’s earliest jobs was to manage a toll road between Winchester and Staunton and he took regular trips on it to check maintenance. Could this be a precursor of the public private partnerships that some find so attractive today? Ironically, Byrd fought against Dwight Eisenhower’s Interstate highway system in the 1950s. Go that have been that federal money means federal control and oversight of contractors, so the Good Ole Boys might not get the gravy?
    • Race relations. Forget it. Byrd was an unabashed racist and enthusiastically backed segregation.
    • The ironies of his anti-federalism and his own political style. As Time wrote in a 1965 obituary, “While decrying federal ‘paternalism,’ Byrd ruled his own domain with a feudalistic hand. It was velvet gloved but his Virginia autocracy, known simply as the ‘Organization’,’ was one of the most powerful the U.S. had ever seen.”

    True, Virginia has changed immensely from the Byrd Organization days as out-of-staters have poured into Northern Virginia and Hampton Roads, completely changing the electorate.

    But in places such as Richmond and some of the more rural areas, the old structure seems to endure. You still sense that kind of pseudo-polite, smug paternalism that those with Family Names or power or money know a lot more about things than you do, are inherently wiser, so you’d better not make any trouble.
    One thing Virginia needs, however, is more, not fewer, troublemakers.
    Peter Galuszka

  • Eric Cantor’s Funny Ties To Health Care Firms

    One of the drawbacks of living in the Richmond area is the dearth of penetrating reporting in
    the local daily rag. Luckily for me, The New York Times finally started home delivery last week in the piney woods edge of Chesterfield County where I have lived for the past nine years.
    True, I get the Wall Street Journal, which is great in its own way, but one really needs a counter balance to the increasingly awful Richmond Times-Dispatch which is shamelessly biased in favor of some crazed concept of “Richmond” as defined by its arrogant and out-of-touch publisher and constant cheer leading for the home-town boy congressman Eric Cantor, whose wife sits on the board of the owner of the newspaper.
    So, it is strange that one has to get local insights from the Times, specifically from one of my favorite columnists, Frank Rich, who has ties to Richmond and helped edit the scrappy Richmond Mercury alternative newspaper many moons ago.
    In his Sunday column, Rich took apart Cantor and his ties to big health insurance companies. As House Minority Whip, Cantor is leading the charge against any “public option” to provide customers with an alternative to private health insurance. The for-profit companies have benefited immensely from “managed care” that got its start back int he 1970s with the view that doctors and other professionals could not contain costs.
    But with managed care, big companies such as UnitedHealth Group have enjoyed tremendous pricing power sometimes demanding double digit hikes in premiums in a system that no can understand, let alone challenge.
    President Barack Obama wants a complete overhaul but has botched the job so badly that people like Cantor can easily do the bidding of the powerful insurance companies. Cantor and his fellow conservatives have led a charge against the “public option” which will probably get dumped as legislators try to merge parts of five separate House and Senate bills into one.
    But let’s back up. Cantor comes down strongly against the public option. According to Rich of the Times, Cantor regularly cites data bashing the public option from the research firm Lewin Group. The firm claims that if there were a public option, some 88 million Americans might bolt from their private plans. Big Insurance doesn’t like the idea of such competition so they are marshaling their messenger boys such as Cantor to shout it down. Never mind that the Congressional Budget Office estimates that only about 11 million people with private insurance would switch to a government alternative if one were available.
    Let’s connect some dots:
    • The Lewin Group is wholly owned by UnitedHealth Group. So, one might question the sanctity of the data it projects.
    • More specifically, according to The Washington Post, Lewin Group is part of a UnitedHealth subsidiary called Ingenix which has been accused by the New York attorney general of helping insurers shift medical expenses to customers by monkeying data. True the New York AGs office is pretty activist, but even the venerable and conservative American Medical Association makes the exact, same accusation. Lewin officials told the Post that Lewin had nothing to do with the scheme but had had “adjustment” issues when it was bought by UnitedHealth in 2007.
    • Speaking of UnitedHealth, guess whose political campaigns it bankrolls? Eric Cantor’s, that who. The Huffington Post reported in August that Cantor and fellow GOP leader Rep. John Boehner of Ohio have taken roughly $60,000 in contributions from UnitedHealth. Cantor got something like $28,000. The Huff Post said that a Cantor aide labelled the contribution story as a “distraction.

    Guess where one never reads anything about these odd strands of thread? The Richmond Times-Dispatch, that’s where.

