Reason Foundation

Air Traffic System Is Outdated and Politicized

Posted on November 20, 2009, 3:34pm | Robert Poole

Early Thursday morning a computer glitch disrupted the nation’s system which handles flight plan processing for air traffic controllers. For nearly four hours, flight plans filed by many pilots had to be entered into the National Airspace Data Interchange Network by hand. The problem occurred at the FAA Telecommunications Infrastructure center in Salt Lake City, and then the other center (in Atlanta) could not handle the workload by itself. Because planes cannot take off until their flight plans are in the system, the result was long delays for travelers thanks to the backlog caused by the manual entry of flight plans.

If you think this sounds familiar, you’re right. In August 2008, there was a similar failure at the Atlanta facility, with similar delays. And there were two such outages in September of this year, one at both locations and the other just at Salt Lake City. The big question is why these delays keep happening.

These problems are symptoms of an institutional structure that, despite some well-meaning reforms this decade, still cannot get the job done well. Consider that the old radar technology the Federal Aviation Administration (FAA) uses to navigate $200 million jets is far less advanced than the GPS technology drivers can use to navigate $20,000 cars.

If air traffic control were being operated as a business, responsible to its paying customers, it’s inconceivable that there would not be 100 percent backup for the vital flight plan filing centers that caused these delays. At the very least, if one center goes down, the other should have the capacity to handle the full workload. More broadly, these problems reflect a system whose funding and governance does not make sense for a high-tech, 24/7 service business like the country’s aviation system.

The FAA is under way on what is projected to be a 20-year top-to-bottom revamp of the way it controls air traffic. Called NextGen, this new approach will largely replace ground-based radars and other navigation aids with GPS navigation, digital communications (rather than voice, for routine messages), and replace many routine manual operations with more automation. The cost is estimated at $20 billion for FAA equipment and facilities and up to another $20 billion for those who operate planes in U.S. airspace to equip aircraft with the necessary gear. While everyone supports this modernization in principle, it is correctly judged to be a “high-risk” endeavor by the Government Accountability Office. The FAA has a long track record of bringing in new technologies late and way over budget, though modest reforms this decade have actually made some improvements on recent projects.

The underlying air traffic problem is the mismatch between the system’s tax-funded, government bureaucracy and the needs of a high-tech service business.

In most businesses, a major technological paradigm shift, like that needed by our air traffic system, would be worked out and justified by the company and its customers, with a solid business case for making each investment, and mutual agreement on the schedule—so that customers don’t buy their gear way before the company is ready with its new facilities and equipment. And based on the customers’ willingness to pay, the company could go to the capital markets to raise the $20 billion in a timely manner. It could also crack the whip on program managers and contractors to get the projects done on-time and on-budget.

The FAA can’t do any of that.

It gets its capital budget in dribs and drabs from annual congressional appropriations, along with generous amounts of “oversight” (otherwise known as micromanagement). The current “reauthorization” of the FAA budget is over two years late, making any kind of long-term capital planning problematic. Plus, in calling the shots, Congress tends to resist cost-saving, productivity-improving measures such as automation and facility consolidation in the interest of preserving jobs in members’ districts. But without those kinds of changes, much of the increased-productivity benefits of the new technology go away.

Former Vice President Al Gore and a half-dozen national commissions have called for changing this model—making the FAA’s Air Traffic Organization a self-supporting business unit paid directly by its aviation customers and able to go to the bond market for capital funding. So far, none of these recommendations has gained any traction. Until they do, we are likely to be stuck with a status-quo that leads to outages, cost overruns, delays in new technology, and chronic delays for air travelers.

Air Traffic Control Reform Newsletter

New At Reason: Treating Wall Street Like the Mafia

Posted on November 20, 2009, 2:23pm | Anthony Randazzo

I have a new commentary posted at Reason Online looking at how Sen. Dodd's new Agency for Financial Stability would be the financial equivalent for the FBI seeking to take down La Cosa Nostra:

Perhaps Senate Banking Committee Chairman Chris Dodd (D-Conn.) thinks of himself as a modern day John Sherman. In 1890, Ohio Sen. Sherman set out on a mission to establish “just competition” laws and level the economic playing field. His quest culminated in the dismantling of monopolies—such as American Tobacco and Standard Oil—and the passage of new laws prohibiting malicious competitive practices. In a similar way, Dodd now seeks the power to tear apart any company he considers a risk to the national economy. But unlike Sherman, Dodd isn’t out to create the best possible conditions for competition to thrive. He’s out for blood.

Dodd’s plan for overhauling Wall Street regulations, released last week, includes a proposed new organization: the Agency for Financial Stability (AFS). This new regulator would be tasked with identifying and addressing “systemic risks posed by large, complex companies as well as products and activities that can spread risk across firms.” This represents one piece of the most extensive proposal to reform financial services regulation—topping even the ridiculousness of the Obama plan and Barney Frank plan. Which is saying a lot.

