Dispatches from District 48
Posts tagged ‘Government’
Humans have a natural desire to innovate and exercise creativity. Unfortunately, in government bureaucracies, the only place where this creativity is channeled is into inventing new ways to expand one's or one's agency's power. Which is why life as a libertarian seems to be a constant whack-a-mole game against stupid regulatory proposals like banning even hands-free cell phones from cars.
I do not think that word "anarchist" means what they think it means.
This has from the beginning been the almost charming oddity of the OWS movement - we are anarchists that want more government. We oppose "the man" but want him to pay our college tuition. We hate capitalism but can't go anywhere without our iPods.
There are cases in which I support jury nullification. I cannot imagine sitting on a jury and voting to convict someone of violating a law I thought to be grossly unethical, no matter what the jury instructions were.
For explanation, see here, but the key quote
In response to Julian Heicklen’s motion to dismiss his indictment [for distributing pamphlets on jury nullification] on First Amendment grounds, federal attorneys have filed a response with the court. Here is the federal government’s position: “[T]he defendant’s advocacy of jury nullification, directed as it is to jurors, would be both criminal and without Constitutional protections no matter where it occurred” [emphasis added]. This is really astonishing. A talk radio host is subject to arrest for saying something like, “Let me tell you all what I think. Jurors should vote their conscience!” Newspaper columnists and bloggers subject to arrest too?
Next up -- it will be illegal to speak out against the President's ability to detain or assassinate Americans who he believes to be terrorists.
Thank God for the Left and their scientific approach to government decision making
EU bans claim that water can prevent dehydration...
EU officials concluded that, following a three-year investigation, there was no evidence to prove the previously undisputed fact.
Producers of bottled water are now forbidden by law from making the claim and will face a two-year jail sentence if they defy the edict, which comes into force in the UK next month.
For three years a group of government employees actually got paid to come to the conclusion that drinking water does not prevent dehydration. Congrats.
If you want an explanation, my guess is that this is part of the Left's war on bottled water. For some bizarre reason, bottled water has been singled out as one of the evils of modern technology that will drive us into a carbon dioxide-induced climate disaster. So I don't think the EU would have approved any label claim for water. Since this is such an absurdly obvious claim that most consumers would just chuckle at (yes, consumers can be trusted to parse product claims), I almost wonder if some water company didn't just float this to make the point that no claim could be approved in the EU system.
Transparency and accountability are always loved by those out of power but seldom by those in power. Thus we hear a lot about them on the campaign trail, and then suddenly, once folks are in office, silence. Two examples today.
First, this unbelievably anti-democratic and egregious proposal
A proposed rule to the Freedom of Information Act would allow federal agencies to tell people requesting certain law-enforcement or national security documents that records don't exist—even when they do.
Under current FOIA practice, the government may withhold information and issue what's known as a Glomar denial that says it can neither confirm nor deny the existence of records.
The new proposal—part of a lengthy rule revision by the Department of Justice—would direct government agencies to "respond to the request as if the excluded records did not exist."
The second story is in the same spirit, of using secrecy to avoid scrutiny and accountability
Sometime in 2012, I will begin the ninth year of my life under an FBI gag order, which began when I received what is known as a national security letter at the small Internet service provider I owned. On that day in 2004 (the exact date is redacted from court papers, so I can’t reveal it), an FBI agent came to my office and handed me a letter. It demanded that I turn over information about one of my clients and forbade me from telling “any person” that the government had approached me....
For years, the government implausibly claimed that if I were able to identify myself as the plaintiff in the case, irreparable damage to national security would result. But I did not believe then, nor do I believe now, that the FBI’s gag order was motivated by legitimate national security concerns. It was motivated by a desire to insulate the FBI from public criticism and oversight.
Earlier today, New York Times columnist Nick Kristoff opined on Twitter about cuts in government services. It’s not every day that you see such stupidity displayed so confidently…except from the Left:
Imagine John Boehner home in OH, seeing an escaped tiger–and getting a msg that help is unavailable due to govt cutbacks.