    On Sept. 21, the newspaper held another one of its Phil Donahue shows with the publisher plays emcee featuring Cantor and Democratic Rep. Bobby Scott talking about health care reform.
    The newspaper repeated several times the opinions of the politicians and those of some of the citizen attendees, who were patronized horribly by the publisher when he said they were “civil” as if the the general public were third graders who might pee on a potted plant if given the chance.
    It’s too bad the newspaper keeps dumbing down its reporting to the readers it is supposed to serve instead of actually reporting on the politicians it is supposed to watch. Holding Donahue shows is a lot cheaper than keeping on veteran reporters who might have the wit and skill to look at some campaign contribution reports.
    And it is too bad that when it comes to Eric Cantor, The Richmond Times-Dispatch comes like off like Richmondesque Pravda, the official mouthpiece of the ruling local political party.
    Peter Galuszka



  • Deeds and the Educational Status Quo

    Creigh Deeds went on the attack yesterday. With some back-up from Gov. Timothy M. Kaine at a Virginia Business for Higher Education Council event, the gubernatorial wannabe criticized Bob McDonnell’s transportation plan on the grounds that it would short-change funding for education.

    As reported by Jim Nolan at the Times-Dispatch, “Kaine and Deeds say McDonnell’s transportation funding plan would drain education money from the general fund…. [Deeds] said: ‘Education is one area where we can’t cut.’ … He likened draining money from education to a farmer using all of his seed corn, leaving nothing to harvest later.”

    I don’t defend McDonnell’s plan to tap General Fund revenues for transportation. (See “Disaster on Wheels.”) But Deeds’ education platform is almost as bad.

    Deeds’ approach to education can be spelled out in seven letters: Mo’ Money. While touting incremental efficiencies to be gained through audits, a bulk purchase program and loans for efficiency-enhancing measures, Deeds provides a laundry list of initiatives that start with the verbs “establish,” “pay for,” “promote,” “expand,” “support,” “provide,” “use,” “offer,” institute,” “make” and “pursue.” (See the plan here.) He has lots of ideas for improving the educational system, and almost all of them require mo’ money.

    And none of them require fundamental reform. The U.S. may spend more than any other country in the world for worse outcomes, and Virginia may not perform a whole lot better than the national average, but all we have to do is expand a pre-K program here or pay teachers a bit more over there, and everything will be better.

    McDonnell’s education plan would not fundamentally change the system but at least it would rock the status quo. McDonnell calls for more charter schools, college-partnership laboratory schools, virtual schooling and controls on administrative overhead. Compared to the root-and-branch changes we need to make, they’re pretty tame stuff. But at least they move in the right direction.

    The U.S. is veering toward fiscal armageddon. Virginia will face unprecedented fiscal challenges itself. Instead of expanding the scope and cost of government, we need to begin the hard work of radically re-thinking the way we deliver core government services more cost effectively. Fundamental change will take years to enact. That’s why we need to get started now.


  • READING TODAY’S WaPo

    TODAYโ€™S WAPO, REINFORCED BY A FEW ITEMS FROM THE LAST FEW DAYS PAINTS AN INTERESTING PICTURE OF THE WORLD:

    On the Census report dealing with Stay at Home Moms:

    Who knew that McDonnell is targeting primarily a lower income, less-well-educated, primarily Hispanic demographic? Not a traditional winner in the Commonwealth.

    And speaking of McDonnell Tom Toles did a nice job on the McDonnell AntiPlan. Papering over the chasm.

    Finally, a good ad from Allstate.

    โ€œTwo out of three teens admit to texting while driving. Some of them will never be hear from again.โ€ Now how about an ad from Allstate about the need to transition to more safer and more energy efficient modes of travel to support functional settlement patterns? Perhaps they could insure METRO riders.

    And on the topic of ads, who knew that it was worth a multi-day buy of a 4 page color insert in section A to tout Siemens? Does anyone believe those Chevron and BP ads?

    Under the category of โ€œThere is not a single dysfunctional activity that does not have a lobby group supporting it.โ€ Try this headline:

    โ€œAir Safety Initiatives Run Into Opposition.โ€ Yes, sir, keep flying those commuter planes into the ground because if more flying time is required to adequately train pilots, we will not make as much money.

    Fairly distribute the full cost of alternative modes and let citizens choose the most efficient and safe mode.

    Have you noticed that the news of the economic โ€˜recoveryโ€™ is illustrated with graphics that show โ€œquarterly percentage change from previous year.โ€ A shorter red bar looks less freighting than the full picture.

    Todayโ€™s Metro section announces a โ€œNew Local Home Pageโ€ with the URL of washingtonpost.com/local. A perfect example of why โ€œlocalโ€ is one of the eight Core Confusing Words.

    Go there and you see a rehash of the Metro page with links to โ€œD.C., VA and MDโ€ โ€˜news.โ€™ Just ten days ago Ian Shapira pointed out (in WaPo) that MainStream Media outlets that tried to put out news based on municipal jurisdiction boundaries (much less by state borders) were dying like flies at the first hard frost.

    A few days ago there was a headline โ€œSuburb Braces for An End to Tranquillityโ€ about a place that was being converted to? A โ€œSUBURB.โ€

    MEMO to MainStream Media: Stop using Core Confusing Words and understand the organic structure of human settlement patterns or keep dying like flies.

