Economic Logic vs. Political Illogic

Please humor me and follow this train (wreck) of logic taking place in Virginia’s state Senate:

(1) Virginia is running short of money to pay for road maintenance and transportation improvements.

(2) One of the main reasons the Commonwealth is running short of money is that gasoline tax revenues are failing to keep up with the amount of driving that people do.

(3) A commonly cited reason for inadequate gasoline tax revenues is that people are driving more fuel efficient vehicles, which means they can drive farther between filling up their tanks and paying the tax.

(4) Therefore, to pay for Virginia’s road-funding needs, the Senate proposes raising taxes to the tune of more than $1 billion a year (although, for what it’s worth, not by raising the gasoline tax.)

Got that? Now, please explain this. According to an item in the Fredericksburg Free-Lance Star, “The Virginia Senate has voted to allow hybrid vehicles to use high-occupancy vehicle lanes until July 2007, extending the exemption for the pollution-cutting cars for another year. “

Hybrids, of course, don’t just pollute less — they’re more fuel efficient. It doesn’t take a Nobel Prize winner in economics to see that encouraging the purchase of hybrids makes the transportation funding problem worse!!

I can hear the apologists bleat: But that’s the price we pay for cleaning the air. Baaaa! Baaaa! Baaaa!

Let me propose a better way to clean the air. Convert the HOV lanes to HOT lanes that people must pay congestion tolls to use. Charging a toll for scarce roadway capacity encourages people to ride share… thus taking cars off the road and reducing pollution!!! As a bonus, the state raises more for highway improvements.


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27 responses to “Economic Logic vs. Political Illogic”

  1. Anonymous Avatar

    Early today I saw a proposed commuter tax credit bite the dust in a House subcommittee on that same argument — why would we want to encourage long commutes? Why reward that? Perhaps the hybrid bill will face a similar question in the House. Don’t disagree with your logic at all (on this anyway.) Five percent sales tax at the rack isn’t a tax on gasoline? Yeah it is — and a big one (again, that doesn’t mean I’m against it.)

  2. NoVA Scout Avatar
    NoVA Scout

    This is a digression that is nots central to your thesis, but why wouldn’t a more fuel efficient vehicle pollute less? Obviously, there may be differences in the emissions profiles of different engine (i.e., a 3-cylinder gas engine in a hybrid Honda Insight might pollute more than a 4-cylinder engine in a conventional Civic) but, generally speaking, I would expect that the emissions/distance travelled would be directly related to the amount of fuel consumed. On my commute from Falls Church to downtown DC (about 15 miles one-way) would I not put out fewer pollutants if I drive a car that gets 30 mpg, as opposed to one that gets 15mpg? I will burn two gallons with the latter and only one with the former. Can’t resist asking, but fear there is something fundamental that I’m overlooking that will make me feel stupid when I get the answer. That’s life in the blogosphere, I guess. Usually I prefer to ask naive questions in a more private setting.

  3. Anonymous Avatar

    NOVA,

    Because a each person driving a new hybrid vechicle does nothing to change the fundamental problem… not enough road to accomadate the amount of traffic. Furthermore, increased effeciency will encourage mean to increase the total milage they drive, knowing they will save money

  4. NOVA Scout Avatar
    NOVA Scout

    I just found the answer -it’s in reading the post more carefully. “hybrids don’t just pollute less. . .”

    Never Mind.

    I sensed that there was a logical explanation that would make me look silly.

  5. Ray Hyde Avatar

    I drive a hybrid. I don’t save money by driving it more, I don’t save time by driving it more. Fuel economy aside, it is the best car I’ve ever owned.

    When I drive it, I contribute to the congestion problem exactly the same as someone who drives a Hummer, maybe less because my hybrid is shorter. Hybrids were never promoted as a means to solve the congestion problem. Some claim that because of their higher initial cost, they don’t solve an economic problem either. For myself, I travel as little as possible given all the other constraints in the problem. I’m willing to pay a little more up front to pollute less, and also because it is such a nice car.

    The gas tax wasn’t keeping up with transportation costs long before hybrids showed up. My 1960 VW, which I drove until 1980, got around 25 mpg. My 1994 Ford Tempo, which I drove until 2003 got qaround 25 MPG. The overall CAFE mileage has hardly gone down at all in recent years. I believe that the argument that more fuel efficient cars is the cause of our funding problem is bogus. The problem is we haven’t raised the gas tax since 1987.

    Another part of the problem is that roads we should have built years ago will now cost much more than if we had done them in a timely manner. Something like 40% of the cost of building a new road is tied up in the environmental impact studies, environmental mitigation, endless public hearings, and ultimately lawsuits. If we strip those costs out we would find that actually building new roads is probably not that much more expensive. After all, road building equipment and processes have increased in efficiency at least as much as hybrids have.

    Virginia might have enough money to spend on road improvements if we spent the money building roads instead of arguing about the problem.

    Maintenance is another issue. The more you build, the more you have to maintain. Hybrids and other light vehicles add almost nothing to the maintenance problem. If you stopped all commuter traffic tomorrow, you would still have to maintain the roads, and they would still deteriorate due to weather. Having eliminated 100% of commuter traffic would still leave you with the other 80% of travel and shipping.