Well, I don’t know about John Boehner. But I do know that if I received such a message, it’d be because I was trying to call up a government flunky to haul a tiger carcass away. And if I did get such a message, my very next call would be to a good taxidermist.
It’s an interesting glimpse into the worldview though. The unspoken assumption is that, without government tiger hunters, we’re all doomed to be mauled by wild beasts. Presumably, this is because we are all tiny, little children, utterly incapable of solving our problems without the intervention of our benevolent government overlords. It’s a worldview that operates on the assumption that the government is the only adult in the room.
A great example of this sort of mentality was the Bruce Willis action filmLive Free or Die Hard. The movie was a decent thriller, falling into the unlikely-buddy-movie genre (including also 48 Hours and most of the Lethal Weapon movies).
Like most modern techno-thrillers, it required a lot of technical suspension of belief, but what really struck me was the premise -- that somehow, if terrorists were able to really shut down the government, people would go into a panic and be totally lost and forlorn. Even the strong male hero buys into the premise. Can you even imagine a Clint Eastwood movie where Clint laments how scared Americans will be if they were to call the FDA to inquire if a certain product is truly organic and no one answered the phone? It makes for a sort of irony in the movie because in fact the government is completely useless in the face of the terrorists, who are brought down essentially by a few private individuals.
Paul Krugman had this sideswipe comment the other day:
This isn't the only case where news organizations consistently report as truth something that didn't happen, while failing to report what did. Another one that comes to mind is the California electricity crisis of 2001-2002. As some readers may recall, that crisis was caused by market manipulation -- and that's not a hypothesis, Enron traders were caught on tape telling plants to shut down to create artificial shortages. Yet "news analyses" published after the whole thing was revealed would often tell readers that excessive environmental regulation and Nimbyism caused the crisis, with nary a mention of the deliberate creation of shortages.
And as you'll notice, in both cases the imaginary history just happened to be one more comfortable to status quo interests.
I find it hilarious that Krugman is talking about imaginary history, since he plays the same game so often. In fact, the disconnect between many of Krugman's current political writings and his historical economic work are often jaw-dropping. Even the differences in Krugman's opinion on the same topic when a Republican vs. a Democrat is in the White House can be amazing.
But I wanted to address the California utility issue. Certainly Krugman is right, as far as he goes, in that Enron made a lot of money in the California electricity crisis creating some short-term artificial shortages. But what he leaves out of his brief comment were the structural rules the government had put in place that made Enron's actions possible. Enron's profits in the California electricity crisis could never have been made in a free market.
I am not an expert on the whole regulatory environment in which these events occurred, but there were three key regulatory facts that need to be understood:
1. California, due to the NIMBY and environmental concerns Krugman mentions in passing, want lots of electricity but do not want the electricity production near them. So they have exported the production to other states, and, more importantly, California utilities did not control the production of the electricity they needed. Thus a lot of California power, and all of its marginal demand, is satisfied by local utilities buying out of state power. As we will see next, Krugman is really putting up a straw man here, as this is simply background, the least important of the three government factors that drove the problem.
2. California deregulated wholesale utility prices, but not retail prices. The point of price deregulation is that suppliers and consumers can make better decisions because the information they get via prices is not distorted by government mandates. But price deregulation only makes sense if the ultimate consumers have prices that float with the market. But California consumers still had fixed prices. There were no changes to pricing signals to consumers that might cause them to conserve more when electricity was particularly short.
So, only wholesale customers saw their prices paid increase when electricity supplies ran short. This mainly applied to large California utilities that bought power they needed from out of state. Theoretically, when prices spiked, they could cut back their demand. This is more awkward for them than consumers, but could be done either with pre-determined shut down priorities or rolling brown-outs. At some point, one would assume the cost of power would be higher than the cost of service disruptions, but...
3. California utilities were effectively required by regulation to try to serve all demand. Right or wrong, they felt they were in a position that if power were available, they had to buy it no matter what the cost.
So step in Enron. Seeing this mess, they found they could corner the market at a few peak demand times and sell Calfornia power for a gazillion dollars a Kw. I would not personally have been proud to make money that way, but Enron jumped right in.