The financial crisis has made off with nearly $30 trillion in global wealth. Dodd believes Wall Street banks and other financial institutions are the chief culprits in this dubious economic caper. And to exact revenge, he will push for some of the toughest, most expansive regulatory powers to date.

To do this, Dodd plans to go Elliot Ness on Wall Street, using economists and accountants as if they were FBI agents. Only instead of targeting Al Capone and Big Angelo Lonardo, these number-crunchers would be given nearly limitless power to hunt down systemic risks inside America’s financial institutions.

Read the whole piece here.

Don't Let Banks Keep Disguising Risk

Posted on November 20, 2009, 10:24am | Anthony Randazzo

Systemic risk oversight is on tap up on the Hill. (Though you wouldn’t know it with all the health care talk.) The House is laying the groundwork for a new division of Treasury called the "Financial Services Oversight Council" to monitor systemic risk. The Senate Banking Committee is going to be discussing the creation of a new, independent "Agency for Financial Stability" with much wider authority. Ironically, both ideas—as currently proposed—for creating a systemic risk regulator, which are based on the Obama plan from this summer, are dangerous to the health of the financial sector.

One of the dangers some believe we face is highlighted in yesterday’s WSJ in an op-ed from three former chairmen of the SEC. Roderick Hills, Harvey Pitt, and David Ruder write:

the Obama administration is on the verge of transferring accounting standards responsibility from the SEC to a systemic risk regulator. Such a radical move would have extremely negative consequences for our capital markets. […]

Today, the American Bankers Association, on behalf of many commercial banks, is seeking to prevent disclosure of the fair value of the financial instruments they own. It is attempting to persuade Congress that the safety and soundness of the banking system will be protected if a systemic risk regulator can prescribe accounting disclosures for financial companies.

The government shouldn't follow their advice. This change might well interfere with efforts by financial firms to raise capital. Investors will assume that the accounting standards they employ are designed to mask risks.

Read their whole column here.

I’ve written more about the Obama proposal for systemic risk in these two papers:

• Fixing the Regulation of Wall Street: A review of the Obama administration's proposal for reforming financial services regulation and recommendations to end the era of too big to fail
• The Future of Too Big to Fail and Bailouts: A comparison of the two plans to overhaul financial services regulation in the 21st Century

Also see some blogged thoughts on this here and here.

Congress Plans "Too Big To Fail" Witch Hunts

Posted on November 19, 2009, 11:18am | Anthony Randazzo

Now Congress really is out for blood. Yesterday, the House Financial Services Committee moved a step closer to giving regulators the power to break apart companies if they are considered too big to fail. The Committee is currently discussing the creation of a Financial Services Oversight Council that would be the systemic risk watch dog in the overhaul of Wall St. rules.

Here is the crazy part: under the proposed legislation, the FSOC would be allowed to take apart big firms, even if they were well-capitalized and not displaying any signs of weakness.

With such unbridled authority, the potential for political games is palpable. Just think about all the rage that directed towards Goldman Sachs these days. Are they in danger of collapsing right now? Almost assuredly not. Woud their collapse negatively impact the financial system? I'm sure a host of Hill staffers could make an impassioned case for that. So it would just be a matter of time before an entrenched political war began between the systemic risk regulator and Goldman over the question of whether the firm should be taken apart "for the good of the whole."

It doesn’t take a Randian stretch to imagine excuses like “to expand competition” or “to create a fair playing field” rolling off the tongues of council spokesmen on the attack. Before long, the witch hunts, partially to exact vengeance for the financial crisis, partially out of of political ideology, will start. And the meantime, the threat of having the government gunning for the overly successful will be sure to be a disincentive to growth.

The provision passed yesterday is similar to one recently unveiled in the Dodd plan for financial services reform in the Senate. That plan would create an independent Agency for Financial Stability to manage systemic risk and go after big companies.

GAO: Stimulus Program Has Significant Reporting Problems

Posted on November 18, 2009, 4:30pm | Samuel Staley

The U.S. Government Accountability Office (GAO), the federal government's watchdog agency, has taken a look at the numbers and found 10 percent of the jobs claimed as "saved" or "created" by the so-called stimulus program didn't have any spending attached to them. In other words, the reported numbers are so unreliable they really shouldn't be used.

According to an ABC News report:

More than 50,000 jobs, or one out of every 10 jobs the White House says were "saved or created" by their economic stimulus plan, came from projects that reported spending no money yet, according to a government report obtained by ABC News.

The report by the Government Accountability Office (GAO) analyzes the Administration's October 2009 report on jobs saved or created by the $787 billion stimulus program and finds a "range of significant reporting and processing problems that need to be addressed."

Even with the errors, GAO gives the Obama Administration high marks for its efforts at transparency and in making so much information public in such a short period of time.

