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Out of Control Policy Blog Archives: 2.19.12–2.25.12

US Department of Transportation Secretary Should Know Something About Transportation

In 2009, President Obama shocked the transportation world by choosing Ray LaHood as Secretary of Transportation. President Obama chose the Republican House member from Illinois for his Washington experience, his ability to reach across the aisle to Republicans and because the President wanted a Republican member of his cabinet. Transportation groups across the political spectrum reacted the same way when Obama announced LaHood—Who? 

Most transportation professionals have been less than thrilled with LaHood’s tenure as Secretary of Transportation. LaHood, who will be retiring in less than a year, has focused much of his energy crusading against distracted driving. Safety is important but it is a very small part of a very large field. Most transportation types are more interested in enacting a long-term transportation bill, or creating an economically sustainable transportation system. LaHood is a nice enough guy, but his lack of transportation knowledge is a problem.

The Secretary of Transportation’s job is to explain to the President why transportation is important. His or her role is part expert and part booster. Most Presidents have no experience in transportation preferring sexier issues such as health care or taxes. Has LaHood been effective? What has the Obama-LaHood team brought us? Three plus years into the President’s term we still do not have a surface transportation bill. Congress recently passed an Aviation bill but not before the President created an additional hurdle by changing the unionization rules. Worse, we have no transportation vision. What is the federal government’s proper role in transportation? What is the future of transportation? 

To be fair, the problem did not start with LaHood. However, the expiration of SAFETEA-LU provided an excellent opportunity to start the conversation. The White House missed a golden opportunity. Congress has started discussing the issue but the White House has either stayed silent or proposed totally unrealistic legislation. The President’s 2012 Transportation budget was so unrealistic that both Democrats and Republicans dismissed it. Again, the White House included its version of a transportation bank that is really a loan program in disguise. This “infrastructure bank” has failed to pass either chamber multiple times. Recently, the White House signaled it would be happy with most any multiyear transportation bill that the Senate passes. Is this vision? Is this leadership? Would we be in this situation with a Secretary of Transportation with 10-20 years of experience in the Transportation field? It is doubtful.

LaHood served on the Transportation and Infrastructure Committee from 1995 until 2000 when he chose to move on to other issues. As a member of the House Appropriations Committee he did not work on transportation funding. In researching LaHood’s congressional activity, there is little actual transportation work. Prior to being appointed Secretary, LaHood replaced a rail right of way with a greenway and helped secure funds for the improvement of a road in his district. He sponsored a bill easing the process of claiming tax exemptions for transit ridership and argued against Amtrak serving Peoria. That’s about it. Members who never served on a transportation-related committee have more impressive transportation backgrounds than Secretary LaHood.

What were the backgrounds of the past Secretaries of Transportation?

Republican Mary Peters, George W Bush’s 2nd Secretary of Transporation, led the Arizona Department of Transportation, was a top leader in the Federal Highway Administration (FHWA) and was active in both the American Association of State Highway and Transportation Officials (AASHTO) and the Transportation Research Board. She won the Women’s Transportation Seminar person of the year award in 2004. Before becoming secretary she served as national director for transportation policy and consulting at HDR. 

Democrat Norman Mineta, George W Bush’s first Secretary of Transportation, chaired the House Public Works and Transportation Committee, was principal author of the Intermodal Surface Transportation Efficiency Act of 1991 (ISTEA), headed the National Civil Aviation Review Commission and was awarded the Presidential Medal of Freedom.

Democrat Rodney Slater, Bill Clinton’s second Secretary of Transportation, was Secretary and Chairman of the Arkansas Highway Commission and served as Federal Highway Administrator where he enabled airline and railroad mergers and helped avert a strike at AMTRAK. 

Democrat Fredrico Pena, Bill Clinton’s first Secretary of Transportation, was Mayor of Denver where he oversaw of Denver’s new International Airport, worked in transportation pension reform and served on Clinton’s transportation transition team.  