I have no problem giving Enron grief for the way they make money, but one has to ask themselves, why the hell were California utilities buying power no matter what the price, and why was it that when electricity was so dear, it was illegal to communicate this to end users via prices (as we do with any other product or commodity). The story here is a lot more complicated than Enron.
Update: Finem Respice took a more sophisticated look at this same issue a while back in a broader post about trying to close an open system.
On the retail side, just as California was patting itself on the back for "deregulating" in 1996 (via a bill that Pete Wilson created with complexities and exceptions for e.g., San Diego that make the special interest game in Washington look tame by comparison), it froze, just after reducing, retail electricity rates for five years. Add to this the fact that California had long depended on supplies from, e.g., the Northwest, which, for years, enjoyed a hydroelectric power generation surplus. As the surplus vanished with droughts and increased demand in the Pacific Northwest, so did the supply buffer California was so used to, and that it leaned on most heavily over the years to avoid building new generating capacity (new capacity being the bane of the progressively green environmental utopian-paradise that was (is) California energy politics). All this conspired to spike rates. Who is surprised?
It is somewhat unfortunate that Enron's shrewd manipulation of California's badly flawed and outright schizophrenic market scheme was so flagrant, and that unrelated accounting scandals at the company permitted the story to become one of deregulation evils and free market greed rather than the core issue: the political spinelessness exhibited by California officials and their ongoing attempt to insulate voters from anything resembling market prices for electricity
This is a pretty interesting interview with Eric Schmidt of Google. I am running out the door and don't have time to excerpt it, but in short, Schmidt is quite critical of the ability of government to intelligently regulate technology.
His solution is telling. There is nothing here about reducing the power and scope of government, despite his clear and concise description of its consistent structural failures. His solution: more power for my guys. That way, when Washington plays its game of sacrificing the less connected in favor of the well connected, we will do OK.
I am working on this concept for my next Forbes column vis a vis the Occupy Wall Street movement. The OWS folks seem incoherent to us, because, in short, they complain about people having unfair power over them and then their solution is ... to give other people more power. I have reconciled this in my mind with a cold war analogy. Everyone accepts the arms race as a fact, and so the only way to survive is to have more nukes than the other guy. The only way to deal with power, is to get more power for my side.
Frankly, its time for disarmament. As a retailer, I get irritated with credit card processors, but I understood when Congress was considering regulation of interchange fees that giving the Feds the power to set credit card terms, rather than the banks, was not going to make things any easier, just shift the costs from more to less favored constituencies (and consumers are always the least favored constituency).
More later as I sort this out in my head.
Do you remember back in the late 70's, when the economy sucked, and no private entity would fund new technologies like computer startups Apple and Microsoft, so the government had to step in to provide the needed investment? Yeah, neither do I.
Faced with serious questions after the Solyndra failure as to their ability to make intelligent investments, the government is reacting by.... accelerating the approval of other green energy loans. Again, the difference with the private sector is not that the private sector makes no mistakes, but there is real accountability for those mistakes which lead to changes in behavior.
"Today, about 40 percent of all U.S. corn -- that's 15 percent of global corn production or 5 percent of all global grain -- is diverted into the corn ethanol scam in order to produce the energy equivalent of about 0.6 percent of global oil needs.Corn prices, now close to $7 per bushel, have more than doubled over the past two years (see chart above). And recent harsh weather, including floods in the Midwest and drought in the South, will likely mean a subpar U.S. corn harvest. That, in turn, will mean yet higher prices for corn, which will translate into higher prices for meat, milk, eggs, cheese and other commodities.
Brilliant! Selling dollar coins for 95-cents. Maybe they will make it up on volume.
The progressive argument for a larger state has, for over a hundred years, rested in part on the premise that smart people at the top in government can better optimize the allocation of resources and make better investment choices.
This premise always has been ludicrous. Government officials have neither the information nor incentives to perform this function, and lacking such, decisions always get made based on political rather than economic or other objective functions.
Ethanol is such a great example, it will almost be a shame when its mandates and subsidies are repealed. As a reminder, corn-based ethanol production get the trifecta of state sponsorship -- mandates for its use, subsidies for its protections, and stiff tariffs to prevent lower-cost imports.