While the Obama Adminsitration should get credit for its attempt at transparency, we can't lose sight of what this really means. These numbers should not be used as any indication of how well the stimulus program is working. They simply aren't reliable enough. It will take months, perhaps years, to just sort out the accuracy of the reported numbers.

Again from ABC News:

On Thursday the GAO's Gene Dodaro will testify before the House Oversight & Government Reform Committee.

"Neither the recipients nor analysts can identify with certainty the impact of the Recovery Act because of the inability to compare the observed outcome with the unobserved, counterfactual scenario in which the stimulus does not take place," Dodaro says in draft testimony prepared for the hearing that was obtained Wednesday by ABC News.

In his prepared testimony Dodaro notes problems such as "different interpretations" of the administration's guidance for what constitutes a job saved or created by stimulus funds. These problems, he says, were "one of the most significant problems" they found. Therefore the GAO states that the Office of Management & Budget should "clarify the definition" and "consider being more explicit that 'jobs saved or retained' are to be reported as hours worked and paid for with Recovery Act funds."

In response to the watchdog's findings, OMB has "generally agreed to implement" the recommendations, Dodaro says, noting that OMB has also "undertaken a lessons learned process for the first round of recipient reporting." No OMB officials will testify at Thursday's hearing, despite calls from the House panel's ranking member Darrell Issa, R-Calif., that they do so.

Beyond that, there is the more fundamental and substantive question of sorting out whether a job actually was "saved" or "created" (an issue I have discussed earlier on this blog).  In truth, this is viritually impossible to evaluate without examining each report individually and subjecting each to a consistent, regorous methodology with well defined criteria about how to classify the jobs. Each report would be scored against these criteria by an independent auditor or analyst.

To my knowledge, no one is taking up that task. Then again, perhaps this can be part of the next stimulus program so the federal government can "create" jobs by hiring auditors for the first stimulus program.

Reason's Stimulus and Bailouts Coverage

Netherlands to Replace Car Taxes with Distance Charges

Posted on November 18, 2009, 4:28pm | Samuel Staley

I reported yesterday that the Netherlands is proposing to replace its vehicle taxes with a distance- based charge closer to a real user fee. Today, I found an English language explanation published by the Dutch government of the new approach that is well worth a quick read. Perhaps most notable is the argument that the new fee system is intended to make driving cheaper, not more expensive. The intent appears to move toward a new funding platform for road infrastructure rather than an instrument for reducing mobility.

Key features of the proposal also appear to mirror the pilot road charging project pioneered in Portland, Oregon, including

• Peak and off-peak charging
• Dedicating the revenues to an infrastructure fund, not general government spending
• Substitituting the distance-based charge for the other taxes to keep the proposal revenue neutral (or even reduce costs to drivers)

Unfortuantely (for the US), this is another example of where Europeans are making the investments necessary to be on the leading edge of transportation policy while American policymakers wallow in the ideas of the mid-20th century.

How Republicans can Kill ObamaCare

Posted on November 18, 2009, 1:21pm | Shikha Dalmia

Republicans are trying to defeat ObamaCare by arguing that its public option -- or government-run insurance plan -- will drive private insurance companies out of business, leaving Americans with less - not more - options. But the fudmental problem with ObamaCare, I note in my latest Forbes column, is not the public option, but its tyrannical designs to force all Americans to purchase coverage through an insurance mandate. Build public support against this, and the whole Rube Goldberg-like edifice that is ObamaCare will come tumbling down.

A mandate will fundamentally alter the relationship between Americans and their government. Instead of the government being accountable to them, they will become accountable to their government. No less than the Congressional Budget Office--a non-partisan government agency--once admitted as much. "A mandate requiring all individuals to purchase health insurance would be an unprecedented form of federal action," it noted. "The government has never required people to buy any good or service as a condition of lawful residence in the United States."

If the government can force Americans to buy coverage on the threat of fines or even imprisonment--an option that Nancy Pelosi has pointedly refused to rule out--every other government diktat becomes small potatoes by contrast. In fact, it becomes necessary. If uninsured Americans must buy coverage, why shouldn't other Americans be taxed to subsidize them? Why shouldn't the insurance industry be required to sell them coverage? Why shouldn't government set insurance prices to ensure affordability? Why shouldn't doctors and hospitals be asked to charge only "reasonable" rates--or offer only government-sanctioned treatments? Nothing about ObamaCare fundamentally changes so long as the individual mandate remains intact.

Therefore, instead of wonkishly droning about the public option, Republicans should counter Democrats' grand appeals for "universal coverage for all" with equally grand appeals for "medical freedom for all." They should stand together on the Capitol steps and issue the health care equivalent of Reagan's Berlin Wall ultimatum: "Mr. President: Tear up this mandate."

Whole column here.

National Journal Forum Spotlights Transportation Policy Reform

Posted on November 18, 2009, 12:15pm | Samuel Staley

Several hundred people gathered in Washington, D.C. on Tuesday (November 17, 2009) to hear ideas and thoughts on the federal level transportation policy reform.