Republican Andrew Card, George H.W. Bush’s second Secretary of Transportation, was a structural design engineer. Mr. Card attended the Merchant Marine Academy, produced a White Paper on Transportation that focused on intermodal transportation and created transportation policy with Samuel Skinner.

Republican Samuel Skinner, George H. W. Bush’s First Secretary of Transportation, was head of the regional transportation authority of Illinois and transportation advisor to James R Thompson.

While their transportation experience varied, all of these secretaries had more experience than LaHood. They each served in elected or appointed transportation positions for a minimum of five years before they were appointed U.S. Secretary of Transportation. 

No U.S. president would appoint a Secretary of State with no foreign policy experience or a Secretary of Defense with no military knowledge. Why should the President appoint a Secretary of Transportation with no professional transportation experience? 

With LaHood’s retirement, whoever wins the 2012 election will choose a new Secretary of Transportation. Let us hope they choose one with an actual transportation background.

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Why is Europe So Delusional on Greece?

Earlier this week I noted that Europe was trying to buy time with this bailout package offer. Here are a couple of more clarifying explanations for why the EU’s economic ministers are lying to us about this bailout of Greece having the possibility of success what Europe is trying to buy. Hans-Werner Sinn being interviewed by Spiegel Online:

SPIEGEL ONLINE: Why are the euro-zone countries so adamant that Greece must remain in the currency?

Sinn: This isn't really about the country. The Greeks are being held hostage by the banks and financial institutions on Wall Street, in London and Paris who want to make sure that money keeps on flowing from government bailout packages -- not to Greece, but into their coffers.

SPIEGEL ONLINE: What about the contagion that a bankruptcy or a Greek exit would involve? Financial markets may speculate that other countries will suffer a similar fate as Greece.

Sinn: There may be contagion effects. But I think this argument is being instrumentalized by people who are worried about losing money. People keep on saying "the world will end if you Germans stop paying." In truth only the asset portfolios of some investors will suffer.

And then there is Bill Frezza writing for Forbes about the endless attempts to avoid a “credit event”:

Now those same idiotic bankers, along with the French and German politicians they control, are conspiring with the Greek government to pretend they can fix the problem by forcing private bondholders to “voluntarily” swap one set of worthless bonds for another set of worthless bonds, without acknowledging a default that in a sane world would be all but inevitable.

The reason for this urgency? Private holders of these worthless bonds also hold hundreds of billions in insurance that would have to be paid to them should those bonds fail. And who are the sellers of these insurance policies? Why, the same idiotic bankers who control the French and German politicians!

European politicians don’t want their banks going down, and banks figure this bailout is the cheaper option. Sounds like incentives to lie.

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Latest Articles on Reason Foundation

The Concise Case for a Consumption Tax

John Tamny’s RealClearMarkets column yesterday looked at questions regarding the American tax code, the reasons for our high deficit, and the nature of the income tax. He concludes:

But as history has revealed in ugly fashion, politicians have very little discipline when it comes to spending, and the extra revenues have largely been used to expand existing government programs, or fund new ones. As for the deficits themselves, they've arguably been the result of investor belief that politicians are at the very least good at raising revenues from the productive class, thus making our deficits a good bet if markets are to be believed.

In that case it's time to look for modes of taxation most stimulative to economic effort, but that don't stimulate government growth through heavy revenue collection. A consumption tax would remove the existing penalty on work, would encourage savings and investment, but at the same time would make taxation a voluntary event, thus limiting not just government revenues, but also the government's ability to deficit spend given the limits imposed.

What would this shift provide as benefit? Earlier in the piece Tamny lays out a concise case for a consumption tax:

One form of taxation that has not been tried in modern times is a national consumption tax. The first glance advantages are of course positive.

For one, an income tax is a price placed on productive work effort. Worse, considering what monumental wealth generators Americans tend to be, such a tax is a grand source of revenue that allows our government to harshly expand its footprint on our economy.