The result is a classic government fail. The economic subsidies benefit only a small number of the politically connected, while hurting the great mass of humanity, even outside the US, through higher food and fuel prices. Because ethanol takes as much fuel to produce as it provides, it does nothing to change the amount of fossil fuels we use. And as a result, it does nothing to affect CO2 production and in fact has a number of environmentally negative effects, particularly in land and water use.
I am reminded of all this by these staggering figures, via Carpe Diem
"U.S. ethanol refiners are consuming more domestic corn than livestock and poultry farmers for the first time, underscoring how a government-supported biofuels industry has contributed to surging grain demand.
The U.S. Department of Agriculture estimated that in the year to August 31 ethanol producers will have consumed 5.05 billion bushels of corn, or more than 40% of last year’s harvest. Animal feed and residual demand accounted for 5 billion bushels."
As Mark Perry shows in his blog, US ethanol policy has also pushed corn prices up from $2 a bushel in 2007 to over $8 today.
Gary Johnson gave the finger to the Republican my-family-values-must-be-your-family-values set
Presidential candidate and former New Mexico Governor Gary Johnson charged today in a formal statement through his campaign that the Family Leader “pledge” Republican candidates for President are being asked to sign is “offensive to the principles of liberty and freedom on which this country was founded”. Governor Johnson also plans to further state his position against the Family Leader pledge this afternoon in Las Vegas, NV at a speech he will deliver at the Conservative Leadership Conference.
Johnson went on to state that “the so-called ‘Marriage Vow” pledge that FAMILY LEADER is asking Republican candidates for President to sign attacks minority segments of our population and attempts to prevent and eliminate personal freedom. This type of rhetoric is what gives Republicans a bad name.
“Government should not be involved in the bedrooms of consenting adults. I have always been a strong advocate of liberty and freedom from unnecessary government intervention into our lives. The freedoms that our forefathers fought for in this country are sacred and must be preserved. The Republican Party cannot be sidetracked into discussing these morally judgmental issues — such a discussion is simply wrongheaded. We need to maintain our position as the party of efficient government management and the watchdogs of the “public’s pocket book”.
“This ‘pledge’ is nothing short of a promise to discriminate against everyone who makes a personal choice that doesn’t fit into a particular definition of ‘virtue’.
Johnson is easily my favorite Presidential candidate in recent memory.
What does a statist government do when attaching "unexpected" to all negative economic numbers does not provide the necessary political cover?
Argentina’s government has filed criminal charges against the managers of an economic consulting firm, escalating its persecution of independent economists.
…The government is charging MyS Consultores with “publishing false information about inflation data” to benefit themselves and their clients. The criminal complaint alleges that MyS’s data also lead to speculative behavior in Argentina’s bond market.
…Consumer prices rose 9.7% in May from a year ago, according to the national statistics agency, Indec. But virtually all economists say annual inflation surpasses 20%—one of the world’s highest rates—angering government officials who dismiss inflation as a problem.
…So far this year, the Secretariat has fined at least nine economic research firms 500,000 pesos ($122,000) each. This week, the Secretariat also slapped a second fine on Orlando J Ferreres & Asociados.
“They fine us for saying how much prices have risen,” Mr. Ferreres, director of his eponymous firm, said. “They could seek criminal charges against all of us. We don’t know how far they’re willing to go.”
Mr. Ferreres said the legal actions are part of a strategy to prevent independent economists from publishing potentially negative information during an election year…
Government officials say they hoped the fines would deter economists from “deceiving” the public into making poor financial decisions by publishing inflation estimates that differ considerably from Indec’s consumer price index.
It is sad to see how far Argentina has fallen. In the past it has been one of my favorite countries in the world to visit.
It happens all to seldom, for reasons I understand well. Oil companies and Wal-Mart and other vilified private entities that are the object of populist and cynical political attacks very seldom fight back. The reason is not because they are in the wrong, but because the government has the power to gut them like a fish in a myriad of ways, and are populated by petty little thugs who love to dish it out but can seldom take any criticism.
