Category Archives: News commentary

Slow Growth of Labor Productivity

The Bureau of Labor Statistics has published a report finding that labor productivity has grown more slowly after the last recession–in other words, during the Obama administration–than during any other recovery period in recent history. Normally, the response to a recession is for private companies to clean out all of their least productive programs, and the people who worked in those programs find more productive jobs elsewhere. The result is a growth in labor productivity during the recovery period.

Much of Obama’s “stimulus” program, however, was aimed at protecting jobs during the recession, so many less-productive programs managed to survive and the people working in those programs didn’t have the (admittedly stressful) opportunity to find more productive work. Other parts of the stimulus program involved funding of less productive projects that normally wouldn’t have been funded. The result was a slow growth in productivity.

We can see the difference between government and private productivity by comparing the private rail industry with Amtrak and the transit industry. As shown in the table below, transit employees have more than doubled while ridership has grown by just 50 percent, so employee productivity has declined by more than 30 percent.

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Confusion about Infrastructure

The Christian Science Monitor thinks that the Democrats wrote their infrastructure plan as a “political bridge to President Trump.” Fox News thinks that Trump might “get on board” the Democrats’ plan. Statements like these show that many reporters–and by extension members of the public–haven’t yet figured out the real issues behind the infrastructure debate.

As Business Insider points out, there’s a bigger difference between the two sides over “how it’s paid for” than “what gets built.” The Democrats want the federal government to spend a trillion dollars, money it would have to borrow. Trump wants private investors to spend their own money. Never the twain shall meet.

But Business Insider doesn’t understand how Trump’s idea will work. If Trump is going to rely on the private sector, it says, then only projects that generate revenue will be built because “projects that don’t generate revenue for the private sector generally don’t get financed.” But there are two kinds of public-private partnerships. The kind that Business Insider is writing about is called demand risk because the private partner takes the risk that tolls, fares, or other user fees won’t repay the cost.

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Competing Infrastructure Plans: Trump vs. Democrats

Senate Democrats have proposed an infrastructure plan that calls for $1 trillion in federal deficit spending. In detail, the plan calls for:

  • $100 billion for reconstructing roads & bridges;
  • $100 billion to “revitalize Main Street,” that is, subsidies to New Urbanism and affordable housing;
  • $10 billion for TIGER stimulus projects;
  • $110 for reconstructing water and sewer;
  • $50 billion for modernizing rail (Amtrak and freight railroad) infrastructure;
  • $130 billion to repair and expand transit;
  • $75 billion for rebuilding public schools;
  • $30 billion to improve airports;
  • $10 billion for ports & waterways;
  • $25 billion to improve communities’ resistance to natural disasters;
  • $100 billion for a next-generation electrical grid;
  • $20 billion for broadband;
  • $20 billion for public lands and tribal infrastructure;
  • $10 billion for VA hospitals;
  • $10 billion for an infrastructure bank;
  • $200 billion for “vital projects” that “think big” such as building “the world’s fastest trains.”

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The New Housing Bubble

Because the past few years have seen the slowest recovery from a recession on record, the Federal Reserve Bank has been keeping interest rates low and in fact cutting them to almost zero. But this has raised concerns among leading bankers that the low rates are producing another asset bubble, including another housing bubble.

The above graph shows the home price index for several metropolitan areas calculated by the Federal Housing Finance Agency using the Case-Shiller method. (The official Case-Shiller Index published by Standard & Poors doesn’t include as many metropolitan areas as the FHFA index.) It shows that, not only are housing prices rising again, in some urban areas–on the chart, Honolulu, San Francisco-Oakland, San Jose, and Seattle–already have prices much greater than they were at the peak of the 2006 bubble. It seems likely that these prices are going to crash again soon.

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Fake News Stories Undermine Our Economy

Democrats complain that fake news stories from web sites linked to Russia undermined the electoral process. The Antiplanner has been concerned with a related issue for some time, which is fake news stories inspired by Russia that undermine our economy. Here are a few of those stories that I hope Democrats will disavow.

Fake News Item #1: Urban sprawl is paving over all of our farms–This is an old one that has been used to justify central planning similar to that done in the Soviet Union. According to the U.S. Department of Agriculture, the contiguous 48 states have 900 million acres of agricultural land, of which we use only about 40 percent for growing crops. The acres used for crop production have been declining, not because they are getting paved over, but because per-acre yields of most crops are growing faster than our population.

Meanwhile, the department also says that just 84 million acres have been urbanized. This is a little less than the Census Bureau’s estimate of 106 million acres, but either way, as the Department of Agriculture says, urbanization is “not considered a threat to the Nation’s food production.”