    The big news for Baconโ€™s Rebellion is from the Metro section today under the headline โ€œFor Relief, Region Told to Go East.โ€ That is shorthand for โ€œmove the Jobs and Services East so there is not so much East to West AM (and West to East PM) commuting. This follows a report on 29 September on the distribution of poverty within R=25. Poor East, rich West.

    Stewart Schwartz gets a lot of good press. He is right on all counts. However, no one mentions the issue is really Balance within Clear Edges and Critical Mass.

    There is discussion of the need for shared-vehicle system station-area development. There must be METRO system wide Balance as well as Alpha Village and Alpha Community scale Balance.

    EMR


  • THE TRANSPORT PROBLEM*

    THE TRANSPORT PROBLEM IS NOT WHAT THE POLITICAL CLANS WOULD LIKE VOTERS TO THINK IT IS

    The Commonwealthโ€™s quadrennial political football classic is ratcheting up to peak frenzy. Many agree that the number one โ€˜PROBLEMโ€™ in the stateโ€™s most populous New Urban Region is โ€œThe Transport Problemโ€

    In the words of WaPo columnist Robert McCartney: โ€œIf youโ€™re a candidate for governor coming to debate in Northern Virginia, youโ€™d better be able to say simply and plainly how youโ€™d raise money to repair and improve the roads.โ€ (WaPo B-1 18 Sept 09)

    That spin on the โ€œThe Transport Problemโ€ (aka, the Mobility and Access Crisis) is in complete harmony with conventional wisdom and spawns questions such as:

    โ€œWhere will the money come from to fix up and expand the roadway system?โ€

    โ€œWhat are we going to do to help commuters trapped in congestion?โ€

    As pointed out in โ€œTransport Strategy Disasterโ€ (Baconโ€™s Rebellion Blog. 1 Sept 2009) both political Clans have been trying to avoid addressing the fundamental realities underlying โ€œThe Transport Problem.โ€ Since that essay was completed, the picture has changed but it has not improved in any significant way.

    THE ELEPHANT CLAN ANTIPLAN AND THE DONKEY CLAN SOUND BITES PLUS PROCESS.

    Jim Baconโ€™s perspective in โ€œMcDonnellโ€™s Transportation Plan: Disaster on Wheelsโ€ (Baconโ€™s Rebellion Blog, 19 Sept 09) are RIGHT ON. The Elephant Clan has NO Mobility and Access strategy beyond โ€“ โ€œvote for me. You know you can trust me to find money to fix the transportation problem from sources that are not called a โ€˜taxโ€™ โ€“ really!! You can trust me, I believe the same things you do.โ€

    * This is the second of two Fall 2009 essays on the politics of transport in the Commonwealth of Virginia. โ€œTransport Strategy Disasterโ€ was published 1 September 2009.

    WaPo tends to agree on the transparency of the Elephant Clan ploy. See editorial โ€œDrinking Games: Robert F. McDonnellโ€™s transportation plans rest heavily on privatizing hard-liquor sales in Virginia. It is sober?โ€ 26 Sept 09.

    The Business-As-Usual interests, including MainStream Media is frustrated that the Elephant Clan is not committed to a new source of revenue to throw at โ€œThe Transportation Problem.โ€

    Until very recently the Donkey Clan also had no strategy to solve โ€œThe Transport Problem.โ€ As WaPo put it editorially on 20 September: โ€œMr. Deedsโ€™s Dilemma: Itโ€™s Political Suicide To Urge Higher Taxes, and Folly Not To.โ€

    As of 23 September, the Donkey Clan HAS a โ€˜plan.โ€™ (โ€œMy Transportation Planโ€ Creigh Deeds, (WaPo Page A-29, 23 Sept 09). The plan consists of nine popular transportation sound bites and a โ€˜bipartisanโ€™ process. The process is based on the program employed by Gov. Gerald Baliles in 1985 / 86. Business-As-Usual interests like to point out that this was the last substantial increase in transportation funding in the Commonwealth. The mid 80s were also the point at which it became very obvious that more money was not โ€˜the answerโ€™ to the Mobility and Access Crisis.

    This has resulted in the evolution of The Three Legged Stalemate. On the one hand are those who want to find money to throw at the problem. On the other hand there are those who, for a variety of reasons โ€“ โ€œdo not raise taxes,โ€ โ€œlet someone else payโ€ and โ€œstarve the beast of governmentโ€ among them โ€“ do not want to spend money. A third perspective is that spending money is needed but spending it on the same things that have not worked in the past will only make things worse. This is the Three Legged Stalemate.

    In addition, the climate for bipartisan compromises has changed since the mid 80s as noted below. Before getting to that reality, what about the Donkey Clan transport sound bites?