And then not discussed enough is how successful it is at securing revenues from the "vital few", or the greatest wealth producers with the most productivity to tax. Supply-siders often brag about how much our tax code at present takes from the top 1 percent (at present the number is around 40 percent of total federal income tax revenues), but this isn't something we should be proud of.

Not asked enough is why the rich owe so much more than everyone else. Instead, it should be said that by virtue of growing wealthy the rich have conferred myriad benefits on society through lifestyle enhancing innovations and jobs, so to then hit them with a major portion of the tax bill seems backwards.

Better it would be to let taxation on the national level be voluntary. The more one consumes, the more one pays.

Such a tax would firstly support the most economically beneficial act of all which is to encourage saving. It is through savings that we expand the capital base necessary so that good ideas can be matched with investment, and a consumption tax would aid just that.

Second, a consumption tax would be the one way that the citizenry could limit the ability of the federal government to collect revenues. If in place, it's not unfair to assume that Treasury's ability to sell bonds necessary to fund a government that always seems to grow would be reduced. If so, as in if Treasury debt is made less attractive to investors, credit would migrate elsewhere; logically toward economic concepts that tend toward wealth creation rather than capital destruction.

Third, assuming an economic downturn, downturns regularly coinciding with reduced consumption, the federal government would be forced to get by on a smaller budget alongside Americans similarly making do with less. This alone speaks to recessions shorter in duration.

Indeed, as past columns have revealed about the 1920-21 US recession, it was then that government spending was cut in half in response to the economy's recessed condition. Of course with funds left in the private sector as a result, the subsequent rebound was rather powerful, and with a consumption tax we could perhaps count on something similar.

Read the whole piece here.

 

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Poll Finds Americans Want Keystone Pipeline

A new poll by Pew Research found that for people who have heard about the Keystone pipeline, 66% want the government to approve it, with only 23% saying it should not.

Republicans were more likely to have heard about it (77%), with only 57% of Democrats aware of the subject.

It's not surprising that Republicans were far more likely to support the pipeline, but Democrat and Independent support may be higher than you expected:

Republicans are far more likely than Democrats or independents to have heard about the pipeline. Among those aware of this issue, 84% of Republicans say the government should build the pipeline, while just 9% say they should not. Independents, by greater than two-to-one (66% to 27%) approve of its construction. Democrats who have heard about the pipeline also are supportive – 49% approve of building the pipeline and 33% disapprove.

Keystone XL pipeline is a proposed $7 billion project that would transport Canadian crude oil between Alberta, Canada and Port Arthur, Texas via a 1,700-mile pipeline. Last month, President Obama denied the company's application to construct the pipeline across our border.

For more information on Keystone, see my blogs and commentaries on the subject.

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China's Highway Network Now Larger than U.S. Interstate System

Most of the media coverage of China’s infrastructure has focused on the country’s aggressive high-speed rail expansion plans. However, it is in highways where China is making the biggest news. As first noted by Wendell Cox at newgeography, (according to the Beijing Review,) China’s highway network surpassed the length of the U.S. network in 2011.

In 2011, China added 11,000 kilometers (6,835 miles) of expressway to its national system. At 52,800 miles, China’s intercity freeway system is longer than the 46,720 miles in the U.S. Interstate system. There are a couple caveats with the data. In China some urban expressways are not included in the official numbers. The U.S. also has many non-interstate expressways. Regardless, if China’s total limited access highway expressway network is not already longer than the U.S. system, it will be by the end of this year.

While much has been made of China’s high-speed rail problems, see here, here, here, here, here and here, China is investing in highways as much as it is investing in rail. What some in the U.S. miss is that China realizes it needs to invest in all modes. Comparing China to the U.S. is a bad idea because the U.S. has a developed highway network, a comprehensive freight rail network and an expansive aviation network. 

