Budget Rumble

Does a $641 million revenue shortfall in the state budget justify tapping the state’s Rainy Day Fund?

Gov. Timothy M. Kaine thinks it does. He is willing to lay off 74 state workers and reduce the state workforce by another 386 jobs through attrition, saving some $39 million. He’s ordered agency spending cuts of $54 million, instituted operating efficiencies expected to yield another $92 million, and cut programmatic costs. He’s even willing to return five percent of his annual salary. That amounts to about $300 million. But that’s all he’s willing to cut.

Says Kaine in a press release: “The Revenue Stabilization Fund was created for just this type of budget situation—a sudden, unexpected change in economic conditions after a budget has been adopted by the General Assembly. The Fund has specific triggers that have to be met before it can be used, and those triggers have been met this year.”

The House of Delegates leadership says, “No way, Jose.” (Well, that’s what GOP legislators would say if they weren’t so worried about illegal immigrants!)

House Speaker William J. Howell, R-Stafford, and Vincent F. Callahan, R-Fairfax, make their case this way:

The Commonwealth is not in a recession and our economy continues to grow, albeit at a slower rate. Unlike the recession earlier this decade, when the state actually collected less revenue, the most recent updated revenue forecast presented by Secretary Wagner in August indicates Virginia’s revenues will grow 3 percent in the current fiscal year (FY 2008). Through August, growth stands at 3.4 percent.

Many lawmakers believe it is ill-advised to consider using the Rainy Day Fund under these circumstances. If we begin the practice of using the state’s Rainy Day Fund during a non-recessionary period, we run the risk of establishing a precedent that suggests that the Commonwealth can overspend taxpayer resources without consequence.

I agree with Howell and Callahan: The circumstances don’t warrant dipping into the kitty. However, they don’t specify where spending should be cut. Might I make a humble suggestion? Kaine has covered nearly half the shortfall through cuts in the operating budget. Cover the rest through reductions in capital spending. If I recall correctly, the legislature had loaded up the current budget with $1 billion on more in funding for roads, water treatment plants and other capital improvements. Roads in particular were to be funded with surplus funds. If the surplus evaporates, then so should the road spending. Sounds like a no-brainer to me.

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28 responses to “Budget Rumble”

  1. Anonymous Avatar

    “He is willing to lay off 74 state workers and reduce the state workforce by another 386 jobs through attrition,….etc.”

    If successful, Kaine will have reduced the size of Government more than any Republican (RINO’s included) has in the past 10 years.

    Give some credit where credit is due.

  2. Groveton Avatar

    No transparency, no Rainy Day fund.

    Virginia’s politicians can’t be trusted with over a half billion dollars in cash. They will blow it on something stupid and then cover it up.

    What was the name of that coal fired power plant that generates electricity at 58% efficiency and must use overpriced Virginia coal?


    Get the money out of their hands.

    Build the roads.

    Build the water treatment plants.

    Subsidize corporations to come to SW VA.

    Jim – you say they may over spend relative to taxes raised. They have already over taxed relative to need – isn’t that how they built the Rainy Day fund to start with?

    Or ….

    Just give it back to the taxpayers.

    Virginia’s population is just under 8 million people. How big a check could be written to every man, woman and child in the Commonwealth with the money that the politicians have stashed by over-taxing the citizens.

    When a corporation has more cash than good ideas where to spend it they:

    1. Pay a regular dividend (or increase a regular dividend).
    2. Buy back shares.
    3. Make a one time distribution of the cash back to the shareholders.

    If Virginia has so few good ideas for the cash they have hoarded then they should give it back to the people who really own the money – the taxpayers.

  3. Groveton Avatar

    Is there really $1.2B in the Rainy Day Fund?


    Or, $150 for every man, woman and child in VA?

    I have a wife and 5 kids. That’s $1,050. And, what the pseudo-conservatives on this blog fail to understand, that’s my money!! It’s not Kaine’s money or Callahan’s money, it’s my money and your money and all the other people’s money.

    Gimme me back my money!!