    THE LIMITED VALUE OF SOUND BITES

    Every one of the nine Donkey Clan sound bites requires a set of detailed, specific conditions and caveats. The devil is in the details and without the specifics every sound bite could be โ€˜accomplishedโ€™ in a way that makes Mobility and Access worse, NOT better. At first blush, most of the ideas sound โ€˜goodโ€™ but are detrimental unless there is a clear definition of what exactly the sound bites mean.

    For example the first Donkey Clan sound bite is โ€œBring high-speed rail to Virginia.โ€ Here the parameters of success are very clear:

    Unless there are supportive land uses in the station areas of a high-speed rail system (including across-the-platform connections to SubRegion-serving shared-vehicle systems) building high-speed rail lines will NOT improve Mobility and Access in the Commonwealthโ€™s three New Urban Regions.

    These three New Urban Regions are where over 85 percent of the economic activity is concentrated and nearly that percentage of the population of the Commonwealth lives and works.
    Every one of the sound bites requires similar specific caveats.

    โ€œSPECIFICSโ€ BEHIND THE GENERALITIES?

    On 27 September, WaPo published responses from the Donkey Clan and Elephant Clan candidates titled โ€œMy (Specific) Promises to Northern Virginia.โ€ We leave it to others to judge which Clan representative makes the most effective promises.

    However, with respect to โ€œThe Transport Problemโ€ each trots out a list โ€“ or by vague reference embraces โ€“ the Business-As-Usual wish list of โ€˜projects.โ€™ The named projects are examples of just what one would hope were NOT the โ€œcontentโ€ behind the sound bites โ€“ if the objective is Mobility and Access for a majority of the citizens in the Commonwealth.

    The Elephant Clan is STILL proud that they unveiled the AntiPlan overlooking I-66 instead of Columbia Pike. For the reasons spelled out in โ€œTransport Strategy Disasterโ€ that is NOT a good thing.

    AND THE DONKEY CLAN PROCESS?

    After carefully articulating the parameters of the sound bites and a full evaluation of all the projects on the Business-As-Usual wish list, the next hurtle is the probability of having a better outcome from a bipartisan process than was the case over that last four years โ€“ or the last two decades.

    Based on the last decade of transport funding conflict in Virginia (and almost every other topic on state and national political agendas) signing a bipartisan bill to raise money for the nine sound bites is wildly optimistic โ€“ or a good excuse for nothing at all getting done.

    There is no question that Business-As-Usual likes the Donkey Clan โ€˜planโ€™ better than the Elephant AntiPlan because it is presumed that it would entail spending more money. The 24 September WaPo editorial was titled โ€œHonesty on Transportation: Mr. Deeds has leveled with Virginia voters, Will they listen?โ€ WaPo has consistently confused solving โ€œThe Transport Problemโ€ with spending money on what has not worked, is not working and will not work in the future.

    The real question is: Will citizens vote for the nine sound bites and a bipartisan process or will they vote for another no tax promise?

    BUT WAIT JUST A MINUTE!!

    The PROBLEM IS that MONEY is NOT โ€˜THE PROBLEMโ€™ with Mobility and Access.

    Pretending that money is โ€œThe Problemโ€ and pretending that building more of the same infrastructure is โ€˜The Solutionโ€ leads to repeating the wrong questions and perpetuating the myths outlined in โ€œThe Transport Strategy Disaster.โ€

    The REAL questions are, will Commonwealth Agencies:

    โ€œStart to prepare citizens for the future now?, OR

    โ€œWill they allow the drivers of the Mobility and Access Crisis to fester for yet another election cycle?

    It is just a matter of time โ€“ and time is running out โ€“ before the lack of Mobility and Access will explode with devastating impact on the economic, social and physical well being of every citizen in Virginia.

    STOP LYING TO CITIZENS

    The first step is to stop lying to citizens.

    Traffic congestion is NOT the problem, and

    More roadways for Large, Private vehicles to carry passengers, goods and services are not the โ€˜answerโ€™ REGARDLESS of who pays or if it is called โ€˜taxโ€™ or manna.

    Of course there is a need to invest in infrastructure.

    Of course it will take a lot of money to make up for past neglect of infrastructure.

    Of course it would be nice to have a fair distribution of costs and a rational nexus between use of and payment for transport infrastructure. If that had been the strategy for providing Mobility and Access when the Commonwealth took responsibility for roadways 85 years ago there would not be a Mobility and Access Crisis now.

    But we are where we are and it is time to come clean:

    THE PROBLEM is almost exclusive reliance on Large, Private vehicles to provide citizens with Mobility and Access. It does not work.

    Exclusive reliance on Large, Private vehicles did not work in times of cheap energy and it will be a disaster to pretend it is a viable option as the cost of energy goes up.

    It turns out that Large, Private vehicles have NEVER been a good option to provide the majority of citizens with Mobility and Access.