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It’s Infrastructure, So It Must Be Worthwhile

The city of Port Angeles, Washington spent $107,516 putting up wind turbines in a new city park. The turbines will power 31 lights in the park. This will save the taxpayers of Port Angeles a whopping $41.58 per month. At that rate, it will take 216 years for it to pay off (at zero interest rate).

That’s before subtracting operating costs, though no one yet knows how much it will cost to operate them. The city is in a dispute with the manufacturer, so it will be another month or so before they turn them on.

The ridiculous benefit-cost ratio is unimportant, says one city councilor, because the purpose of the turbines wasn’t to generate electricity, it was “to educate folks about wind power.” That’s quite an education they are getting. “I wouldn’t have voted for it knowing it was that little” electricity, the councilor added. Isn’t it her job to ask questions like that?

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Not All Infrastructure Is Created Equal

An op-ed in the New York Daily News argues that Trump’s infrastructure plan “will result in wasteful spending and do little to fix crumbling facilities or promote economic growth” unless it is properly targeted, and the best way to target is to spend only on infrastructure that can be built and maintained with user fees.

The country should also avoid building new infrastructure that will soon be obsolete. For example, Bay Area Rapid Transit (BART) spent nearly half a billion dollars building the Airport Connector, a 3.2-mile elevated cable-car line to the Oakland Airport. BART expected to cover operating costs by charging people $6 to travel between the airport and the nearest BART station. Instead, it is losing money, and they are blaming Uber and Lyft. It was a dumb idea even if they did recover operating costs, but new technologies have made it even dumber still.

The Trump Administration needs to learn the Antiplanner’s Law of Transportation Infrastructure: Any transportation technology that requires new infrastructure is doomed to failure because it will be unable to compete against technologies using existing infrastructure such as the nation’s hundreds of commercial airports and millions of miles of highways.

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Meet the New Secretary of Transportation

In what may turn out to be his least controversial cabinet nomination, President-elect Trump has picked Elaine Chao as Secretary of Transportation. Chao was previously Secretary of Labor under George W. Bush and Deputy Secretary of Transportation under George H.W. Bush. She has also served as director of the Peace Corps and worked as a distinguished fellow for the Heritage Foundation.

Chao was born in Taiwan and when she was 8 years old her family emigrated to the United States, where her father ended up founding a major shipping company that owns a fleet of at least fifteen ships. She earned a degree in economics from Mount Holyoke College in 1975 and an MBA from Harvard Business School in 1979.

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Trump’s Trillion-Dollar Infrastructure Plan

On the campaign trail, Donald Trump promised to spend twice as much on infrastructure as whatever Hillary Clinton was proposing, which at the time was $275 billion. Doubling down again in a speech after winning the election, Trump now proposes to spend a trillion dollars on infrastructure over the next ten years.

President Obama had proposed to fix infrastructure with an infrastructure bank, though just where the bank would get its money was never clear (actually, it was perfectly clear: the taxpayers). Trump’s alternative plan is for the private sector, not taxpayers, to spend the money, and to encourage them he proposes to offer tax credits for infrastructure projects. He says this would be “revenue neutral” because the taxes paid by people working on the infrastructure would offset the tax breaks. In short, Trump is proposing tax credits in lieu of an infrastructure bank as a form of economic stimulus.

America’s infrastructure needs are not nearly as serious as Trump thinks. Throwing a trillion dollars at infrastructure, no matter how it is funded, guarantees that a lot will be spent on unnecessary things. As Harvard economist Edward Glaeser recently pointed out in an article that should be required reading for Trump’s transition team, just calling something “infrastructure” doesn’t mean it is worth doing or that it will stimulate economic growth.

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Three Steps to Fix America’s Voting System

Almost everyone agrees that we just finished the most painful election season in anyone’s living memory, an agony made worse by the fact that it was nearly two years long. Fortunately, we aren’t doomed to repeat it, as we know many other countries have shorter and more civil election campaigns. Three changes to our method of electing presidents could reduce costs, save time, and make the process less divisive and alienating to voters.

First, we should replace individual state primaries with a national primary in June. Individual primaries not only stretch out the election season and give a few states inordinate say in the nominations, they promote divisiveness because they force presidential candidates to concentrate on local issues that are really outside the scope of the office of the president.

Second, we should abolish the electoral college. Hillary Clinton won at least 200,000 more votes than Donald Trump, but this is the second election in sixteen years in which the winner of the popular vote didn’t win the election.

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