U.S. Senator Thomas Carper (D-Del) started out the forum hosted by the National Journal with an engaging, humerous and telling commentary on the state of climate change legislation and the role of transportation. Carper introduced legislation in march that would boost Green techology as a way to address climate change through transportation policy reform (the Clean, Low-Emission, Affordable New Transportation Efficiency Act, or CLEAN-TEA). A brief report and video can be found on the National Journal's web site. Carper holds out little hope for climate change legislation passing during this Congress or serious transportation policy reform moving forward before the other big three domestic policy issues are settled (the economy, health care, and climate change).

Other participants in the exchange included Jeff Corless (Transportation for America), Jack Schenendorf (National Surface Transportation Polcy and Revenue Study Commission), Polly Trottenberg (Asst Secretary for Policy at the U.S. Dept of Transportation), Deron Lovaas (federal policy director for the Natural Resources Defense Council), and Sam Staley (Reason Foundation).

Our Air Traffic Control System Is Outdated and Wasteful

Posted on November 18, 2009, 11:12am

As the holiday travel rush approaches, air travelers grounded by delays should take a moment to think about why they're stuck in airports or on the tarmac. There's a good chance Washington is to blame.

"The air traffic control system in the United States is technologically obsolete," says Robert W. Poole, Jr., director of transportation studies at Reason Foundation. "This model is basically the same model that we have used since the beginning of air travel."

The technology the Federal Aviation Administration (FAA) uses to navigate $200 million jets is less advanced than the GPS technology drivers use to navigate $20,000 cars.

Poole says the system could safely handle more planes if the FAA used modern technology that would provide real-time information about where planes are. But the funding process, overseen by pork-hungry members of Congress, often thwarts technology upgrades. 

The only way to get the politics out of our air traffic system is to take the system away from the politicians. Why not let a private corporation manage the skies?

That may sound like a far-out, free-market idea, but Canada doesn't think so.

Our neighbors to the north often take pride in their lavish government programs, yet they allow a private corporation called Nav Canada to manage their air-traffic control system. Canada's approach, often called commercialization, has some surprising supporters in the U.S., including Al Gore, who pushed for commercialization when he was Bill Clinton's vice president.

"Your Flight Has Been Delayed" is written and produced by Ted Balaker. Director of Photography: Alex Manning; Field Producers: Paul Detrick and Hawk Jensen. The host is Nick Gillespie.

Approximately 7.28 minutes. Go here for embed code and downloadable versions. 

Reason's Air Traffic Control Research

Poole's Air Traffic Control Reform Newsletter

Obama Said What About the Economy?

Posted on November 18, 2009, 9:15am | Anthony Randazzo

In a Fox News interview with President Obama to air later today, the president will make an interesting remark:

"It is important though to recognize if we keep on adding to the debt, even in the midst of this recovery, that at some point, people could lose confidence in the U.S. economy in a way that could actually lead to a double-dip recession."

Really?

In all fairness, this isn't completely new language from the president. Obama has mentioned the problem of deficits since his campaign. His first budget was called "A New Era of Fiscal Responsibility" on the platform that spending was out of control. The problem is that his actions have never matched his words.

I agree with the president that out of control spending, piling on to the debt, could cause a double dip recession. I've said so on this blog, as early as May this year. But what is not clear is how the president can support increased national budget spending programs while also taking this Roubiniesk position.

Consider that:

• Health care will not be deficit neutral. Despite what the CBO score winds up being (which on the House bill it is well over $1 trillion), history shows that these kinds of bills always wind up spending more than was originally projected.
• Financial services reform as has been proposed by Sen. Dodd and Rep. Frank will damage the financial industry, firms will make less money, and tax receipts (aka revenue) will decline, further hampering the federal deficit.
• Cap and trade would wreak serious havoc with our debt level.

And this doesn't even go into issues like revenue damage done by the SCHIP cigarette tax, Treasury's talk of extending TARP, the pending "need" to bailout FHA, or what health care proposed tax increases will actually do to revenue. New York and Maryland are prime examples for how millionaire taxes ultimately hurt your tax base, not increase it.

Oh,  and a $250 check to seniors because inflation didn't raise the level of social security checks? Buying their vote on health care and throwing a few billion more on the debt pile?

Why would the president support all of this if he fears debt will trigger a double-dip recession? A great first step towards recovery would be to end the recently extended first-time housing buyers credit. This is artificially supporting the price of housing, stealing demand from the future, and distorting the real price of houses. It is preventing the housing industry from finding its real bottom to build back up from and is extending the length of the recovery process.

Right now Congress is wrestling with one of our major budget issues: out of control Medicare costs. We have the opportunity to reform the system and make our economic future more stable. The president should tell congress he will veto any health bill that does not fix this problem. (Of course, my definition of fix will never be the president's, so I won't hold my breath.)