    Even in relatively Balanced Urban agglomerations โ€“ and in spite of massive subsidies, direct and indirect โ€“ more that half the citizens are too young, too old, or have other conditions that isolate them when the only source of Mobility and Access is Large, Private vehicles (aka Autonomobiles). It is clear that Autonomobiles have provided Mobility and Access for an even lower percentage of the citizens in intensively developed Urban areas (the ones with the lowest per-capita consumption of energy and resources) and in areas of intensive poverty.

    LOOKING BACK

    The peak economic and social efficiency for Large, Private vehicles came in the mid-fifties. At that time a junior in high school could earn enough money in one summer to buy a very serviceable Large, Private vehicle. If Junior paid attention in shop class and read the ownerโ€™s manual they could keep the vehicle running at an affordable cost. Society wide erosion of Mobility and Access has been caused by two forces over the past 50 years:

    โ€ข Ever more complex and expensive Autonomobiles

    โ€ข Ever more dysfunctional settlement patterns

    As Urban agglomerations grew larger and higher percentages of Households which are forced to rely on Autonomobiles for their Mobility and Access, congestion, delays and deaths grew.

    In every large Urban area in the US of A traffic congestion has grown every year for over two decades in spite of billions is roadway construction. At the same time community and environmental destruction has escalated.

    When viewed from a Regional perspective Autonomobiles are a splendid means of driving consumption but they are not an efficient means of Transport. The larger the Urban system (Region), the more inefficient Autonomobiles become. That was true with artificially cheap fuel. As energy cost rise, new technology cannot paper over the fundamental problem with reliance on Autonomobiles for Mobility and Access.

    Scholars and independent researchers have been predicting citizens would reach the end of the road for reliance on Autonomobiles since the 1920s. The โ€œnon-polluting alternative to the horseโ€ turns out to be no more efficient than its four legged predecessor due to the same reality of physics:

    The space to drive and park the Autonomobile disaggregates Urban settlement patterns to the point of gross dysfunction for Urban economic and social activities. (See THE PROBLEM WITH CARS โ€“ PART IV of TRILO-G.)THE DEBT CHASM

    There is a gaping hole in the road ahead for Large, Private vehicles: It is called debt. This debt chasm is made up of: The rising cost of energy, the rising cost of mitigating of environmental impacts, the growing balance of trade deficit, the growing military costs of energy security, the cost of past deficit spending (Household, Agency, Enterprise and Institution), the Wealth Gap and most of all the cost of evolving functional, sustainable human settlement patterns.

    Citizens in Virginia, the US of A and in the First World have burned through Natural Capital in an attempt to cover the costs of patterns and practices of consumption that are unsustainable.

    Now humans must learn to live on Natural Income.

    Pay for past sins of Mass OverConsumption and debt and start living on income or bid goodby to democracies with market economies. Only brutal, totalitarian, dictatorships can maintain the vast disparities in wealth, happiness and safety that result from an inequitable allocation of resources.

    With the rising cost of energy, a growing number of Households will not be able to afford Large, Private vehicles. They will also not be able to pay their fair share of the cost of dysfunctional, scattered settlement patterns. These dysfunctional patterns are dictated by the space needed to drive and park Large, Private vehicles. (See THE PROBLEM WITH CARS noted above.)

    As outlined in โ€œTransport Strategy Disasterโ€ (Baconโ€™s Rebellion Blog, 1 Sept 09) after Agencies stop lying to citizens about the shape of a viable, sustainable future, the next step is to articulate human settlement patterns that are sustainable. A four step process to accomplish this is laid out in โ€œTransport Strategy Disaster.โ€ THEN Mobility and Access systems can be designed to serve these functional settlement patterns.

    THE BASIC PARAMETERS

    A sustainable future requires a Fundamental Transformation in human settlement patterns. Settlement patterns must accommodate a society in which 95 percent of the citizens rely on Urban activities to support their Households. The way to create places where citizens are happy and safe is to have:

    Balanced Communities inside the Clear Edge around the Cores of New Urban Regions and Urban Support Regions, and

    Balanced But Disaggregated Communities in the Countryside outside the Clear Edge around the Cores of New Urban Regions and Urban Support Regions.

    Some would like to profit from creating more Urban places. There are already too many half-built โ€˜placesโ€™ with vacant and underutilized land. These dysfunctional places must evolve to
    become Balanced Places by repairing the scattered and unconnected Urban fabric that now exists.

    One of the most effective tools to create more functional settlement patterns is the creation of shared-vehicle systems serving functional and Balanced Urban activities in the station-areas.

    Failure to understand this reality is why the Elephant Clan choose the wrong place to announce their AntiPlan as articulated in โ€œTransport Strategy Disasterโ€

    The future will not arrive over night but in the long term there must be:

    โ€ข Fewer and fewer Large, Private vehicles

    โ€ข More and more energy efficient shared-vehicle systems for passengers and freight

    โ€ข Less reliance on vehicles of any kind

    The decline in the overall use of vehicles will reflect the fact that vehicles โ€“ especially Large, Private vehicles โ€“ will become more and more expensive.