  4. Groveton-

    I would add that corporations also set up their own investment funds, which give them a cushion against risk and allow them to guarantee a reliable dividend off of interest.
    Alaska’s Permanent Fund is based on this principle, allowing the state to share a steady amount of its oil revenues with residents, while maintaining a good reserve of funds to help Alaska transition as the oil runs out. I believe such a system makes enormous sense in Virginia once we move towards Fundamental Change and price government services more intelligently, as Alaska does with its oil rights.


  5. Groveton Avatar


    Corporations do not hedge their risk of decreasing revenues with cash. You cannot magically turn cash into revenue. Any CFO who tried to do this would go to jail. You can return the cash to shareholders or you can invest the cash in something that will generate revenue. But you can’t declare cash to be revenue when you are short of revenue.

    As for corproations using investment funds to generate interest which is paid in dividends – not really. While most corporations can do this to a certain extent there are strict caps set by the government on this type of activity. If you exceed these caps you become regulated as a financial institution – regardless of what type of business you claim to be. That’s because the federal government understands that the skills required to manage large investment funds are different than the skills required to manage large factories (for example). There are strict disclosure requirements for publicly traded investment-based businesses.

    Read Tim Kaine’s bio:


    Does he have the background to manage a $1B+ investment portfolio? Not in my view. I don’t want him investing my money. And it IS my money.

    I can also sell the shares of any corporation where I believe management is squandering my money. Is there an alternate government in Virginia where I can put my $1,050 worth of the Rainy Day Fund? I might even let Mark Warner invest my money for me. He has some real skill in that regard. But a career lawyer, housing advocate and politician? You must be kidding me.


    That’s the best example you can cite?

    Alaska has a state-wide population of 670,000 or so. Almost twice as many people live in Fairfax County alone.

    Alaska may be a well run state but it bears no resembelence to Virginia.

  6. Anonymous Avatar



  7. Lyle Solla-Yates Avatar
    Lyle Solla-Yates


    I haven’t looked into this since my last attempt at starting a C Corp, so my information may be stale. However, last I checked, the test for whether a company is a Personal Holding Company (and enjoys a special 39.6% tax on undistributed income) is whether it:
    A. has 60% or more personal holding income compared to adjusted gross income (great majority of income from other investments than the businesses core activity) and also
    B. has five or fewer individuals owning 50 percent or more of outstanding stock.
    Very few businesses employing the strategy I describe would fall under that category. Are you referring to some other reason that corporations can’t invest in the market that I am not aware of? I know of examples like Microsoft’s ownership of Apple stock, but haven’t studied the subject systematically.
    And anyway, where it occurs, investment in the market is part of the financial calculus you accurately describe, comparing the net present value of investment with other project options, and terminating with dividend returns to stockholders, stock buybacks, and cash disbursements.
    I agree that the Alaska analogy is moot. I hadn’t considered the difference in the nature of the revenue held in the respective accounts. Alaska’s fund is a way of stewarding an unsustainable windfall from public assets for an established purpose. I frankly don’t understand the purpose and need of Virginia’s fund, but I agree that its sources in taxes on productive activity give it a higher standard to pass. If it doesn’t pass that standard, then I agree that the money should be returned to the taxpayers.

  8. Larry Gross Avatar
    Larry Gross

    geeze … here I was thinking that Va is considered… even by the Wall Street guys to be one of the better more fiscally responsible states…

    not to say there is not major room for improvement.. but methinks Groveton might really go ballistic in some of our other states that by comparison would make Va. look like it qualified for sainthood…


  9. James Atticus Bowden Avatar
    James Atticus Bowden

    Still would like to see the numbers.

    1. Last actual budget.
    2. Projected budget.
    3. Actual or corrected estimate of revenue.

    Where are those numbers?

  10. Anonymous Avatar

    I’m one guy. I don’t have enough investment clout to invest in much that makes a big return to me, except over a long period of time.

    The state is a consolidator. They can collect a little here and a little there and make an investment that is better than each of us could have made alone.