Another thing to do would be to slash some big cost item in the budget. Nips here and there aren't going to reduce this debt issue. A serious surgery is needed. And a major move, like putting an end date on the social security program, would show the president really means business.

10 New Ohio Congressional Districts "Created" By Stimulus

Posted on November 18, 2009, 9:07am | Samuel Staley

The evidence of the strikingly poor data provided to the federal government on jobs "created" or "saved" from the stimulus continues to mount. Ohio Watchdog reports that according to recovery.org, the federal web site tracking stimulus dollars, ten new Congressional Districts spent $5.3 million and created 11 jobs. These district don't exist. According to the Ohio Watchdog press release:

Over $5 billion of stimulus money has seen its way into the State of Ohio thanks to the federal stimulus.  The main goal of the money is to create or retain jobs and stimulate the economy in Ohio.  According to www.recovery.gov more than 17,00 jobs have been created or retained, 11 of which are in Congressional Districts that do not exist: 21st, 99th, 69th, 87th, 85th, 49th, 20th, 54th, 56th, and 00.  These 11 jobs have cost more than $5.3 million; more than 80% of the jobs created or retained so far are located in the Central Ohio area.  

Of course, most of these are data entry errors, and not outright fraud. But, they speak to the quality of the data and argue for a healthy skepticism about using any of these numbers to evaluate the effectiveness of these programs. It will take years before the effects of the stimulus can be sorted out.

The next time someone cites these numbers to show the effectiveness of the program, remind them of the old computer programming saying: "Garbage in, garbage out."

These errors are also not isolated, as the post by my colleague Anthony Randazzo yesterday pointed out.

More Job Creation Discovered in Non-Existent Congressional Districts

Posted on November 17, 2009, 3:40pm | Anthony Randazzo

Got to love transparency. Building on Sam Staley's post from earlier today—pointing out how MPI discovered the government was reporting job creation numbers in 12 districts that don't exist—there is now a slew of reports pointing out bogus job creation numbers. An ABC News report highlighted several of them:

• Arizona 15th district, $761,420 spent for 30 jobs... but Arizona only has 8 districts
• Arizona 86th district, $34 million spent on the Navajo Housing authority... but that project is in the 1st district
• Connecticut 42nd district, $0 spent for 25 jobs... beyond the confusing spending aspect, but the state only has 5 districts
• Iowa, $10.6 million for 39 jobs in nonexistent districts
• Oklahoma, $19 million for 15 jobs in nonexistent districts
• Virgin Islands 99th district, $8.4 million for 40.3 jobs... uh, they don't even have one congressional district
• Northern Mariana Islands 69th district, $1.5 million for .3 jobs... too bad they don't have any districts, cause I'd love to be the leg of some dude who is getting paid $1.5 million
• Puerto Rico 99th district, $47.7 million for 291 jobs... they voted down entry into the union multiple times, so they don't have any congressional votes.

The administration claims this is human error. And it probably is. So we can safely say that the bogus job creation numbers are human error too. That, nevertheless, still means they are bogus.

New at Reason: Louisiana Provides Model for Closing Budget Deficit

Posted on November 17, 2009, 12:36pm | Leonard Gilroy

Our friends at the Goldwater Institute published a new article of mine today pointing to Louisiana's government reform and streamlining efforts as a model for Arizona policymakers to emulate as they grapple with billions in projected deficits over the next several years. Of course, the same lessons would translate to the dozens of other states also facing severe fiscal crises:

Arizona policymakers need to accept the reality that there's no way to avoid government downsizing. The state is now second to only California in the severity of its fiscal crisis and faces over $5 billion in additional budget deficits through 2011. Yet, our officials remain distracted by Sacramento-style accounting gimmicks and a proposed sales tax hike that wouldn't come close to closing the gap. Worse, many policymakers seem more concerned with preserving agency largesse than trying to eliminate it.

Contrast this with Louisiana, the state taking the most thoughtful approach to solving its fiscal crisis. Pelican State policymakers, led by Governor Bobby Jindal, have embarked on a wide-ranging set of government reforms designed to reduce the size and cost of government.

They created a Commission on Streamlining Government this year to identify over $1.5 billion in cost savings through streamlining, consolidation, and elimination. They passed legislation granting more flexibility in cutting spending in protected "silos." Gov. Jindal has eliminated thousands of positions from the state budget and over 70 unnecessary or inactive state boards and commissions. The Louisiana Division of Administration is developing a range of privatization proposals within each of its departments, and it's also piloting a new budgeting approach designed to fund priorities and drive performance. And this is all just a start.

It's already paying off. Ratings agency Fitch upgraded Louisiana's bond rating last month, specifically citing the state's focus on spending control and streamlining as influencing factors. This alone will save taxpayers millions in avoided interest costs over time.

Arizona policymakers face a simple choice: remain lost in the fiscal forest with California or follow the lead of Louisiana, which is blazing a trail out.