    In addition, with functional settlement patterns, more and more citizens will already be where they want and need to be, or a short walk away. The human body requires exercise and walking, not vehicles, is the most efficient way to Access nearby destinations for most citizens.

    With functional human settlement patterns, shared-vehicle systems can provide high value trips necessary to support quality of life but vehicles will NOT be needed for most trips now requiring Large, Private vehicles due to settlement pattern disaggregation.

    A functional Balance of transportation system alternatives will often include:

    โ€ข A Network of paths and roadways to provide Mobility and Access via walking / human powered vehicles / small self propelled vehicles

    โ€ข Shared Vehicles โ€“ jitneys, short term rental vehicles, car pools / Personal Rapid Transit / street cars / light rial / heavy rail

    โ€ข IntraRegional Rail (often mischaracterized as โ€˜commuter railโ€™)

    โ€ข InterRegional Rail / High Speed Rail

    โ€ข Boats

    โ€ข Aircraft

    When the total costs of location decisions are equitably allocated, a diverse, functional system of Mobility and Access options will facilitate the transport of goods, services and passengers by the most efficient and functional mode.

    When the total costs are fairly and equitably allocated to support CONSERVATION and NOT CONSUMPTION, Regional and Subregional import replacement will provide a more efficient way to supply many (but not all) Regional needs. This will reduce the total transport demand.

    And what about those โ€˜commutersโ€™ to whom both the Elephant Clan and Donkey Clan pander?

    There is no way to โ€˜helpโ€™ those who now rely on Large, Private vehicles for long commutes except to help them become non-commuters by evolving Balanced Communities.

    THE FUTURE OF DEMOCRACIES WITH MARKET ECONOMIES

    What is the alternative to a fair allocation of resources, evolving more effective, democratic governance and creating better informed markets? Totalitarian dictatorships.

    Dictatorships from the right or from the left are the only way to forcibly maintain gross disparity in wealth that has been derived from consumption of natural capital by using contemporary technology and abusing economies of scale. The Wealth Gap has been growing for two decades. The Wealth Gap will continue to grow at an accelerating rate due to settlement patterns that require costly and inefficient vehicles to secure Mobility and Access.

    Unless there are functional human settlement patterns that facilitate Mobility and Access without resort to inefficient vehicles, only a few at the top of the Ziggurat will be able to rely on vehicles โ€“ the rest walk for ALL their trips. There are working models of the future under these conditions โ€“ it was formerly called The Third World.

    When the majority at the bottom realize there is no way to work their way up, chaos will be the order of the day, of the year and of the decade.

    The existence of large, complex Urban agglomerations is the only configuration of human settlement that has demonstrated the capacity to maintain a competitive, technologically driven โ€œmodernโ€ society. Large New Urban Regions attract and support not just โ€˜workersโ€™ but the Creative Class upon which positive evolution of civilization depends.

    Evolution of governance cannot not stop with democratic Region structures to govern New Urban Regions and Urban Support Regions but must extend to the smaller scales of organic human settlement.

    Governance Agencies close to the governed are an absolute necessity in a society of educated citizens. The most important Agency is at the smallest practical scale for direct democracy, the Cluster. Representative democracy at the Neighborhood, Village, Community, SubRegional and Regional scales are also critical.

    Pretending to โ€˜solveโ€™ The Transportation Problemโ€™ by throwing money in the roadway will only prolong the lies and Myths, perhaps past the point of no return.

    There must far more investment in infrastructure in the future. Collectively, citizens and their Organizations have been paying nowhere near the cost of the current trajectory.

    A sustainable future will require money to be raised and spent but not for roadways for Large, Private vehicles.

    In the short term the problem is how to stop lying to citizens without causing them to abandon all hope. It is unrealistic to assume either Clan will be able to make this change before election day.

    However, the next day…

    EMR


  • The Twilight of Pax Americana

    It’s not often that I find myself agreeing with op-eds in the Los Angeles Times, but a piece by Christopher Layne and Benjamin Schwarz, “The Twilight of Pax Americana” is must reading. In a nutshell: The United States is on a fiscally unsustainable path that will undermine its ability to continue playing the world’s policeman. We cannot long maintain our military commitment to allies, much less continue fighting endless wars overseas. As our power recedes, regional powers will fill the vacuum. The era of global U.S. dominance is coming to an end.

    The decline of American power will have severely negative economic consequences (and not just for us). Write the authors:

    Although the weakening of the Pax Americana will not cause international trade and capital flows to come to a grinding halt, in coming years we can expect states to adopt openly competitive economic policies as they are forced to jockey for power and advantage in an increasingly competitive security and economic environment. The world economy will thereby more closely resemble that of the 1930s than the free-trade system of the post-1945 Pax Americana. The coming end of the Pax Americana heralds a crisis for capitalism.