    If they can’t, then Gimme back my money.


  11. Groveton Avatar


    This is coming from back in the “dot bomb era” so forgive me if my memory is faulty.

    I believe the question is whether a company falls under the Investment Company Act of 1940. As I recall, under that law a company must have less than 40% of its total assets invested in securities in order to avoid being defined as an Investment Company and regulated under the Investment Company Act.

    A number of the dot com type companies had raised a fortune in public offerings and had no good ideas as to how to invest the cash they had on hand (kind of like the Rainy Day Fund). So, they started buying securities with the cash. The Feds said, “Hey boys, are you a technology company or an investment company?”. Almost all of the prospecti (sp?) for technology IPOs of that era had a section discussing why the company would not fall under the Investment Company Act of 1940.

    As for the Rainy Day Fund – I really don’t want the state as my stockbroker. If they run short on tax money they can cut spending or raise taxes or both. They are not qualified investment managers and I don’t trust them with my money. They pay neither interest nor dividends. There is no capital appreciation. The Rainy Day Fund is a bad investment of my money. If I want to invest in Virginia I’ll buy municipal bonds.

    Regarding fiscal responsibility – Enron and Worldcom looked like well run companies until the hooey hit the fan. Other companies like Eastern Airlines looked good for years but went bankrupt without fraud. New York City teetered on the brink of financial ruin for a while. Chrysler needed a Federal bail out.

    Virginia is a fiscally well run state only up to the point there are no hidden fiascos ready to explode. If the transportation crisis cripples Virginia’s economy then the “bad news dominoes” will fall in a big, big hurry. The same Wall Street guys who love Virginia today will pull their money and good bond ratings in a “New York minute” when things start to go South (pun intended). Ask Indonesia how that works. From darling to goat in about 4 months.

  12. Larry Gross Avatar
    Larry Gross

    interesting and thoughtful observations…

    You and other folks talk about how the transportation crisis can “hurt” Virginia.

    How so?

    Be specific and show other states experiences.. one’s who are nowhere close to the “hurt themselves” threshold and others.. who have demonstrated economic harm – due to … not doing.. what needed to be done in terms of transportation infrastructure.

    Illustrate what is a “good” transportation model that produces the desired economic benefits and show where Virginia is falling down on meeting that goal.

    I’m trying to understand how Virginia’s experience with it’s transportation issues is good, bad, indifferent.. compared to other states.. urban areas.

    From my little world.. I see places like LA, Houston, Chicago and Atlanta as not as well off as Virginia – transportation-wise.

    In fact Georgia’s gas tax is less than 1/2 of Virginias – and Atlanta is an economic powerhouse despite massive sprawl/gridlock.

    so.. I’m asking you and the other folks who believe this to explain it further.. it certainly will help some of us (me included) to better appreciate at least what some folks think Virginia should be doing…vice current efforts.

  13. Toomanytaxes Avatar

    Larry, Georgia imposes development impact fees that include transportation funding requirements. I’ve worked with clients that have paid them.

    I’d never argue that development impact fees alone can fix public facility problems, but they sure as all heck help.

    Moreover, Atlanta does not have the advantage of huge inputs of federal contracting dollars to the same extent that Virginia does. Georgia has a stronger real economy that does not depend so much on federal appropriations.

    Finally, I’m not aware that Georgia has increased taxes regularly as has occurred in Virginia.

    It makes one think.

  14. Anonymous Avatar

    Larry, get your facts right…

    “In fact Georgia’s gas tax is less than 1/2 of Virginias – and Atlanta is an economic powerhouse despite massive sprawl/gridlock”

    is completely a lie. Look it up GA gas tax is 15.2 cents per gallon plus a statewide 4% sales tax and in you economic powerhouse of Atlanta, another 1%. So at current gas prices it is about 24 cents per gallon in atlanta versus 17.5 in VA.

    “Numbers don’t lie, people do”

  15. Anonymous Avatar

    If the tax is per gallon, why do current gas prices make any difference?