Similar thoughts here and here.

» Reason Foundation's Privatization Research and Commentary

Stimulus Creates Jobs in Non-Existent Congressional Districts

Posted on November 17, 2009, 11:55am | Samuel Staley

The Montana Policy Institute decided to check out where the federal stimulus package was "creating" jobs in the state. Much to its surprise, the number of Congressional districts in Montana has expanded, from one to thirteen!

According to MPI's press release written by Michael Noyes and distributed on the web:

BOZEMAN -  The government-funded website that tracks stimulus spending is reporting jobs created and dollars received in congressional districts that don't exist.
     According to recovery.gov, thirteen different congressional districts in the state reported receiving stimulus funds as of September 30. Montana has only one federal congressional district.
     The majority of state spending and jobs listed on the site are in the congressional district marked "00." A spokesman from Congressman Denny Rehberg's (R) office said that is an accounting tool used to mark at-large districts.
     However, jobs created or stimulus dollars spent were also reported in twelve other Montana districts, including the second, fifth, twelfth, and sixteenth.
     Ed Pound, director of communications for the Recovery Accountability and Transparency Board which oversees the site, said his organization is accurately reporting the information that recipients provide. He said in some cases it appears recipients are entering the wrong congressional districts in their reports.
     "People make errors, and we've found people are making errors in these reports," Pound said.
     Visitors to the website are also able to track the dollars by project, he said.
     Pound said he has received three phone calls about jobs listed in congressional districts that do not exist, including a call a couple of weeks earlier from Wyoming.
     On Monday, media reports from a number of states including New Mexico, New Hampshire, and Kansas also claimed to have discovered stimulus dollars and jobs reported for districts that do not exist. 

Seems to me Montana needs a readjustment to the number of representives it can send to the U.S. House of Representatives.

Dutch Move Forward on VMT Fee

Posted on November 17, 2009, 8:00am | Samuel Staley

As our roads crumble, the U.S. continues to put transportation policy on the back burner. Meanwhile, the Dutch government is moving forward with a wholesale remake of approach to financing transportation infrastructure. The Transport Ministry has forwarded a proposal to parliament that would replace vehicle taxes with a fee based on the the distance driven, or a vehicle miles traveled (VMT) fee. They say the move will cut congestion in half and reduce carbon dioxide emissions by 10 percent.

In Holland, the fee would be equivalent to about 7 cents a mile, rising to 16 cents around 2016.

According to Wired magazine:

"The Dutch cabinet approved the legislation Friday; it must be passed by Parliament before becoming law. Finance Minister Wouter Bos calls the proposal financially irresponsible. According to Radio Netherlands / Expatia, he fears that national budget could take a big hit because people might be less inclined to drive.

"Advocates of the tax say nearly six in 10 drivers will benefit because the tax burden will be shifted to people who drive the most and at peak times. The price of a new car also would decrease significantly, because taxes comprise about 25 percent of the sticker price."

The Trouble with Job Retraining

Posted on November 16, 2009, 6:41pm | Adrian Moore

Job retraining without job creation is, um, pointless.  The federal government is banking heavily on job retraining to help those who lost jobs in this recession, as are many states.  But job retraining is taking a beating these days.  As my colleague Brian Doherty summarized for Reason magazine:

The federal government is planning to spend more than $1 billion this year on job retraining programs for Americans suffering layoffs during the recession. But a late 2008 government-funded study found that job retraining might not really work.

The study, commissioned by the Department of Labor and performed by the social science research firm Impaq International, looked at the effects of a 1998 federal job retraining initiative in 12 states, following 160,000 total participants who started with the program from 2003 to 2005. In the short term, earnings prospects for many groups of workers actually got worse after they participated in job retraining, “implying that those who participate in the program experience lower earnings during the first five quarters after program participation as a result of their program participation.”

Part of that effect may be due to concentrating on retraining rather than trying to find new jobs, but the assessment of the program’s long-term benefits was no brighter. It took two years for the earnings of those who received job retraining to catch up to those of their nonparticipating counterparts. “Perhaps more important,” the study said, “the growth in earnings, relative to nonparticipants, slows at that point.…Overall, it appears possible that ultimate gains from participation are small or nonexistent.”

Why might the programs be ineffective? Job retraining is irrelevant without job creation, especially job creation in the particular fields for which people are being trained. Predicting where the next employment boom will take place is difficult enough for entrepreneurs. It certainly isn’t a specialty of government bureaucrats.

Read a NY Times article on the study here. Read the whole study here.

A better strategy is policies that make it easier to start new businesses or expand existing ones. That creates jobs and the incentive for people to get the skills needed to land one of the new jobs.

More Coverage of the Cioffi/Tannin Verdict

Posted on November 16, 2009, 3:48pm | Anthony Randazzo

Last week former Bear Sterns hedge fund managers were found not-guilty of fraud. Here is a good summary of the issue and the competing views on the verdict:

My take on the issue is here.