    Hybrids are still a tiny fraction of total auto sales, and the proportion of road damage they cause is miniscule. Bacon’s argument that they make the transportation problem worse is absolutely laughable precisely because it is so infinitesimally correct.

    Charging congestion fees will not reduce congestion, and that is not their purpose. Their purpose is to raise taxes, a function Bacon ordinarily opposes.

    You don’t have to believe me on this, go read Winston and Shirley. Congestion charges or hot lanes will encourage some people to travel earlier or later, but since rush hour is already four hours, this will be a small effect. It will encourage some people to car pool, but this will also be a small effect.

    Hot lane fares will be adjusted to maximize income, not to minimize congestion. What this means is that the fares will be adjusted just to the point that the ordinary lanes are still congested: otherwise there would be no reason to pay the toll. They will also be adjusted high enough to keep the hot lanes just on the verge of being congested, otherwise there would be no benefit from paying the toll.

    It is exactly the same problem as adding more lanes or adding metro. As long as the demand exceeds capacity the roads will still be congested. Every vehicle that is diverted because they are unwillling to pay the price makes a new opportunity for some other latent demand which will be used opportunistically. It is the old induced demand argument all over again. Every gallon of fuel saved by hybrids will be burned in some other process, by some other user, but ast least they are paying for it, not me.

    What congestion fees will do is make it still more expensive to conduct business in those areas and some business and traffic will go elsewhere (More sprawl, if that is what you choose to call it.) London instituted congestion charges and BMW is now moving out of the city because they estimated the fees were costing them a million British pounds a year. At least one Scandinavian city just ended the use of congestion pricing.

    It might also be that some small percentage of traffic and the business associated with it just won’t happen.

    Jim and Bob and Ed keep confounding these problems, with endless circularity and no resolution in sight. There are many different issues and they are interrelated: excess travel, congestion, accessibility, pollution, road costs, road funding, land costs, housing costs, sprawl, land conservation, economic activity, ecology, and overall public welfare.

    Every time you focus on one of these issues you miss the point.
    It is my opinion, that on this blog, the overiding issue is land conservation, and that might have something to do with the sponsors. Every other agument presented here is a red herring designed only to promote the land use agenda.

    So we see this kind of nonsense argument: “hybrids are the cause of our 20 year old transportaion problem because thy don’t pay their way and they encourage people to drive more. In a free market the government has no business encouraging people to buy a certain vehicle by offering HOV rights, therefore the government should interfere in the free market of congestion by charging artificial additional taxes over and above the costs and waste already associated with congestion.”

    That is an idiotic argument, in my opinion. No one in their right mind drives a car more just because it is more efficient.

    Bacon does make one valid point: there is no reason for the government to offer incentives for people to drive a particular kind of efficient vehicle. Except that there are many late adopters and critics of new technology that will avoid the risk associated with new technology. The government has apparently decided that a) people are going to drive anyway, b) some car pool lanes are underused anyway, and c) we might as well encourage them to pollute less even if it doesn’t solve all the other related issues.

    There is really only one bottom line which is the overall best welfare of the public, or what I have previously called the Gross Domestic Happiness. Under the market system the GDH is a function of millions of people making small economic and social decisions.

    Anyone who thinks the govenment is smart enough to model, monitor, and control all those decisions and achieve a better result, hasn’t read any modern history.

    But the government is after all a political reflection of our current beliefs. Those beliefs are strongly affected by whichever of the interrelated issues is affecting us most right now.

    PEC serves its role by advertising to affect beliefs which it believes are counter to the goal of land preservation.
    They and other groups have managed to make sprawl the issue of the moment.

    To the extent they succeed they will unbalance some other part of the equation and some competing special interest group will pick up that banner and carry it to the head of the battle. We have been there before.

    I think PEC would do more good if they took their advertising budget and just bought land they think is worth preserving, or alternately, buy and develop land that should be developed in the ways they think best.

    They should stay out of the congestion argument, the hybrid argument, and the tax argument and go work the land use issue directly. They might even make some money.

    For lack of anything better, I support congestion pricing, but if we start that experiment we should monitor its effects carefully and be prepared to abandon it if it doesn’t work. We shouldn’t go into it with false claims or overheated expectations. It is going to be hard to abandon if we write a long term contract to some Australian company to hold a gun at our head, and later decide we don’t like it. Like telecommuting, let’s take it for what it is worth and not sell this as something it is not.

  6. nova_middle_man Avatar
    nova_middle_man

    1. I really enjoy this site and the ideas presented here

    however this will not work
    “Let me propose a better way to clean the air. Convert the HOV lanes to HOT lanes that people must pay congestion tolls to use. Charging a toll for scarce roadway capacity encourages people to ride share… thus taking cars off the road and reducing pollution!!! As a bonus, the state raises more for highway improvements.”

    Now, granted I don’t have any data but do you think people will begin to carpool because there is a toll??