    Georgias gas tax would appear to be 37% higher than in Virginia.

    Maybe Atlanta’s sprawl is one of the reasons it is a Powerhouse: their is traffic congestion isn’t as bad as it might be in half the space.

    Gerogia has 60,000 more miles of rural roads and 30,000 more miles of urban roads. Georgia travels 49,480 million VMT of which 14.7% is trucks and Virginia travels 41,682 million VMT with only 4.7% trucks.

    How much more do they spend per lane mile, and how much more per VMT?


  16. Larry Gross Avatar
    Larry Gross

    I did screw up.. I was reading an
    article making the point that the inflation-adjusted value of the gas tax in Georgia is about 6 cents and basically suffered a brain fart… in my facts..

    my error.

    but I think my point stands that Virginia is not underfunding transportation any more than most states and that the basic problem is national in scope and not due to any State including Virginia as conciously deciding to cut funding and reduce their investments.

    Rather… a combination of market forces has .. resulted in… the problem.

    * – gas tax not adjusted for inflation

    * – construction materials skyrocket in price

    * – more and more fuel-efficient cars resulting in gas tax revenues not keeping pace with gasoline useage

    * – the prospect of higher gasoline prices AND even more fuel efficient cars – possibly more hybirds and plug-in hybrids – portends more problems.

    * – in most states, including Virginia, the current revenues from gasoline taxes barely covers maintenance for the existing roads (and some would say if you include bridges, it does not cover at all).

    So… we end up with many states, including Virginia no longer having money for new roads.

    This is not a purposely strategy of the State cutting funding for roads.

    It is a circumstance that has come about that it cannot control – and more important, it cannot easily adapt to in a fiscal sense.

    Proponents claim that the answer is simple. The state must put more money into roads or bad stuff will happen.

    What I asking.. is for some examples of bad stuff happening… but also… show me an example of where the bad stuff was corrected by an infusion of more money for roads.

    In other words, I’m a bit skeptical that more money.. is the answer… realistically … but even from a functional point of view.

    And I gave examples of booming urban areas whose congestion problems are as bad or worse that the Wash DC/Virginia area and I don’t see their economies shutting down .. or even harmed.. in any sense that people agree to.

    and yet… we do have people who claim that we will.. see… harmed economies as a direct result of “under-investing” in transportation.

    I’m asking for examples… of places whose economies have actually declined/shrunk as a direct result of transportation congestion.. and a lack of adequate funding for more roads.

  17. Anonymous Avatar

    “I’m asking for examples… of places whose economies have actually declined/shrunk as a direct result of transportation congestion.. and a lack of adequate funding for more roads.”

    This why you need that reference junction. How would you possibly know the answer to that question?

    First, it is possible that the economy and congestion would continue to grow, but at a slower rate, and the damag would be in the slower rate.

    It is possible that the congestion and economy stayed the same, but what might have been new growth went someplace else.

    It’s posible that congestion declines because the economy declines, and we have seen this.

    So, the real question is, what else could we hvae done with all the waste that congestion represents? Wasted fuel, wasted time, and wasted environment?

    When we propose solutions to congestion, if they do not reduce the waste, fuel, and pollution, then they are not solutions. They have not helped us a bit.

    Therefore, getting a few more people downtown on a HOT lane is probably not an answer.

    Getting a lot more people downtown on the Metro or VRE is probably not an answer, because we have the same or worse waste as before.

    It is called solving the wrong problem.

    But, the TAMU study does list some places where congestion has increased more slowly than others because they have increased road capacity more. I guess we need to look ath those places and see if the residents there have more time, and money, and nerves left at the end of the week. Compare how often they turn their cars in for new, etc.

    If the state does not put more money in roads, in some places, then demand and supply will eventually take over. The bad thing that will happen is that some other place will get the business, and the traffic. Just because it is moved doesn’t mean it is lost.

    Atlanta isn’t shutting down because it is growing fifty acres a day, maybe. And if that does not happen, then the bad thing is more waste, more fuel burned for less value delivered, more concentrated pollution.

