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Regulating to Prevent the Last Crisis

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In addition to mentioning high-speed rail a couple of times, President Obama’s state of the union speech mentioned the need to regulate the finance industry to prevent the kind of global crisis that took place in 2008. This received one of the loudest applauses of the evening as it has become conventional wisdom that the crisis was due to banker greed and the lack of regulation. “The main cause of the crisis was the behavior of the banks–largely a result of misguided incentives unrestrained by good regulation,” says Nobel-prize winning economist Joseph Stiglitz.

An alternate view is provided by Jeffrey Friedman: the crisis was actually caused by too much regulation, most of which had been written precisely to prevent such crises. But instead of preventing financial panics, successive waves of regulation each laid the groundwork for the next crash. Friedman presents his view in a new book, What Caused the Financial Crisis, which also includes the paper by Stiglitz that contains the above quote.

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State of the Federal Budget

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In his state of the union address, President Obama proposed to build a high-speed rail network reaching 80 percent of Americans within 25 years. But he also proposed to freeze domestic spending for five years. These two goals are incompatible. We can build that rail network, but it will not lead to the economic revival Obama envisions; it will only make it harder to reign in government spending.

More than three-fourths of federal revenues go for just four things: social security, medicare, medicaid, and interest on the national debt. By 2020, those four things will consume more than 90 percent of federal revenues. By 2030, they will consume all of those revenues.

At least, that’s the projection made by a November 15, 2010 report from the Government Accountability Office. It has apparently become news now because the national debt exceeded $14 trillion for the first time on January 20.

One possible lesson from this is that, if you want to build an expensive high-speed rail network or some other costly project, you better do it now while the federal government is still solvent. A more responsible lesson should be that we shouldn’t expect the federal government to things for us that the market can do better (and at no cost to taxpayers). If private investors won’t build high-speed rail, maybe we don’t really need high-speed rail.

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House Transportation Subcommittee Chairs

By | | News commentary, Transportation
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Yesterday, Representative John Mica, who chairs the House Transportation and Infrastructure Committee, announced the names of the chairs and members of the committee’s various subcommittees. The good news for those who believe in user-fee driven transportation is that the chair of the Highways and Transit Subcommittee is John “Jimmy” Duncan, Jr., who is probably one of the four or five most fiscally conservative members of the House. The good news for those who believe in high-speed rail subsidies is that the chair of the Railroads, Pipelines, and Hazardous Materials Subcommittee, which oversees Amtrak, is Bill Shuster, who has a history of sending pork to his district in Pennsylvania.

Not your George Bush conservative: Rep. Duncan questioning the high cost of the war in Afghanistan.

Representing Knoxville, TN, Duncan is a hardcore paleoconservative. For those not familiar with the nuances in the conservative community, paleos are almost the polar opposites of neoconservatives. Paleos hated George W. Bush with a passion. Duncan himself voted against the wars in Iraq and Afghanistan, as well as every stimulus bill. He thinks global warming is a scam, so he probably won’t be persuaded by many environmental arguments. Like almost all members of Congress, Duncan has taken advantage of earmarks, but he supports legislation to ban them and wants to cut federal spending.

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Virginia Light Rail Woes

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The city manager for Norfolk, Virginia, has been forced to resign due to allegations that she knew about light rail cost overruns but failed to inform the city council. The senior vice president for development of Norfolk’s transit agency, Hampton Roads Transit, has also quit in response to allegations that her mismanagement led to the cost overruns.

When Flickr user DearEdward took this photo in July, 2008, Hampton Roads Transit was promising to start operating Norfolk’s light rail in December, 2009. Now it has postponed the opening to late in 2011.

They follow the transit agency’s previous general manager, who was forced to quit a year ago when the cost overruns first came to light. Meanwhile, Hampton Roads Transit has announced that the light-rail line is not only $106 million over budget, it is at least 16 months behind schedule. The most recent scheduled date for opening the line, May 2011, has been postponed indefinitely because of delays in delivering and installing safety equipment.