    I think most people prefer to drive alone and are willing to pay a fee (expecially in NoVA) to get to work faster

    As we all know the real problem is too many people in one area

    However, there is a natural tipping point and at some point in time people will refuse to relocate to NoVA because the negative factors outweigh the positive factors

    I will use myself as an example. I am seriously considering moving to Baltimore, Richmond, or North Carolina because the housing costs and congestion in the Washington DC metro area are not worth living here.

  7. Jim Bacon Avatar

    NoVa Middle Man, you ask, “do you think people will begin to carpool because there is a toll?”

    Most people will continue driving alone. But some people might begin ride sharing, whether in a carpool or a bus rapid transit. In previous columns and posts, I’ve written about the cool new service offered by NuRide in Northern Virginia that puts ride-sharers together. It provides much more flexibility than traditional car-pooling.

    If you change the economic incentives through congestion pricing, you do two things: incentivize motorists to change their behavior, and incentivize the marketplace to come up with solutions, such as NuRide. It’s not a static situation. It’s a dynamic process. Solutions emerge that planners never conceived of.

    Furthermore, you don’t have to convert 100 percent of all the drivers to make a difference. If you convert 5 percent to ride sharing, you’ll make a big difference in congestion.

  8. Ray Hyde Avatar

    There you have it. And congestion fees will be one more reason for people and businesses to try to go elsewhere. It is not so much too many people in one place as too many jobs in one place.

    Even in Fauquier, they now realize that they need more local jobs, because gridlock in Haymarket and Centreville will eventually lock Fauquier residents out of the core area jobs.

    And EMR’s idea that another million or so people in Fairfax will solve our transportation problems by making shared rides feasible won’t work either. they will always cost more, take longer and provide less service.

    Congestion pricing will cause a few people to car pool or travel earlier, but the spaces they free up will be quickly filled. It will raise money for roads, but it will do little for congestion. After all, without congestion, you can’t very well have congestion pricing.

    Transportation supports the engine of commerce, and the “road subsidy” therefore subsidises us all. The current move to privatize transportation is just going to take those subsidy dollars away from us and turn it ove to corporations. It is a huge mistake to go down that path.

  9. Jim Bacon Avatar

    Ray, Let’s turn the tables. You tell us what will work.

    You want to build more roads? Fine. What criteria would you use for deciding which ones to build? How much money would you raise to build them? How would you raise money to build them? Would road construction constitute your entire transportation program, or would you allow room for the kinds of alternate strategies we’ve laid out in our columns and blog postings?

    You tell us what you would do, then we get to knock holes in your proposals using the same criteria that you’ve used to knock holes in ours.

  10. Lucy Jones Avatar
    Lucy Jones

    Wow! I have learned more about transportation in one post than I’ve learned my whole life. I’m loving this!!!

    Just my little input… we could certainly use more jobs east of Richmond. Southwest Va could use some too. I bet there are some other areas that could use a little more as well. AND we can already support a little more traffic without going into overload status.

    It’s just beyond me why we keep begging more and more companies to go to NoVa or even why the residents of NoVa would want more.

    We’ve got a wonderful technology park just waiting for someone to come to Eastern Henrico. It was started for Motorola/Siemens (sp?) that went partially sour after they finished taking everything they could from government incentives. There are just acres and acres of land begging for some attention. I understand there are several empty factories in SwVa as well. The land in these areas is already zoned for business. We already have the supporting roads that the citizens have paid for.

    Why on earth are we looking for ways to encourage MORE businesses/traffic to NoVa?

    As an aside: I like the idea of hybrids more and more and after the President’s speech, I’ve been hearing a lot on using switch grass (sp?) to make fuel. I heard some commentary that the energy output was 1 unit energy in = 4 units clean, renewable energy out. If the price for this fuel was set at $1.50/gallon, the average acre could produce $1,500 worth. That’s higher than the yield from any other crop currently grown in the U.S. The farmers in our country could really use this to become self-sufficient again. If this is true, why are we not screaming to bring this kind of industry to Va?

    Can we have a little investigation on the use of switch grass, Mr. Bacon? Could we become independent from the middle east, save citizens some money, save the ozone layer AND provide livelyhood for farmers?

  11. Anonymous Avatar

    I wish someone would post an analysis as to whether hybrids actually are cleaner and more efficient — on a total energy basis.

    The greens who push hybrids seem to ingore that hybrids merely push energy demand away from petroleum and to the fuels used to produce electricity, which is increasingly natural gas.

    I’ve seen data sugegsting that 95% of the electric plants to come on line in the last decade are natural gas fired. Important point — that is the result of Clean Air laws that cranked up demand for natural gas while capping supply by not allowing domestic natural gas production in over 85% of the Lower 48 (including offshore). Demand up, supply steady or decreasing, and we have much, much higher natural gas prices.

    So that policy, while beneficial in a sense, has caused severe economic issues. It seems hypocritical to me to advance a policy favoring more natural gas consumption without also allowing for more production. Yet the greens did it with electric generation and now they’re doing it with hybrid vehicles.

    All of which speaks volumes about the Energy Plan being developed in the General Assembly. It recognizes that fuel diversity, supply diversity, efficiency and conservation — a completely holistic approach — is in order.