    The cost effective solution and the environmental solution are the same thing, or else someone is getting ripped off. Either way, whether you decide to cram more into less space, or use more space so you can do less cramming, you are going to have to put a price on open space, and pay that price.

    Our commuting, housing, and working problems are just a manifestation of that one little fact.


  18. Larry Gross Avatar
    Larry Gross

    the question remains.. though

    show me a place that has suffered quantifiable economic harm..as a direct result of “underfunding” transportation.

    This thread is about the budget rumble in Richmond and how to cover the gap.

    And several folks have suggested backing down on the road money…

    It would seem to me that if the road money was a guaranteed investment with a defined ROI.. that it would not be the place to cut the budget.

    TAMU.. it would seem.. as well as the Reason folks, etc.. wouldn’t that be THE definitive Proof?

    to have a list of the most econonmically vital places.. with the least congestion commensurate with a high level of transportation dollar investments.

    Where is that list?

  19. Anonymous Avatar

    TAMU reports on wasted time caused by congestion. Polluton is related to that, at least pollution that generates no economic benefit in return.

    TAMU reports the quatififable damage at around $1090 per commuter per year in the DC area. The results have been previously reported on this blog.

    The list also reports a few places that have beenable to reduce the rate of increase through prodigious expenditures or use of increased space. Atlanta is one of them.

    What we don’t know is whether the prodigious expenditures outweighed the loss they might otherwise have incurred. Some statistical inferences could probably be made, if we choose to spend the money to do the work.


  20. Larry Gross Avatar
    Larry Gross

    I think we don’t know squat.

    If we did.. “investing” in transportation would be an easily demonstrated “no-brainer”.

    More money for roads = higher regional gross domestic product

    I can easily demonstrate how a big gulp “wastes” money especially compared to a 2-liter that costs less than the big glup… then I can multiply it out to how many big gulps are “wasted” in a year to ..”prove” the harm being done.

    anyone can prove almost anything in this way.

    I’m asking to “prove”.. or least make a strong case that putting more money into roads and more lane miles in urbanized areas – leads to stronger economic results.

    No pro-road organization that I know of.. TAMU, the Reason Foundation, even the Roadbuilding industry in general.. as far as I know.. has produced a study that demonstrates how much dollar is returned for each dollar invested.

  21. Anonymous Avatar

    “I’m asking to “prove”.. or least make a strong case that putting more money into roads and more lane miles in urbanized areas – leads to stronger economic results.”

    We do know that roads are necessary but not sufficient. There are plenty of examples of roads that were built ostensibly for economic development purposes and then languished for years before development actually happend.

    There are also plenty of examples where economic development took a backslide, and suddenly there was excess road capacity.

    We know at least anecdotally of whole businesses that have packed up and left because of congestion. They may have been replaced with others with a higher tolerance, but it’s more likely they were replaced by businesses that just built the extra cost into their fees. Looked at that way, congestion is good for business: they can make more money and do no more productive work.

    If TAMU only estimated costs at $15.00 per wasted hour or something, it might capture the personal waste involved in getting to work and miss out on the additional costs associated with doing work, and the adder of overhead and profit on top of that.

    Maybe all those hours sittting in our cars would have been spent watching TV anyway, and there is no real productive loss. But when the GNP and VMT are so closely correlated, over a long period of time, it is hard to believe there isn’t at least some causality.

  22. Anonymous Avatar

    “I can easily demonstrate how a big gulp “wastes” money especially compared to a 2-liter that costs less than the big glup… then I can multiply it out to how many big gulps are “wasted” in a year to ..”prove” the harm being done.

    anyone can prove almost anything in this way.”

    And most of the time, they would be right.

    In this case we know pretty much how much fuel is being wasted because the vehicles are sitting rather than moving, and we know hoe much excess pollution that causes. Where we don’t agree is how much real damage the pollution does, and what is the cost of that damage.

    What we don’t know is how much fuel might be wasted by moving the vehicles farther than necessary. We can’t decide what necessary means.