That is why its great to see Koch Industries telling demagogues in the Democratic Party to take a hike. For some bizarre reason, perhaps because the Left saw how much fun the Right had vilifying George Soros for everything, the Koch brothers are not the source of all imaginable plots and schemes.
Check out this letter, where Koch Industries responds to Democratic fundraising pitch.
Our rulers are pretty good at finding tricky ways to expand their power
...several environmental groups that have received millions in EPA grants regularly file suit against that same agency. A dozen green groups were responsible for more than 3,000 suits against the EPA and other government agencies over the past decade, according to a study by the Wyoming-based Budd-Falen Law Offices.
The EPA even tacitly encourages such suits, going so far as to pay for and promote a "Citizen's Guide" that, among other things, explains how to sue the agency under "citizen suit" provisions in environmental laws. The guide's author — the Environmental Law Institute — has received $9.9 million in EPA grants over the past decade.
And, to top it off, critics say the EPA often ends up paying the groups' legal fees under the Equal Access to Justice Act.
"The EPA isn't harmed by these suits," said Jeffrey Holmstead, who was an EPA official during the Bush administration. "Often the suits involve things the EPA wants to do anyway. By inviting a lawsuit and then signing a consent decree, the agency gets legal cover from political heat."
This was a pretty amazing article on cost savings experienced already by one school district in Wisconsin after the collective bargaining agreement with government unions was voided.
Of course, there have already been substantial cost-savings as more sane work rules have been put in place and employees have to pay a larger (but still trivial) share of their pension and health care premiums.
But I thought this bit of self-dealing by the unions was pretty amazing and is the type of thing that did not make the news back in the whole Wisconsin brouhaha
"The monetary part of it is not the entire issue," says Arnoldussen, a political independent who won a spot on the board in a nonpartisan election. Indeed, some of the most important improvements in Kaukauna's outlook are because of the new limits on collective bargaining.
In the past, Kaukauna's agreement with the teachers union required the school district to purchase health insurance coverage from something called WEA Trust -- a company created by the Wisconsin teachers union. "It was in the collective bargaining agreement that we could only negotiate with them," says Arnoldussen. "Well, you know what happens when you can only negotiate with one vendor." This year, WEA Trust told Kaukauna that it would face a significant increase in premiums.
Now, the collective bargaining agreement is gone, and the school district is free to shop around for coverage. And all of a sudden, WEA Trust has changed its position. "With these changes, the schools could go out for bids, and lo and behold, WEA Trust said, 'We can match the lowest bid,'" says Republican state Rep. Jim Steineke, who represents the area and supports the Walker changes. At least for the moment, Kaukauna is staying with WEA Trust, but saving substantial amounts of money.
This strikes me as an amazing example of self-dealing. The union requires that their health care insurer get a monopoly, and then extract monopoly rents from the relationship. You can be sure the union rank and file never saw a dime of these health care profits, which likely flowed to just a few union leaders plus the politicians who helped make it possible.
Standard disclaimer: I have no particular beef with unions per se, whose ability to organize workers is protected under the First Amendment's right to assembly. My problems related to unions are
I have often described this statist feedback loop:
Obama's new political strategy seems to be even more brazen
Specifically, tax breaks for corporate jets:
The chief economic culprit of President Obama’s Wednesday press conference was undoubtedly “corporate jets.” He mentioned them on at least six occasions, each time offering their owners as an example of a group that should be paying more in taxes.
“I think it’s only fair to ask an oil company or a corporate jet owner that has done so well,” the president stated at one point, “to give up that tax break that no other business enjoys.”
But the corporate jet tax break to which Obama was referring – called “accelerated depreciation,” and a popular Democratic foil of late – was created by his own stimulus package.
Which is not to say that the losers in the Republican party would not likely have supported the same plan had it been their idea.
By the way, this is nearly exactly what Obama has been doing with those so-called special subsidies for oil companies. This subsidies are in fact the identical tax breaks that all manufacturers receive that allow them to accelerate expensing of capital investment. This is a tax policy that has enjoyed bipartisan support and no one is suggesting should be eliminated in general -- just eliminated for industries that have bad PR.