However, the U.S. can take one lesson from China. Parts of the U.S. including the south and the west need more highways. When the interstate system was envisioned places like Las Vegas and Phoenix were much smaller in size. Las Vegas grew 37 percent and Phoenix 33 percent just between 2000-2009. While that growth has slowed considerably, both cities will start growing again when the recession ends. The U.S. needs to build several new interstate links. At the same time, China has four times as many people as the U.S. We do not want to start building highways to nowhere so we can brag that we have the longest highway network. But targeting investments in growing corridors with strong benefit to cost ratios is the right move. Making selective improvements to our highway network is the lesson that we should be learning from China.

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How Justice Broke Down in the Mortgage Settlement

Following on the commentary we published last week calling out the politically oriented nature of the mortgage settlement between state attorneys general and the top five mortgage servicers, I had an op-ed published by RealClearMarkets this morning that highlights the unjust nature of the settlement. And any judicial agreement that doesn't pass the "justice" test should be seriously reconsidered:

...rather than helping the housing market, all the attorneys general wound up accomplishing was pushing aside justice in lieu of political grandstanding.

The mortgage settlement lacked what should have been basic procedure for investigating claims of misconduct at financial firms. There should have been evidence collected, executives deposed, the facts presented, and restitution paid to those who were wronged.

But this did not happen in any meaningful sense - only a "small number" of cases were found where robo-signed foreclosure notices were served on households making their payments. And had the attorneys generals' case against mortgage services been taken to court, there would have been little evidence to persuade a judge or jury that $26 billion payout was due. [...]

Since the settlement has yet to be approved by a judge, it is still possible this "landmark" deal could be dismissed. The arbitrary $2.5 billion slush fund state attorneys general got in the deal should be grounds enough for a judge to reject this (ala Jed "Dread" Rakoff). The unjust treatment of mortgage investors being linked to a non-germane robo-signing case is even more substantial grounds for refusal.

See the whole commentary here.

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The Coming Greek Default

Over at Reason.com this afternoon, I have a new column on the Greek debt crisis. Last year we looked at the numbers on the blog and came to the conclusion that no matter what happens, Greece is going to default. With a new Greek bailout on the table, we update the numbers but come to the same conclusion:

The target is to get Greek debt down to just 120.5 percent of GDP by 2020. But a confidential 10-page report prepared for European finance ministers that was leaked on Monday suggests that the best-case scenario is closer to 130 percent of GDP by the end of the decade. Furthermore, the report suggested that if the bailout deal is not upheld on the Greek side, debt could rise to the 180 percent of debt-to-GDP range.  To put this in perspective, Greece should be at something more like 60 or 70 percent of debt to GDP to be a stable European nation. [...]

The second bailout is also based on overly rosy estimates of economic growth for Greece. Where the Greek economy has seen negative GDP growth of 7 percent recently and is projected to have no growth in 2012 or 2013, the target goal of 120.5 percent of GDP by 2020 assumes economic growth of 2.3 percent in 2014 and 2.0 percent in 2015. But growth from where?

Read the whole commentary here.

If you want to start making a list of reasons why Greece will default here is a starter:

  • It took over a year for Greece to start mandatory public sector layoffs because of constant protests and demands from the Greek citizenry that they retain their paychecks with salaries three times the private sector and no requirement to actually show up for the job. 
  • Greece consumes more than it produces—partly because its people are busy consuming and not working, and partly because it doesn't produce that much period. It is a tourist based economy that can't generate rapid growth needed to eventually draw in the revenues needed to pay their debts after this second bailout goes through (if it goes through).
  • The Greek penchant for tax evasion isn't just going to disappear overnight.
  • For Greece to really have a future the nation needs to take a collective pay cut (probably somewhere between 25% and 50%), but a Trojan horse is more likely to appear on their shores than this happening willingly. It would be much simplier to make this happen by getting Greece out of the Euro and going back to the drachma—but it'll take a default for the Euro to let Greece go. One way or the other, this is all inevitable.

For even more see these two interviews from earlier this week on the Greek debt crisis.