    Assuming we could agree on what the damage from the waste is, we could estimate how many urban roads (or other projects) it would take to alleviate the waste, how much they would cost, and whether the effort was worth it. Then, if stronger economic results occur, that would be a bonus.

    Except the one thing we do know is that strong economic results will surely generate more traffic, utimately oveloading our projects (road or otherwise).

    Whatever those projects are, they will be more expensive in the urban areas, and therefore yield less return. If you knew that building x roads would produce y economic results, then you would NOT put them in the urban areas. You would get more bang per buck building them someplace where it is cheaper, but we have already seen some roads fail that test.

    You can see a GAO study on the benefits and costs of highway and transit investments at


    or read Winston and Shirley, among others.

  23. Anonymous Avatar

    One staement from the report is this:

    “However, benefit-cost analysis and other types of economic analysis usually pay limited attention to land use issues, in part, because land-use issues—as well as other indirect benefits—are difficult to estimate. The panel also highlighted the importance of taking into account which
    groups benefit from a project and which bear the costs. Although the
    distribution of transportation investments’ benefits and costs is an important local concern, it is frequently not considered adequately in the evaluation of a project’s benefits and costs.”

    In other words, we don’t know squat about land use benefits or costs, let alone the distribution of benefits and costs.

    We can either put forth the effort it will take to figure all this out, or we can throw the money in a box and figure it will all come out in the wash eventually.

    The strong correlation between GNP and VMT suggests this might be the case.

    All we gotta do is get off of each others backs, stop claiming anything and everything as unpaid externalities, and get on with the job at hand.

  24. Larry Gross Avatar
    Larry Gross

    ….” What we don’t know is how much fuel might be wasted by moving the vehicles farther than necessary”

    what we don’t kmow .. is how much fuel and highway capacity is wasted.. because someone wants to drive.

    Here’s an interesting POLL. How many miles does someone put on a car that is not leased verses a car that is leased with a penalty clause for high mileage?

    what if everyone was guaranteed 15K miles a year with 5K of rush hour driving – and penalities kicked in if you exceed your rush hour minutes or your total minutes?

    sound familiar?

    What do you think would happen to the cell phone network.. if everyone could talk anytime they wanted for as long as they wanted?

    No one rails about the terrible unfairness of the cell phone method of “congestion pricing” but put that same method on road via congestion pricing and some folks go high order.

    The same guy who has the cell phone bleats about the terrible unfairness of the “Lexus lanes”.

    why is it okay for the cell phone but not roads?

  25. Anonymous Avatar

    But we do agree that if the car is running and stuck in traffic, that is a waste, for the most part.


    All I’m saying is that there is a local minimum cost. Too many people going to one place and you have waste from congestion.

    Too many people using a gallon of gas to buy a gallon of milk, you have waste from traveling too much overbuying space, which is the antidote for congestion.

    Somewhere in between you have the lowest social cost, lowest private cost, and the least waste, pollution etc.

    That gallon of milk can travel on a shared vehicle – we used to have milk deliveries and bread deliveries. So there are alot of possible solutions.

    And after you figure all that out, fuel costs change, mortgage costs change, vehicle maintenance costs change, and the most optimum local solution changes.

    The only thing that doesn’t change or changes glacially is zoning, which pretty much guarantees your settlement pattern will always be less efficient than it might be.


    What if everyone was guaranteed jobs in their community would not exceed 125% of the number of people that lived there, with penalties kicking in for localities that exceed the limit? The state could assess the fees and use it to promote economic development for those that are below the limit.

    Sound familiar? Why not congestion pricing on what really causes the congestion?