  12. Lucy Jones Avatar
    Lucy Jones

    I’m confused… Are the hybrid cars something you plug in or are they the cars GE is talking about making that will be able to use alternate fuels?

  13. nova_middle_man Avatar
    nova_middle_man

    So I was reading the post again and I think converting HOT lanes to HOV lanes will create MORE congestion not less.

    HOV lanes incentive to carpool
    less cars on road good

    HOT by paying a fee you can get around carpooling net result more cars on the roads

    The local governments in NoVA realize that busineeses put less drain on the local economy than houses. Houses have school costs among others. Therefore businesses are encouraged to be built here and housing is discouraged. Net result lower taxes but housing shortages. Unless or course you already live here and then its a win win. Until you hop on the road and have to deal with people from the exurbs commuting in

    For a possible solution:
    I am sure there are problems 🙂

    I think we need more HOV lanes and every car should pay a toll. That way people who carpool pay less money and get to work faster. While those who drive solo pay more and get to work slower.
    Basically more Dulles Toll Road models

    Also, long term more businesses in lower populated areas. But, be careful because it might lead to a giant sprawl map. Ideally, that is why mixed use planning wins. It gets complicated when people work in different places.

  14. Ray Hyde Avatar

    First on hybrids. A hybrid never has to be plugged in. Hybrids don’t use any additional generating caacity or, at present fuels other than gas or diesel. They get their high mileage primarily by capturing energy that other cars waste by heating the brakes. When a hybrid is coasting, going downhill, or braking, the polarity on the electric motor is reversed, which turns it into a generator. By reabsorbing energy when the car is slowing down, the generator uses that energy to recharge the batteries.

    The engine is computer controlled so it attempts to either run at optimum rpm or else stop. The engine shuts off whenever the car is motionless, as in traffic or at a light and this saves energy. Driving down the road at normal speeds you may not actually need all the power the engine produces. When this happens the generator kicks in and adds more charge to the batteries.

    The only time your car needs anything like all the energy the engine is capable of is going uphill or accelerating The rest of the time all that engine is just heating itself. When power is needed on the hybrid both the electic motor and the engine supply power, and the electric motor draws down the battery in the process.

    Electric motors, unlike gas engines, deliver maximum torque at zero RPM. This means that even though the gas engine is small, the car accelerates briskly from a stop. In my Prius the gas engine is around 70 HP and the electric motor/generator is around 50 HP. Because the torque curves are different you don’t get that herky jerky, or sudden power sensation when the gas engine “gets on the cam”.

    The car also has a continuously variable transmission. You can think of it as having only one gear, but the gear changes size. Consequently you don’t feel any shift points. It is computer controlled to exactly match the output of the engine at every point.

    The sensation on acceleration is more like a jet engine or turbine than like a gas engine. While the acceleration is not head snapping like in my wife’s V6 220 HP Jetta, it is smooth and continuous so it seems to acclerates at the same rate from zero to eighty.

    It won’t spin the tires because of the traction control, but even with such modest horsepower I’ve never been afraid to pull out or merge. It’s got plenty of pickup.

    Instead of a speedometer, the main guage is the fuel consumption guage. It shows your instantaneous milage as a vertical bar, and shows the average mileage for the last thirty minutes in five minute increments. There is an overall average display that resets each time you fill up. It also shows the amount of energy in watts that is regenerated.

    You can see the bar out of the corner of your eye, and before long, when it drops precipitously your foot comes off the gas. Simply making you conscious of the mileage probably saves a bundle.

    All of this technology works seamlessly, unless you have the display set to show you what is happening you would never know. Occasionally when the engine stops there is a slight shudder. When you step on the “gas” the electric motor starts the acceleration and the gas engine starts itself and kicks in smoothly. You can seldom tell by feel or sound when the motor/generator kicks back and forth or the engine cycles in and out. On a very smooth road with a steep downhill grade, you might step on the brake and hear the motor speed up, as it absorbs the energy and generates electricity. The first time it happens it’s a little weird because you get the feeling you stepped on the gas by mistake.

    I got 52 MPG in everyday driving, until I replaced the tires with non specified all season radials. The tires dropped my mileage to 42 MPG. Before I screwed up on the tires It would routinely get 60 to 62 MPG in heavy traffic, way better than my motorcycle.

    Your tires probably have a similar effect on your mileage, so a word to the wise is to look up the rolling resistance rating on the tire, and not buy them solely on longevity rating. Without the mileage computer I might never have noticed or noticed but not understood the magnitude.

    Anonymous 12:40 has a point, but not the one he made. Since the car has basically two engines, plus batteries, you could argue that it takes more energy to CONSTRUCT the car, and whether the difference is made up in the mileage over the life of the car is unknown. Then of course some day you will have to replace, and dispose of, the batteries.

    Overall the car is comfortable, spacious and quiet. You can actually enjoy the radio while driving. It has high intensity discharge lamps that light up these dark county roads like daylight. You have to be very carful with the headlight aiming and the brights. Unlike most small cars, the AC is more than adequate, and it doesn’t seem to affect the performance or mileage at all. In my Tempo, SOP was to turn off the AC when accelerating away from a light. Comparing this car to the Tempo is like night and day. No wonder Ford is in trouble.