Cash-Strapped North Texas Cities Embrace Privatization

Posted on November 16, 2009, 1:45pm | Leonard Gilroy

Theodore Kim at the Dallas Morning News highlights the growing trend of municipal privatization/outsouring in North Texas cities:

Plano decided to eliminate its city printing and graphic design staff in September, farming out the work to Office Depot and Ricoh.

At Plano's Douglass Community Recreation Center, Kennedy Estrada, 10, runs in the gym. The Boys and Girls Club of Collin County may take over operating the center.

Leaders in cash-strapped Rowlett may contract out city planning services, tech support and other departments. [...]

In North Texas, Dallas officials hope to save some $1.5 million this year, as well as millions more later, by transferring the reins of the city zoo to the Dallas Zoological Society.

And Dallas County, by some estimates, could save up to $1 million by contracting out for certain legal services.

"In the environment we are in, cities are going to have to look at every option," said Chris Hoene, research director for the National League of Cities in Washington, D.C.

I couldn't agree more. Former Indianapolis Mayor and Harvard Kennedy School professor Stephen Goldsmith adds an important point—the trick for policymakers will be to ensure that the cost savings with privatization are accompanied by current or higher levels of service quality:

"The question becomes: How can you save money by outsourcing and managed competition while improving the quality of service, or at least keeping it the same?" Goldsmith said.

This is why performance-based contracting and good contract management and oversight are such critical skills for public administrators to cultivate internally, as these are the direct means through which to ensure that contractors deliver on performance. In a Governing column last month, Goldsmith offers similar thoughts from a different angle—the setting of arbitrary federal insourcing mandates by the Obama administration:

So rather than committing to insourcing 7 percent of existing contracts, let's ask some fundamental questions: What are the costs (activity-based costing) per unit of work accomplished? How are outputs and outcomes measured? How are high performing workers acknowledged and rewarded? How is citizen satisfaction measured and translated into accountability? What are the private and public benchmarks by which productivity is compared? Can a part of the service be tested in the marketplace for true comparisons?

In Indianapolis, we found that theoretical examinations of our public agencies were often way off the actual results produced by competition. For example, a consultant told us that we could save maybe 5 percent by privatizing our wastewater-treatment facility. We held a competition, and wound up saving 44 percent. Even in cases where we didn't contract out, public agencies that were exposed to competition found ways to reduce their costs.

Deciding what to contract out and what to do in-house requires hard facts. Are there private contractors or nonprofits that provide similar services? How recently was the market tested? Most important, many complicated services are neither wholly insourced nor outsourced, but rather are accomplished in partnership, with government responsible for quality management and a network of contractors providing the back-office and front-office support.

For the federal government, there will be certain activities that you may decide are inherently governmental. For reasons of national security, you may want to keep certain skill sets in-house, regardless of cost inefficiencies. That's fine. But as a general rule, a competitive process is the best way to discover whether insourcing or outsourcing makes sense. In every case, the goal should be "rightsourcing."

Read the whole thing for a sage perspective from a pioneer in competitive public service delivery.

» Reason Foundation's Annual Privatization Report 2009
» Reason Foundation's Privatization Research and Commentary

The Dodd Plan Isn't Any Improvement On the Obama or Frank Proposals

Posted on November 16, 2009, 1:09pm | Anthony Randazzo

This summer I was on a driving tour around the Turkish capital city, Ankara. About half way through the day, an economist friend of mine pointed out a rather imposing structure: “That’s the Bureau of Economic Planning.” Internally reflecting on some of Turkey’s recent economic troubles, I quipped back, “And how’s that working out for you?”

Last week, chairman of the Senate Banking Committee, Chris Dodd (D-CT), revealed his plan to overhaul Wall Street regulations. And while the plan isn’t quite on par with Soviet-style economic planning, it would not be hyperbole to equate the regulatory structure he proposes with some of the more dire policy proposals pursued by politicians in the collapsing world of Atlas Shrugged.

Of particular interest is Dodd’s proposed Agency for Financial Stability. This is the widest reaching proposal for dealing with systemic risk. The AFS would be able to break apart big firms, keep firms from growing too large, and restrict any activity it deemed harmful to the system. The Obama/Geithner plan suggested an Oversight Council made up of the regulators, chaired in Treasury but using the Fed to do its dirty work. The GOP has asked for a toothless board that would just make suggestions. Bernanke has testified that the Fed is capable of handling the role of systemic risk overseer on its own.

The AFS is probably the worst of the proposals to deal with systemic risk. And the rest of his plan is similarly problematic. I’m going through it now and will have a breakdown out by the end of the week. It doesn't quite amount to a Turkish economic central planning center, but it's not exactly free market either.

For more, see my breakdown of the GOP and Obama/Geithner proposals for dealing financial services regulation here. And see my full review and critique of the Obama plan here.