Monday on GBTV's Real News: 

 

Tuesday on RT's The Aloyna Show:


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Bernanke and You: Charting His Control

 

Chairman of the Federal Reserve Ben Bernanke is largely responsible for the 1 percent interest rates under Greenspan in 2003-2004 that contributed to the housing bubble, and Bernanke is absolutely responsible for the $2.3 trillion of asset purchases and zero percent interest rates over the past three years. His policies, and his policies ALONE in conjunction with fiscal spending, are responsible for the following charts. The nearly one-to-one correlation has to do with the institutionalization of financial markets in commodities (backstopped by the Fed) over the past 30 years. Everything you read about growing global demand, diminishing supplies, global unrest, political instability, etc. etc. etc. is merely at the margin and largely the conjuring of the media to pocket whatever remaining disposable cash you may have left after the following has destroyed your purchasing power:

25 year copper price:

25 year heating oil price:

25 year corn price:

25 year crude price:

25 year wheat price:

25 year soybeans price:

25 year gold price:

The “crash” in commodities that took place during the winter of 2008 that saw crude prices drop from $150 per barrel to $30 over three months time in direct correlation with the fall in price of every other commodity was nothing more than a reversion to normalcy.  There was no crisis, no panic. It was the cleansing of exuberance, of stupidity, of irrational exploitation, of utter nonsense.

And now we’re right back. Thanks, Ben.

The difference now is that Americans are not insulated by high home equity and a strong labor market like during the lead-up to the bubble five years ago. The stock market may at present be robust, but the gains over the past three years priced in real terms relative to the rise in the price of commodities, particularly gold, is actually negative. It’s fluff.

Also, consider this: Bernanke likes to point to the fact that all the loans, totaling somewhere between $7 trillion and $16 trillion, made from October 2008 through early 2010 were paid back, and the Fed (and so the taxpayers) made money. The Fed just paid the Treasury $77 billion in 2011 and $80 billion in 2010 for the earnings on its balance sheet. Hey, great. But all that money just went to re-cap banks, institutions, insurance companies and the like to make outsize gains in the rally that was about to ensue, to the tune of 100 percent or even multiple doublings. If the Fed had just simply purchased $7 trillion of soybeans, for instance, taxpayers could have netted $4.3 trillion. We could have then paid for all of Obama’s deficits to date! Hurray, problem solved!

Investing ten percent of the world’s total GDP into soybeans may be impossible, but it’s not too far off as ludicrous as just giving it away to a handful of financial shells to re-inflate illusory wealth that never should have existed anyway.

This whole situation is far from simplistic, but understanding the effects is as simple as reading the charts. The price of such a diverse array of inputs (commodities) should not trade in such direct correlations as they have under the era of easy money, the stock and bond markets included. These movements will have a serious effect just as they did in 2008. Reversion to the mean is always inevitable in some not-always-observable fashion. To boot, the quicker they diverge, the quicker and harder they revert. Whether Bernanke succeeds with his monetary experiment by bringing up employment and GDP is not of concern if in a short-period thereafter it crumbles under its own weight.

 

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Entitling Professional Sports Through Taxpayer Subsidies

The Sacramento Kings owners are apparently relenting to political pressure and agreeing to "significantly contribute" to the financing of the new sports arena the city is planning to build for them. This is pretty extraordinary. The city is planning to finance a $387 million facility that will primarily benefit the team franchise, and the team owners act as if their financial backing is optional. Although the numbers aren't publicly finalized, the Sacramento Bee is reporting that the Kings might be putting up $85 milllion of "their own money," or about 22% of the total cost.

Team owners shouldn't look at their contribution as being optional. The real question is: Why don't the Kings owners pay the full cost of the facility? Or at least they should invest as an equity stakeholder in a private venturs so they have a financial interest in seeing it succeed financially. They don't for one simple reason: It won't make money. The benefits of their teams aren't high enough to lure enough patrons willing to pay a high enough ticket price to cover the costs.

Professional sports continues to be crony capitalism at its worst, using its oligopoly status to extract rents from taxpayers through elected officials. The reality is that precious little evidence exists suggesting that professional sports teams boost economic growth for cities, let alone neghborhoods, and the so-called benefits reflect the low bar used by local officials to claim success.