    People don’t realize it but the same argument holds true for trains. Theoretically they can transport riders very cheaply, but because their load factors are so low they never achieve those numbers. If you add back all the energy it takes to make steel rails and the station stops and all the switch and signalling gear, then trains are an energy catastrophe. Even cars have a higher load factor than trains.

    So that’s it on hybrids. I suspect that before long single engine vehicles will be history. Maybe my next one will run on ethanol, and my farm will have a crop that makes money.

  15. Lucy Jones Avatar
    Lucy Jones

    Mr. Hyde,

    Thank you for all the info. Well, that certainly is better than my VW beetle. How is the maintenance? Do you have to go only to the dealer (like I do) or is it something the local garage can work on as well?

    I’m on schedule to buy another vehicle sometime in 2009 or 2010. I hope by then they can produce a car that is double engine and runs on alternate fuel. I’ll stop by the Hyde farm to fill up! Maybe you could fire up that old still every farm should have…

  16. Ray Hyde Avatar

    This stuff is really complicated. I live in a drafty old uninsulated farmhouse. I might have been money and energy ahead if I drove the Tempo and insulated the house with the money I spent on the Prius. Theoretically I could measure all this and calculate the savings. If only we had perfect knowledge we could make better decisions.

    That’s just a simple problem, try and solve it for the whole society.

    Well, here is what I would do for transportation. Although our ‘burbs are increasingly crowded with weekend shopping etc. our biggest problem with traffic jams is going to and from work. No amount of pavement is going to solve that problem. (There I said it.) Airways and seaways have virtually unlimited “pavement” and they have traffic problems for exactly the same reason: everyone wants to go to the same place at the same time.

    Only demand management can solve that problem and congestion pricing is one way to do that. But the enormous investment we put into highways (and Metro) primarily benefits business, not labor. I suggest we incentivize business to locate in more places and place more of the road burden on businesses. They will offload the costs to us, but they can make better location decisions than individuals.

    Government offices in particular should not be concentrated, but disseminated as widely as makes sense. Let government telecommute with government, and put more of the money back in the communities that provide it. Maybe the less we get them in one place the less damage they can do, and that goes for schools, too.

    Some of this is already happening and it is the cause of edge cities and job dispersion that EMR thinks is a myth. Beijing is planning to build eight new cities on the perimeter, primarily to manage traffic and disperse business.

    It is not going to be any easier to relocate businesses than homes, because businesses don’t want to be told what to do any more than homeowners want to be told where to live. But there are a lot fewer of them, and each move can make a large impact.

    I would make a very careful study of places like Metro West to see if they live up to their promises. But 911 showed us the folly of making big concentrations of stuff: it makes a target and it is a risk factor otherwise as well. I kind of believe (without proof) that small is beautiful, so we need several thousand entirely new towns the size of Warrenton or smaller.

    We know we have places where there is almost no traffic (or business) and palces where there is too much of both. Some places business and trafic is tolerable. So far as I know, no one has tried to actually measure places that work and come up with rules of thumb that should not be exceeded, or exceeded only with special infrastructure in place.

    To the extent that such rules do exist, the engineers have them, and they should be allowed to use them. Public participation is good, but somehow we have let it run amok. I’d suggest a user fee for participation, you know, like congestion management. At present it doesn’t cost anything to be opposed, and like roads the right to oppose is overused.

    The famous example is the California case where the authorities had an applicant redraw his plans eleven times, each time saying they would look more favorably on the project if certain changes and reductions were included. The plan was reduced to almost nothing when the board finally rejected it outright.

    We have concentrated on radial roads and Metro. The rise of ring cities means we need more circumferential roads. Here in NOVA there is almost nothing going north and south primarily because they have been opposed to death, at almost no cost to the opposees. If you want someone to perform to your specifications, then you should share the cost of having him do that: put him on your payroll, if he is working for you.

    I’d stop worrying about sprawl and pay more attention to land use. I’d also use more of it. Survey the best farmland, drainage areas, wildlife habitat, and forest resources, and figure out how to preserve them specifically for their best use. Instead we plan to put greenbelts around our towns, whether that land needs to be saved or not. That is a totally dumb idea.

    I’d privatize the bus services and railroads and end the subsidies. We would have a lot less transit, but what we had left would be profitable, instead of wasteful. I’d suggest that Winston and Shirley are right and auto use should be charged at higher rate, but we should accept the fact that an optimal, best cost – best benefit, transportation system is going to be more than 80% based on motor vehicles. We should plan accordingly.

    I’d privatize the schools through vouchers and be done with it. Our school systems are such a political mess they need some serious triage. I don’t think that public education can be saved: it was a mess when I went through forty years ago, and it is worse now.

    Schools are a big determinant of the bad decisions people make about where to live. Put a big pile of money out there and let the kids and and teachers compete for it. I’d make the vouchers avaliable at all ages, not just for kids. I’d let the vouchers be for students not schools, and if the parents want to spend it on religious instruction, so be it. Let the state keep separate from religion by staying out of it.