National Journal Holds Transportation Forum on Tuesday, November 17th.

Posted on November 16, 2009, 12:07pm | Samuel Staley

The National Journal is holding a lunch forum on transportation policy at the Liaison Capital Hill hotel, Metropolian Ballroom, beginning at 11:30 pm on Tuesday, November 17th. U.S. Senator Tom Carper (D-DE) will be the featured speaker and will be followed by a panel discussion on the role transportation plays in meeting national climate change goals. (Among the panelists will be yours truly.) If you're in town, RSVP on-line here.

Federal Takeover of Subways: Another Blow to Federalism

Posted on November 16, 2009, 11:46am | Samuel Staley

The Federal government's approach to its proposed takeover of subway and light rail safety regulation is an all too common way it approaches problem solving: Identify a problem, identify a political solution, but the federal government in charge. Secretary Ron LaHood says as much based on statements reported in the Washington Post:

"Administration officials said they are responding to a growing number of collisions, derailments and worker fatalities on subways -- and in particular to the fatal June 22 crash on Metro's Red Line and failures in oversight that have surfaced in its wake. Those failures have been the subject of an ongoing investigative series in The Washington Post.

"After the [Metro] train crash, we were all sitting around here scratching our heads, saying, 'Hey, we've got to do something about this,' " Transportation Secretary Ray LaHood said in an interview. "And we discovered that there's not much we could do, because the law wouldn't allow us to do it."

"Metro spokeswoman Lisa Farbstein said the agency had not seen details of the proposal. "The bottom line is we welcome additional safety oversight with open arms," she said.

This Administration has shown little tolerance for boundaries established by tradition or Constitutional principle. Perhaps this is because the President is a former law professor who taught Constitutional law; he knows how to get around the law to make the system work for him.

Subways are particularly noteworthy, as both a test case for the breakdown of federalism as well as setting the tone for how local governance will be handled by the Federal Government in the future. Most transit agencies, unlike Amtrak and airlines, are well within state jurisdictional boundaries (Washington, D.C. Metro being a notable exception). The Obama Administration will use its funding precedent--most capital costs for transit agencies are funded by the Federal Government--as the mechanism for taking over rail transit agencies. The trick will be trying to accomplish this, like highway funding, through incentives instead of direct mandates.

Interesting, virtually no one in the media seems to even understand the Constitutional principles involved. Intercity rail and airlines can be regulated by the federal government because they plausibly fall under the interstate commerce regulatory authority of the federal government. That doesn't apply to the vast majority of rail transit systems, including those in Los Angeles, Denver, San Francisco, Dallas and even Chicago.

Yet, this shouldn't be a surprise. Progressive political philosophies show little respect for governing principles that divide or limit the power of government. President Obama is not just a progressive politician, he's also a populist. So, using the Federal government to address an identified political problems is consistent with an overall political philosophy, even if it isn't consistent with principles of federal-state governance embedded in the U.S. Constitution.

NYT Forum Debates Eminent Domain

Posted on November 16, 2009, 8:34am | Samuel Staley

Last week, the drug maker Pfizer announced it would close its research and development facility in New London, Connecticut. The Pfizer facility was at the heart of the city's decision to use eminent domain to seize and raze an entire neighborhood to make way for the development project and prompted the now infamous Kelo v. City of New London. According to the New York Times:

"Pfizer said it would pull 1,400 jobs out of New London within two years and move most of them a few miles away to a campus it owns in Groton, Conn., as a cost-cutting measure. It would leave behind the city’s biggest office complex and an adjacent swath of barren land that was cleared of dozens of homes to make room for a hotel, stores and condominiums that were never built.

"The announcement stirred up resentment and bitterness among some local residents. They see Pfizer as a corporate carpetbagger that took public money, in the form of big tax breaks, and now wants to run."

The Kelo case is named after Suzette Kelo, who argued with the help of the Institute for Justice in Washington, D.C. that the government simply couldn't seize her property and hand it over to another private party because their intended use would be more profitable. The U.S. Supreme Court disagreed, and said, in effect, that as long as the city officially said seizing her house (and others in the neighborhood) served a public purpose that's all they needed to use eminent domain. The decision effectively gave a green light to takings for economic development purposes, and the Institute for Justice has been documenting rising levels of abuse since then.

Well, now the entire project in New London has gone down the tubes. The failure of the economic development project and the implications for using eminent domain for economic development purposes were the subject of a New York Times forum "Room for Debate" last week and has prompted nearly 200 responses.

Among the formal contributions include law professors that argue that the Constitution really was never meant to restraint government's taking of private property anyway as long as compensation is paid to the victims. Interesting, most of the formal responses focus on the political ramifications rather than the abandonment of private property protections by the judiciary and elected officials.

More on Reason Foundation's work on eminent domain and regulatory takings, including our amicus brief on Kelo, can be found here.