    Many – the kinds of people who create posters like the one shown above — will cheer to see the U.S. humbled. But the world will see (this is me speaking now) that the U.S. was the most benign hegemon in world history. We maintained a world order based on relatively free trade to lift hundreds of millions of people out of poverty. The end of American dominance will lead to more military conflict, more anarchy, more disruption of trade, more poverty and a greater slaughter of innocents. We will see more Somalias, more Congos, more Afghanistans and more Dafurs as vast swaths of the globe revert to barbarism.

    This is the world that is unfolding — the world in which Virginia is a part. Speaking parochially, the most immediate impact will be the contraction of the military sector, upon which our state’s economy is so dependent. As Layne and Schwarz write: “This will mean radically scaling back defense expenditures, because discretionary nondefense spending accounts for only about 20% of annual federal outlays.” But that’s only the beginning. When federal insolvency comes, the federal civilian sector will contract as well. World trade flows will be disrupted. Refugees will seek asylum. But the new world order won’t be entirely negative. Financial and human capital will seek safe havens.

    If we’re not thinking ahead and preparing ourselves for this world, we Virginians are living in la-la land.

  • ‘Atta Boy, Bacon


    From time to time, one must admit he is wrong — or maybe not quite right.

    I’ve been critical of Jim Bacon for his jeremiads against debt and deficit spending, but last night I had a moment of epiphany that shows that he might be on target here.
    By some chance, I was invited to a talk and reception up in DC at a restored mansion just off 16th Street for Prof. Jim Thurber of American University, someone I have talked to for magazine stories over the years, A number of foreign diplomats gathered to hear Thurber, who is probably the country’s leading academic expert on lobbying Congress and federal agencies.
    Thurber says that he is indeed worried about the debt and that at some point it could become 100 percent of GDP. The Congressional Budget Office says that the debt as percentage of GDP was 33 percent in 2001 but will be about 54 percent this year and could be 68 percent by 2019.
    One reason, Thurber notes, is the troubled history of PAYGO, which was instituted in 1990 during the George H.W. Bush Administration which compels any new spending not be added to the federal deficit. Bill Clinton adhered to PAYGO and the U.S. budget deficit shrank to a surplus. The PAYGO expired in 2002 and was not renewed in part because Bush II was anxious to get to his unneeded and irresponsible tax cuts.
    Congress has screwed around with PAYGO ever since. The results have been catastrophic: a $236.2 billion budget surplus in 2000 quickly grew to a deficit of $377.6 billion after 2003 and keeps growing.
    Prof. Thurber says the Wars in Iraq and Afghanistan are “immoral” in the sense that the U.S. is not paying for them, really. It is borrowing for them. Of course, in my view, this is a Bush policy that the right wing can’t stick on Obama despite all the outcry over his stimulus package and health care bill.
    A few other nuggets from Prof. Thurber:
    • Obama has been a big success in his ability to focus, speak publicly, administer staff and turnaround America’s image overseas which had been badly damaged by Bush.
    • He made a big mistake early on by simply turning over the Congress such major legislation as “cap and trade” to reduce greenhouse gases. In the hands of Rep. Henry Waxman and lobbyists, the result has been a dog’s breakfast.
    • Congress has been so polarized that there is really no “middle” any more.
    • Obama mishandled the health care reform initiative and is paying the price. One wonders why Senate Finance, instead of more appropriate health committees, are leading the charge.
    • Efforts to reform financial services and police practices such as off the books derivatives trading that almost brought the money system to its knees are getting the “slow dance” by lobbyists. The strategy is to slow all reform efforts down so only a few things really get passed.
    • Lobbyists are having a field day.

    Anyway, it was a fun evening. And Bacon should take a bow.

    Peter Galuszka

  • Random Fact of the Week: Corporate Income Tax


    Corporate income tax as a percentage of gross revenues reported to the IRS (2008):

    United States: 12.9%
    Virginia: 17.3%

    Source: Internal Revenue Service Data Book (2008), Table 5.

    Question: What does this tell us? How do we explain the fact that corporations account for a disproportionately large share of the federal income tax take in Virginia than in the United States as a whole? The same federal tax code applies across the country. Do Virginia certain industries disproportionately benefit from special tax breaks analogous to the oil depletion allowance? Alternatively, do Virginia businesses pay higher taxes because they are more profitable? Or, another theory: Do Virginia businesses pay higher taxes simply because we have more large tax-paying corporations domiciled in the state?

    I’d like to see you braniacs out there weigh in on the issue. Perhaps you can bring some relevant data or analysis to bear.