    I’d have minimal curriculum requirements and let the kids specialize sooner, if that is what they want.

    I’d put a mandatory sunset on most laws. Let the legislature keep busy passing and refining the same ones instead of constantly saddling us with new ones. I’d put the budget on the back of the tax form and let people allocate their own dollars. Then no one could argue that our funds are being misallocated. It might take some of the sting out of people who are opposed, if they see where other people really want to put their money. If someone really feals strongly, he can allocate additional dollars over and above his tax bill.

    What would Bacon say, for example if we did that and a majority of the tax forms came back with big allocations for road spending, and even extra money in some cases? I know that if it turned out people wanted to spend money on open space, my farm could come up with some suggestions. Maybe they would come up with some kind of minimalist government like New Hampshire. With the system we have now there is now way of knowing how people want their money spent.

    If DOD wants to prosecute an unpopular war, let them pay to advertise their argument for support. Same for homeless people, schools, and roads. When people think things are out of balance, they will shift or increase their allocations.

    The argument is frequently made that housing doesn’t pay its own full costs. I’m not convinced that is true: all the bills that get paid get paid by someone who lives in a house. But if it is true, then homes like everything else should pay more to support their costs and that means we need higher taxes. We would need to be a lot more scientific about figuring out what those costs are: I wouldn’t be willing to subscribe to EMR’s formula, for example.

    But as far as congestion goes, I’m a pessimist, none of theswe ideas are going to be adopted. Anthony Downs and Shirley and Winston are right right: we are going to have to live with it, and probably pay for the privilege.

  17. Ray Hyde Avatar

    I wouldn’t dare let anyone but a specialist get anywhere near it. On the other hand, so far it is a Toyota through and through. All I’ve had is oil and filters. The brakes should last forever, because it is mostly engine braking.

  18. Lucy Jones Avatar
    Lucy Jones

    I really like the idea of putting the budget on the back of the taxes. My only concern would be what would happen if the funds were to run short for certain security issues? We are not privy to information that the government might have and put ourselves at risk. What about things like homeland security and disaster preparedness. I would be willing to go along with the budget on tax except maybe for that part.

  19. Lucy Jones Avatar
    Lucy Jones

    Mr Hyde,

    I forgot to ask:

    Is the $1,500 previously mentioned a “good” income on an acre of land? I really have no concept on the prices of farming…

    Do you think Virginia farmers could benefit from the switchgrass crop if it were to become the next alternate fuel?

    The information I heard was from Auburn University in Alabama.

  20. Jim Bacon Avatar

    Lucy, I’ve heard from a farmer in the Shenandoah Valley, who’s made money in bio-fuels, that soybeans is the way to go in Virginia. The resulting fuel can be mixed with diesel gasoline, as much as 10 percent. That represents a pretty significant potential market for Virginia farmers. Tim Kaine has spoken on the subject. It would be interesting to see if we see any initiatives coming out of the Virginia Department of Agriculture.

  21. Lucy Jones Avatar
    Lucy Jones

    Hmmm… That sounds good too. We have soybeans growing in my area all the time. I think they plant it in between the cotton crops.

  22. Ray Hyde Avatar

    According to an article published in the Fauquier Democrat by Keith Dickenson, the county agricultural agent, a Fauquier farmer can expect to make $75 per acre growing soybeans, before labor and equipment costs. I make about $200 per acre growing hay, gross, before any expenses.

    The county land tax on agricultural land is based on the assumption you can make $400 per acre, gross. That is a number that is theoretically possible, but practically, not.

    Let’s say that as housing, the land is worth 20,000 per acre. If I sold it and invested the money at 7 per cent, it would bring in $1400 per acre. If you consider return on investment, you lose money every day you farm if the land is worth more than $7000 per acre.

    According to the last farm census every farm in a five county area around here is losing money, on average, to the tune of $2000 per year. There are a few large farms that do “make money” but they do that primarily on the basis of farm subsidies. There are a couple of farms that take in $80,000 per year in farm subsidies here.

    In order to be eligible, you need a five year history selling a subsidised crop which means you will take a five year bath before the money comes in – if there is any. The subsidy programs are oversubscribed, and do almost nothing for the smaller farms.

    Almost all small farms are supported by off-farm income. For one thing, you need the health insurance that comes with it more than you need the income. There is no group health plan for farmers.

    The land area goes up like the square of the distance from the core. As jobs develop farther from the center, more jobs are available that farmers, or their wives, can reach. Therefore, I only halfway jokingly claim, that sprawl actually helps preserve farmland.

    I’m pretty sure the farmer growing biodiesel gets a subsidised price. There are hundreds of niche markets where an astute farmer can make (some) money. But all the fruits, nuts, and vegetables consumed in the U.S. are grown on less than 7% of the land (plus, probably, a similar amount of land that is in other countries that export food to us.) If very many people jump on one of those niche markets, it gets flooded and the price collapses. The biodiesel and ethanol markets may eventually prove to be an exception to that, but right now, you still can’t do it without a subsidy, and if everybody did that, the market is not yet large enough to support the price.