For more, and a balanced look at the costs and benefits of stadium and arena development, see this pair of studies by Marc Rosentraub here and here.  This useful article by Victor Matheson on why economic impact studies almost always overestimate the benefits of these investments is worth reading as well. Reason Foundation's work has appeared here and here and here.

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How Does HUD Secretary Donovan Misunderstand So Much About Housing?

“Does this $26 billion deal move the needle on the struggling U.S. housing market at all?” This was the question asked by Ali Velshi to HUD Secretary Shaun Donovan last week in an interview last week on CNN. He was referring to the huge mortgage servicing settlement signed between the states, feds, and top five mortgage servicers announced February 9. Donovan gave a very political answer, yes it moves the needle, but there are challenges that remain. 

That is barely true, as there is almost nothing in the settlement that moves the housing market towards recovery. But what was more interesting is what Donovan suggested we should do to keep the momentum going towards shifting the needle further. Donovan suggests we refinance every underwater mortgage in America and save homeowners an average of $3,000 a year and pay construction workers to rebuild vacant homes.

Huh? 

The biggest problem plaguing the housing market right now is that prices are not at their bottom, household debt has not been deleveraged, and the foreclosure process is jammed up. Let prices fall to their natural bottom and people will buy the vacant homes and pay to fix them up themselves—taxpayers don’t need to foot the bill to keep the price of that home unaffordable. Meanwhile, since you have to be current on your mortgage payments to refinance, doing a forcible nationwide refinance program isn’t going to prevent borrowers who have fallen behind because they can’t afford their current payments avoid foreclosure. 

Velshi, recognizing this argument puts it to Donovan, asking why we should not just let the housing market fall to the bottom. Donovan spins the answer:

From an economic view most people look at the market say house prices are where they should be at equilibrium, it’s what folks can afford.  Folks who are saying let it hit bottom, the real consequences of that to families and neighborhoods are enormous. A home is the single biggest investment that a family makes. It is how they often send kids to colleges through the equity in their home, they start businesses. It’s like saying if somebody’s house is burning down we should just let nature take its courses even if it might make the entire neighborhood go up in flames. I and the president don’t believe that we should let families and neighborhoods bear the brunt of this crisis like that. We are going to keep fighting, taking additional steps like this settlement to make sure the encouraging signs in the economy continue.

Okay, four things. Well, five. Pretty much every sentence in there is wrong. It is stunning—especially for someone who is supposed to be the top adviser on housing for the president. 

First, housing prices are not where they should be or at what people can afford today. If they were, then we wouldn’t have 3 million homes on the market and another 7 million or so in the shadow inventory. Sure, price-to-rent ratios are down to rates last seen in the 1990s. And real housing prices are about where they should be given the historical norms of growth for inflation adjusted housing prices. But every burst housing bubble since WWII has seen real prices fall below the trendline for several years before bouncing back to equilibrium—and there is no reason to think this price decline will be different. 

Second, yes, foreclosures suck. And lower housing prices will mean more underwater debt. But the consequences of dragging the housing collapse out for five years and counting, when we could have been in recovery last year are also “enormous.” 

Third, and this is nothing new on this blog: Homes. Are. Not. Investments. Or at least, they are not good investments. They are savings accounts at best. 

Fourth, using home equity to pay for tuition is an admirable story, but turning homes from a retirement nest egg into an ATM is one of the things that got us into this mess. 

And fifth, letting housing prices fall to where they are affordable is not like saying “let the house burn down.” It is more saying that we should not keep adding support beams to keep a crumbling home that was built on a faulty foundation from collapsing because it is always going to be unstable. It would cost less in the long run to just build a better house. 


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Some Clarity on the Spectrum Crunch

CNN Money began a weeklong series today about the reality and implications of the growing demand for wireless spectrum.