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Save the States by Eliminating Urban Renewal

By | | City planning, News commentary
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One of Jerry Brown’s first acts after taking office as California’s new/old governor was to propose to eliminate the state’s 425 urban redevelopment agencies. These agencies spend more than $5 billion a year on urban renewal subsidies that are largely unnecessary, and Brown hopes he can somehow tap into that money to help the state cover its financial deficit, currently estimated to be about $28 billion.

The redevelopment agencies are mostly funded out of tax-increment financing (TIF), which means the money they spend would otherwise go to schools and other services, many of which also receive state funding. Every dollar that schools get that would otherwise go to urban renewal is a dollar that the state doesn’t have to spend to fund the schools.

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Norfolk Light Rail Scandal

By | | News commentary, Transportation, Urban areas
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When the light-rail line in Norfolk, Virginia, went nearly 50 percent over its projected cost, the general manager of Hampton Roads Transit resigned in disgrace–but they gave him $300,000 in severance pay. Now documents have come to light that agency officials knew the line was going to cost more than their published projections but kept the true cost secret from the public and the Federal Transit Administration when they were seeking funding for the project.

Norfolk light rail under construction.
Flickr photo by DearEdward.

On top of that, the state has found that the transit agency broke contracting and bidding laws when it gave contracts to favored consultants and “preferred individuals”–no doubt ones who would low-ball the cost estimates and not reveal the true costs until construction was well underway. The transit agency’s current CEO is talking about bringing criminal charges against the now-departed officials who were in charge when the line was being planned.

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FAA Bill Postponed for 17th Time

By | | News commentary, Transportation
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Last week, the House decisively postponed reauthorization of the Federal Aviation Administration, something it has already done 16 times since reauthorization was scheduled to take place in 2007. At stake is the future of America’s airline network, which is beholden to the federal government to maintain and update an antiquated air traffic control system.

Flickr photo by Andrew Morrell Photography.

Air traffic control is fully funded by airline ticket fees and other aircraft users. But the system is run by the federal government, which for more than 20 years has promised to update it with a Next Generation system. In contrast, Canada’sprivatized air traffic control recently won an award from the International Air Transport Association for being the world’s best system. ATC agencies in Iceland and the Netherlands also won awards; these have been “corporatized,” turned into independent, government-owned entities that are not dependent on their governments for funding or reauthorizations.

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High-Speed Rail = Low-Quality Planning

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High-speed rail advocates are psychotic, says the Boyd Group, an aviation planning firm. Psychotics, notes the company blog, suffer from “confusion, disorganized thought and speech, mania, delusions, and a loss of touch with reality”–all of which describe rail nuts.

“If you really want to see psychosis,” adds the Boyd Group, “log on to the DOT’s website. Instead of providing hard, accurate information, it’s now a shoddy trumpet for politically-correct schemes pushed by the hobby-lobby that’s running the Department.” Displaying the DOT’s 2009 map of proposed high-speed rail lines, the blog says “high-speed rail isn’t infrastructure; it’s political correctness” and the administration’s plan isn’t a “vision,” it’s “corruption.”

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LaHood Redistributes High-Speed Rail Funds

By | | News commentary, Transportation
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Rather than fight the plans of governors-elect Kasich and Walker to cancel high-speed trains in Ohio and Wisconsin, Secretary of Immobility Ray LaHood has preempted them by redistributing the $1.2 billion in federal rail grants to those states. Not surprisingly, most of the money is going to to California ($624 million) and Florida ($342 million). Washington state will get $162 million, Illinois $42 million, with smaller amounts to other states.

That brings the total of federal grants to California’s project to $3.2 billion. With state matching funds, it now has about $5.5 billion, or slightly more than 10 percent of what it says it needs to build the proposed San Francisco-Los Angeles line. Of course, the actual cost is likely to be much greater.

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Are Earmarks Necessary?

By | | News commentary, Transportation
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Represenative Michele Bachmann, a Republican from Minnesota, is against earmarks. But not when it comes to transportation. “Advocating for transportation projects for ones district in my mind does not equate to an earmark.”

Georgia Republican Representative Jack Kingston agrees. “How do you handle [transportation] without earmarks, since that’s a heavily earmarked bill?” he says.

I don’t think these people got the message last month. Here are a few pertinent points about transportation earmarks.

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