    Then there is the problem noted above: in some places you can sell out and make more money doing nothing. That result is not the fault of the farmer. I think it is highly unfair and even insulting to describe a farmer as a “land speculator” as Bob and Ed and Yak have done, just because he elects to make a business decision to sell out. He doesn’t cause the housing market.

    The side effects of trying to control the housing market through proffers and land controls are higher home prices and lower land prices. One one side the value of society goes up by the amount home prices are artificially inflated. On the other side the value of society goes down by the amount of artificially lower income and land prices owned by the farmer, and by the unseen amount that it might have gone up had people and farmers been allowed to invest their money more wisely.

    That doesn’t cover the whole story. Farming has been described as a labor of love. As a hard bitten Yankee pragmatist, I don’t see it that way. However, living on the farm is a luxury enjoyed by only a few, I’m not blind to the benefits as well as the problems.

    The farms forestry lands and other open space provide huge unfunded benefits to society. Everyone, even the farmers who sell out, have an interest in maintaining those benefits. We create land controls to preserve those benefits, and one of the benefits is that we can control the development and spread of costly infrastructure.

    Only the very best transit systems situated in perfect areas can survive economically on their own, and the same is true for farmers. The questions we have to answer are 1) does the transit system provide benefits to the larger area than it serves, and what are they worth, and 2) does the farmland provide benefits beyond the market value of its products and its own value, and what are they worth? How do we swap the value of those benefits in a fair an meanigful way?

    I have suggested that controlling the spread of expensive infrastructure really means that the urban areas are renting land from the rural areas in order to hold it for future use. EMR argues that the most expensive land is closest to the core areas, but part of the reason is that other land is being administratively held off the market. To the extent that the urban areas benefit from these artificial prices, and from the savings resulting from more compact infrastructure, that money really comes from the rural areas. I don’t thik it is unreasonable for the urban areas to pay rent on the “savings” that these policies represent.

    EMR argues that we should charge the full cost of living in rural areas to those residents and punish them until they don’t want to live there. The land prices would collapse and then the remaining farmers could “afford” to grow soybeans at $75 per acre. I think the problem is that under that scenario soybeans might be only $5 an acre. At that price the (enforced) city slickers could afford to fill up their tank with biodiesel and go visit the country, for which you would need a lot of roads.

    I argue that if the urban areas paid 5 to 7 percent interest on the amount of money that they earn and save by keeping rural land off the market, that would be enough incentive for rural owners to keep their land off the market. It wouldn’t be enough to make farming truly profitable, but considering the lifestyle benefits, it might be enough.

    In my personal case, and based on published figures I might get enough money to cover about half of my present losses. That would mean I could improve the farm faster and ultimately get to a break even position, maybe. Several other countries and some states are using or considering just such a plan.

    Finally, I don’t think the urban areas have anywhere near enough open space. The urban forest is an immense resource that we are neither cultivationg nor capturing. Last year I built an entire barn out of three immense, old growth city trees that were knocked down in the hurricane. One thing we can do to make the cities more liveable is to import more sprawl. People talk about greenhouse gasses and sprawl, but North America is a net absorber of CO2. One reason for that is that our suburban lawns and gardens are among the most intensely cultivated land anywhere.

  23. Ray Hyde Avatar

    Lucy: I got the $1500 figure by taking the $75 and multiplying it by ten 2-acre lots. It’s $1500 for 20 acres, not one.

    I figure that by the time I plant, fertilize, mow, rake, bale, and carry the hay to the barn, for a ten acre field, I’ll drive the tractor a hundred miles. Then I still have to deliver it to the customer.

    So much for saving mileage by working at home!

  24. Ray Hyde Avatar

    Here is another example of net public benefit.

    Every day I spend working on the farm I burn enough fuel to drive to work for a month. I haven’t calculated the exact value, but I’d guess the ratio of dollars produced for each mile I drive the car compared to the dollars produced for each mile I drive the tractor is a thousand to one.

    Environmentally and cash wise, we would be better off if I just let the farm go to, or plant it to, forest. I could use my barn to build boats and make more money than I do farming. But I am REQUIRED to show some farm income. The easiest and cheapest way to do that was to sell hay, which is actually a good cash crop here, until we run out of room for horses. Practically speaking, I could build a couple of thirty footers here every year and no one would care, probably. Some nut case might file a complaint, though. Legally speaking, I’m not zoned for manufacturing.

    Here’s a case where it wouldn’t make any difference to the land and I could even harvest some of my trees for value added sales as boats. I might even be able to hire some help. All I need is for the county to get off my back and stop insisting that this is “prime farm land”.

    The policies we have now are as dumb as toast, and the ones being proposed are even dumber.

  25. Lucy Jones Avatar
    Lucy Jones

    Wonder if you could get some sort of grant or subsidy from the Feds for habitat for birds or biofuel.

    Here is an article on the switchgrass. Looks like it would grow here… Does this sort of thing happen now or is this something waaaaay in the future? Maybe the politicians would be willing to step on the Bush bandwagon…

    If so, would your machinery that you already use to bail hay be usable for this crop as well?