Congress took a big step toward addressing the issue last week when it authorized the Federal Communications Commission to begin re-allocating spectrum from various current licensees, including the U.S, government and private broadcasters, but that process could take years.

What's notable about the CNN Money article is that it is one of the few MSM pieces attempts to put spectrum policy in the context of the FCC's long history of attempting to manage competition. It also said that the spectrum shortage is at the root of slower data speeds, data throttling, and rising prices for wireless data plans, not service provider monopoly, inefficiency or greed, two common accusations heard in the policy debate,

Here's an excerpt:

How did we get here?

The number-one biggest driver is consumers' insatiable thirst for e-mail, apps and particularly video on their mobile devices -- anywhere, anytime. Global mobile data traffic is just about doubling every year, and will continue to do so through at least 2016, according to Cisco's Mobile Visual Networking Index, the industry's most comprehensive annual study.

The iPhone, for instance, uses 24 times as much spectrum as an old-fashioned cell phone, and the iPad uses 122 times as much, according to the Federal FCC. AT&T says wireless data traffic on its network has grown 20,000% since the iPhone debuted in 2007.

"We got into this principally because technology and demand exploded at a rate that nobody had anticipated," says Rory Altman, director of technology consultancy Altman & Vilandrie.

Another catalyst is the way the U.S. government allocated spectrum. The bands that wireless companies hold were broken up into small chunks across various markets, which was helpful in increasing competition in the 1990s.

But the patchwork nature has proven problematic for new technologies like high-speed 4G broadband. Bigger swaths of uninterrupted spectrum provide the larger amounts of bandwidth needed for delivering faster speeds.

Author David Goldman is generous. While the goal of carving up spectrum into slots was greater competition, there was no influx of "mom-and-pop" wireless companies that the FCC anticipated at the time. Faced with huge capital costs of buildout, smaller companies eventually sold their spectrum to larger players. The irony is while there is a competitive wireless market, the FCC's vision of eight to ten facilities-based carriers per market never materialized. Capital markets simply were not going to fund this big an overbuild.

What's worrisome is that FCC remains undeterred, and seems bent on doing the same thing in the next round of auctions--reserving chunks for "new technologies" withe serious performance issues (LightSquared anyone?) or new entrants who have little or no funding to build out regionally, let alone nationally. We've been down this road before. It doesn't work. Consumers will be served best if the spectrum can go to the companies that can 1) actually afford to pay for it; 2) know how to engineer wireless networks and 3) have the resources to get it into service quickest. And, yes, there are more than just two.

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Prison Privatization Failure in Florida Shows Clout of Union

The failure of a signature privatization effort for Florida Gov. Rick Scott earlier this week was a telling sign of the continued clout of unions in the policy marking process. Gov. Scott and his supporters in the legislature tried to keep the debate about sound management. In fact, Scott's proposal even said no privatization would occur unless the state could save a minimum of 7 percent.

Unfortunately, an opposition that included all Democrats and nine Republicans successfully carried the day by arguing, in effect, government is really a big jobs program. As the Miami Herald reported (Feb 24, 2012):

"Senators debated privatization for nearly three hours, and opponents’ floor speeches often showed more passion. Rather than talk about numbers, they talked about people, such as the treatment of correctional officers, whose starting salary is $34,000 a year and who have not received an across-the-board pay raise for the past six years.

“What’s wrong with state employees?” said Sen. Dennis Jones, R-Seminole. “We should be taking care of them, rather than kicking them under the bus.”

"Prison guards displaced by privatization could have “bumped” less experienced officers from their jobs upstate. But, Jones said, with the current housing crisis, many are trapped in their homes and couldn’t sell them if they wanted."

While some argued that the savings were "unproven," the reality is that savings can never be "proven" unless the services are actually put out for bid in the first place. Nothing required the state to privatize even the savings weren't there in the proposals.

For more, see the Reason Foundation policy study by Len Gilroy and Adrian Moore Corrections 2.0, Len's recent review on corrections privatizations for our annual Privatization Report, and my recent podcast with Capitol Vanguard

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