  • Same As the Old Boss

    For all the wailing one hears, especially in Virginia, about Barack Obama being some kind of radical with a socialist agenda, let’s take a reality check.

    It wasn’t enough a few weeks back that many school systems in Virginia and the U.S. refused to show his speech to school kids because they feared some kind of “politicized” leftist message. This riff is also strummed in the state’s gubernatorial race where social right-winger Bob McDonnell faces a good chance of taking the position away from the Democrats for the first time in eight years.As for Barack, let’s take a measure of the man. My yardstick shows that in many ways, he’s not that much different that the hapless George “W” Bush (remember him?). A few points:
    • Obama seems to like national security secrets just as “W” and is taking measures to preserve them.
    • Obama is as tough, if not tougher, on illegal immigration, as Bush. He’s pushing a national electronic system to verify immigration status immediately and has tightened up borders. The only diference seems to be that Obama goes after employers while Bush went after the workers.
    • The meltdown of last year showed that financial services badly needs more regulation not less. Obama is backing away from several campaign initiatives, namely: a Consumer Protection Agency to protect Average Joes from predatory practices. Obama is backing down from putting teeth into the plan. True, business groups like the U.S. Chamber of Commerce are fighting the pro-consumer plan tooth and nail, but none other than Rep. Barney Frank, The Big Liberal, is emasculating the plan. Despite his populism, Frank gets a lot of financing from, you guessed, banks.
    • Credit ratings agencies like Standard & Poor’s, Moody’s and others failed miserably at reporting honestly on the derivatives, CDOs and CDSs that so poisoned the financial well last year. An S&P guy said they’d rate cows if asked. But Obama has backed away from tough regulation of these groups.
    • Former Fed Chief Paul Volcker is criticizing Obama for building in “too big to fail” guidelines into future bailouts that got Bush’s people so much criticism.
    • After the Dems dumped all over the Bushies for “the surge” in Iraq, Obama wants one for Aghanistan although he may be changing his mind.

    And so it goes, if you remember that famous song by The Who.

    Peter Galuszka
    PS: Next time you bloggers get into financial bailouts, remember that JP Morgan Chase, U.S. Bancorp Cap One and BB&T have all paid theirs back. Citi, Bank of A and Well Fargo all still owe big time.

  • Health Care Reform: Giving Virginia a “Wedgy”

    The Virginia Institute for Public Policy has published a must-read analysis of the impact of proposed health care reform on Virginia. Far from bringing the cost of health care under control, as its advocates assert it will, “reform” based on President Barack Obama’s principles will drive medical price inflation 5.2% above what it otherwise would be by 2019. Higher medical costs will run up both federal and state spending, costing every man, woman and child in Virginia $4,176 in net present value.

    The study, “The Prognosis for National Health Insurance: A Virginia Perspective,” is co-authored by Donna Arduin, a partner with Arduin, Laffer & Moore Econometrics. The Laffer in the firm is none other than Arthur Laffer, of “Laffer curve” fame.

    Now, people can argue numbers all day long, so I recognize that those predisposed to support Obama’s plans will dispute the study’s numbers while those predisposed to criticize Obama will defend them. I won’t waste your time describing the methodology. What I thought interesting, though, was the explanation of why Obama’s version of health care is doomed to fail: It fundamentally misdiagnoses the problem.

    The study contends that the grievous flaw in the American health care system is the “wedge” between consumers (patients) and suppliers of health care services. Medicare, Medicaid and private insurance are structured so that patients have been paying a steadily declining percentage of their health costs out of pocket over the past 40 years. When consumers don’t pay for their treatment, they don’t care what it costs. (Indeed, we have reached a point where most consumers don’t even know what their treatments cost.) When patients fail to apply consumer pressure on medical providers, all manner of inefficiencies enter the health care system.

    On the consumer side of the market, the wedge diminishes consumers’ incentives to monitor costs; after all, consumers bear only a fraction of the costs from any additional health care service. On the supplier side, doctors and other medical providers receive no incentive to provide higher quality services for less cost. No positive benefit accrues to those who do so. … The [system] removes competition and patient feedback that drives innovation.

    The Obama administration reverses the cause-and-effect relationship between the number of uninsured and the cost of health care. Obama suggests that the growing number of uninsured is pushing up the cost of health care, and that the way to curtail out-of-control spending is to make sure everyone has insurance. The causality, writes Arduin, actually runs the other way. Out-of-control health care costs (along with counter-productive government regulation) make medical insurance increasingly unaffordable for a growing number of Americans.

    If you’re tired of hearing proponents of a bigger government role in health care blaming the failure of “free markets” for U.S. health care woes today, this study is well worth a read. There is no such thing as a “free market” in U.S. health care. In our bastardized system, a nominally private sector operates within a regulatory framework dictated by government. Increasing the wedge — transferring power and responsibility from patients and doctors to politicians and bureaucrats — will make the problem even worse.