    Seems like there’s got to be some way to keep our farms intact.

  26. Ray Hyde Avatar

    I believe the time will come when the markets for food, fiber and fuel will support the farms that remain by then: it is a matter of supply and demand.

    Right now, the recent improvements in farm production mean we only need a small percentage of what we have. As recently as 1910 75% of our farmland was used to raise forage for the draft animals required to operate the other 25%. The advent of tractors and other machinery made 75% of our farmland surplus, and modern seed, farming practices, and fertilizer and pesticides reduced the need even further. Farmers have seen the greatest productivity gains of any industry.

    That by no means indicates that we don’t still need the open space, but that open space will not exist unless we make it profitable enough to hold and keep.

    Meanwhile, we continue to build in the areas most suitable for productive farming. We should plan to keep the best and most productive areas for when we need it most, and incidentally that will keep our food costs very low until the need does arise for full production capacity. But if prices are low, farmers cannot stay in business, and the land will be converted to other uses.

    Our present policies do not help the farmer, they merely punish him more than the market already is. Calling them speculators is unfair and unjust. He needs profits, and he needs profits that are nearly as high as he would get from building. If those profits don’t come from farming, and they don’t come from a society willing to pay for the plans it needs to make, well, then those plans won’t happen.

    That is why I keep beating up on Jim Bacon and others that think that profit is a dirty word or that we can get what we want (or will someday need) “free, no cost”.

  27. qtalks Avatar

    OK, we’ve known since the first mass production of the automobile that there is a finite supply of oil and fuel efficiency would increase steadily over the long term. We knew when we instated the gas tax that fuel efficiency improvements would over the long haul diminish our capacity to pay for road maintenance and new road construction. Even while Eisenhower – flush with post war cash – was building our national highway network we knew we didn’t have a reliable long-term funding mechanism to keep up with projected population growth and the vicious circle of building more roads means more room for cars means more need for roads means… California is over $100bil behind its road maintenance and construction schedule. Americans built a transportation system it cannot support. We are living beyond our means. This is the opposite of business friendly or sensible economics. It is low performance at best. One rail “lane” or bus rapid transit dedicated lane (like in Curitiba Brazil) can easily transport the same number of travelers as four lanes of highway…at a fraction of the cost to maintain and operate (internalizing all the associated costs and externalizing none). Our best and brightest toil endlessly about road sollutions. Look at any road atlas of any state in the union. This nation is saturated with roadways. We never need another roadway as long as we live. We never need another lane beyond three in each direction. Once you’ve exceeded three it is time to concentrate your taxpayer dollars in the much more efficient and safe alternative (America sports the most dangerous and costly transportation system among developed nations – cars are the most dangerous mode and the related law enforcement and emergency response costs make it the most expensive) We need two things: a secure, long-term financial mechanism to maintain and upgrade our existing network. And we need to concentrate the bulk of our tax-dollars on what Americans have known for ages to be the safest, most efficient, highest capacity, lowest cost mode there is, transit. This nation was built on the railroad. The love of cars is not our problem. The Germans love their cars too. Can’t dismiss Germany’s long storied relationship with cars. They built the first national limited access highway system, the Autobahn, on which we modelled ours. The difference is Germany also has one of the world’s most advanced and efficient and safe transportation systems. It is much closer to the American Dream in terms of offering multiple viable travel mode choices in getting from all points ‘A’ to all points ‘B’ in a timely and affordable manner. Car owners and non-owners are considered equally human and get equal attention and funding for their various preferred travel modes. Now that’s freedom and mobility and equity and choice that our forefathers would be proud of. Germany’s highways are limited to two and three lanes in each direction and are budgeted so that they can be meticulously maintained. Germany’s autobahns with no speed limit are safer than our 65mph ones – cracking up under the weather. Germans still wash their cars on Sunday morning and drive like they always have. As we all have identified, our American transportation infrastructure is mostly subsidized by taxpayers. There are few exceptions to this rule. Car infrastructure is the most expensive and space consuming of all the different modes and – when we were flush with cash at various times thru the years – we always chose to fund that mode almost exclusively. We still can’t seem to come to the realization that transit and pedestrian-oriented, village-style development is the only thing we can afford. It is the only maintenance and capacity sollution that we can afford. This development and transportation strategy is actually healthier for the automobile as well – it makes for much more rewarding town and country driving experience. Nothing I’m saying here is new. We have known it all along. We knew it as we tore up 16 miles of LA streetcar lines (in the 40’s?), at the time the world’s most extensive and advanced streetcar system. From that point on you can trace LA’s decline from a city with a multitude of vibrant districts to a soulless aglomeration of hopeless human depositories. This nation was built on all modes of transportation, not just the car. All transportation modes have been depicted throughout our history as the way to freedom. It’s time we honor all modes and make up for lost ground and turn in this antiquated system for a high-performance one to match our hopes for freedom for all – not just for those who are physically able and can afford the annual $8000 bill to own and operate a car – in the new millennium.

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