    Ooohhh, that’s right. It’s the zoning “Don’t Fairfax Spotsy”


  26. Larry Gross Avatar
    Larry Gross

    hmmm.. restrictive zoning policies .. cause.. congestion…

    let me chew on that ..

    down home in Spotsy.. the idea is that you can slow down or even get rid of congestion if you don’t allow anymore people to move there…especially if the locals would then approach referenda to upgrade the roads.

    but I think you miss the point entirely on waste…

    people make wasteful decisions – all the time…

    heck.. the use of an internal combustion engine is… wasteful…. twice…

    it not only wastes fuel.. that wasted fuel becomes pollution..

    and people DO have a choice with regard to how much they want to waste…

    they can choose to NOT waste MORE by driving 5000lb SUVs solo during rush hour traffic everday…

    instead of claiming that they are being forced to “waste” because they are not provided with 50-100 million dollar per lane new roads.

    Congestion Pricing… basicallly allows them to NOT waste… by not sitting in traffic… they actually would just reallocate their wasted money on gas .. to tolls…

    they spend less money for gasoline AND they get back their lost hours that we are calulating as a “cost” also.

    and we get more money for more capacity… infrastructure which will also help reduce congestion…

    so where is the problem?

    sounds like a win-win.

  27. Anonymous Avatar

    Congestion pricing only works for those that use it: everybody else is still stuck with pretty much the same amount of waste as we have today.

    Therefore, congestion pricing and HOT lanes only get credit for the waste they do eliminate. On that basis the ROI probably sucks, but it might still be better than the alternatives.

    We won’t know because we do not have a procedure that says, look here is how much total waste we have, and where and when it happens. What are all the reasonably possible things we can do to reduce that waste? Which of them reduce that waste the most amount at the least cost, and have the most permanent effect? And, when we implement them whatever we do will have its own negative effects (on somebody), which need to be included in the costs.

    Instead, what we have is HOT lane advocacy, transit advocacy, functional settlement pattern advocacy, each supported by baldheaded statements, and no rational way to compare them.

    Thats why when we say (even if it is true) that denser settlement patterns reduce driving by 60%, the only reasonable response is, so what?

    Every single thing we do causes waste. Even cleaning up causes waste. Therefore, to say that X causes waste is meaningless. To say that Y counteracts the effects of X is also meaningless, because Y will have waste. The only thing that makes sense is to derive the combination of X and Y that results in the least combined waste. Since money is a good proxy for resources and energy the right answer is whatever combination of X and Y results in the lowest cost, because that is what will give you the least waste.

    Driving a 5000 lb SUV is a waste unless you have a mission that requires a 5000 lb SUV, like towing the boat or camper on the weekend. We could claim that the SUV driver should have a hybrid to drive during the week. But, if the cost of the hybrid is more that what the SUV wastes on suboptimal missions, then this proposal is an uneconomic answer that will result in more pollution than just driving the SUV. We could get two hybrids and hitch them together to tow the boat on weekends and let one sit the rest of the week, but that might be uneconomic, and therefore environmentally unsound, too.

    To say that commuting solo in an SUV is a waste seems intuitively obvious, but it could be entirely wrong. There is no way to know unless you consider all of the uses and utility of the SUV, and compare that to the uses and utility of the alternative, along with the costs of the alternative.

    This sounds a lot harder than it is. But, to do it globally, for an entire planned and controlled society, is very hard indeed. To do that you would basically have to break down the problem into all its little parts where it is manageable. The guy who drives the SUV knows what his costs and benefits are, but he is inclined to ignore costs he imoses on others.

    So is everybody else, so if you take all those into account, it probably turns out to be a wash. When I drive I congest you exactly as much as you congest me.

    In other words the guy who drives the SUV is the best guy to decide if it’s worth it, much as we might like to disagree. When you sum up all the SUV vs Hybrid vs Transit decisions made by thousands of individuals, well that is probably the best answer you can get, for now. No planner is capable of making a better decison and proving it.

    The answer might change tomorrow, but only if you let it, and that means minimal government interference, and maximal assistance towards what people seem to want.

    If the result of all those decisions is that you need new roads, it is still probably the cheapest answer, ,and the most environmentally correct, shocking as that answer might seem.

    I didn’t invent this stuff. It is all in the literature.


  28. Larry Gross Avatar
    Larry Gross

    hmmm… if it is a “mission”, it’s not a “waste”?

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