I have written any number of times on the technocratic-statist urge to overturn emergent order that is created bottom up in favor of imposing their own top-down vision of how society should run. The following is from David Mamet via Mathew Shaffer (hat tip Maggies Farm) and is a nice synopsis of this mindset
The problem is that “the Left today is essentially an elitist movement, and it has invested a lot of time and money in the idea that they know better.” Elites have been led to think “by getting the grades, and getting into good schools and think-tanks and government positions that they are fit” to reorder society more rationally. But this requires first demolishing the order produced by the organic processes of tradition, democracy, and markets — the culture. Why are some so susceptible to this fatal conceit? “They get out of elite schools being told nothing but, ‘You’re the best.’” Hubris — a dramatist’s area of expertise.
More good stuff, from the same interview
“There is no secret knowledge. The Federal Government is really the zoning board writ large,” he writes. What does that mean? He explains to me: “Mark Twain famously said, ‘God made the Idiot for practice, and then He made the School Board.’ The zoning board is like that — they’re just a bunch of people with power. Some are good, some are bad. But they gotta be watched like hawks, because power corrupts.” So “secret knowledge” is a Hayekian insight wrapped up like a Talmudic paradox. The secret is there is no secret — no special caste has the knowledge or goodness, inaccessible to the rest of us, to order society. Hence Mamet’s skepticism of technocracy and his preference for order created from the democratic and disaggregated processes of the marketplace.
And here is one more nice quote from Mamet, a while ago in the Village Voice
in the abstract, we may envision an Olympian perfection of perfect beings in Washington doing the business of their employers, the people, but any of us who has ever been at a zoning meeting with our property at stake is aware of the urge to cut through all the pernicious bullshit and go straight to firearms.
Kevin Drum seems upset that the US Government does not mandate paid time off for all US workers
The map below shows this starkly: the United States is virtually alone in not mandating any annual time off for employees, right along with such economic luminaries as Burma, Guyana, and Nepal. More charts on American overwork here.
I could take the same map and make this statement: "unlike such freedom-loving luminaries as Iran, Russia, Mali, and Chad, the United States government does not interfere in private decisions about vacation pay policies."
By the way, why is it for statists that the lack of a government mandate for something desirable is considered equivalent to the desirable policy being non-existent? In fact, Kevin Drum himself says his employer has a good paid leave policy. Wow, how could such a thing have happened without a government mandate?
The PJ Tatler has this bit on the arming of government bureaucrats:
Quin Hillyer discusses the increasing armed firepower of the federal government. Most people expect agencies like the FBI to be well armed for law enforcement purposes. But the Railroad Retirement Board? He reports that federal agencies far and wide now have armed agents, including the Small Business Administration. For what? To scare away phony 8(a) applications?? The United States Department of Education bought 27 Remington Model 870 12-gauge shotguns last year
I have no insight into what is going on in these particular agencies. But I can comment on another agency. Nearly every state parks organization has seen a proliferation of law enforcement titles among its employees. Seemingly every field employee nowadays needs to have a gun and a badge. Why?
Well, there are those who say that this arms race is necessary to keep the parks safe against some mythical crime wave. But I can say with some authority, since our company runs over 150 public parks across the country, that with very, very few exceptions, parks don't need this kind of on-site law enforcement support. Most problems can be handled with on-site customer service employees, with the occasional call the the sheriff if things get rough. In fact, customer service is actually improved without all the badges around. Rangers with law enforcement credentials tend to solve issues with their visitors by issuing citations. This is awful customer service -- I am sure McDonald's doesn't like it if someone messes up the bathroom or parks across two parking spaces, but you won't see them issuing citations to their customers.
The reason for this proliferation of law enforcement titles in parks is not demand for order, but incentives among employees. In most states, getting a law enforcement title in a parks organization gives one an automatic raise, participation in the far-more-lucrative state law enforcement pension plan, and training that can be valuable when one leaves the parks organization. Also, for some, it carries non-monetary benefits -- some folks think its cool to wield a gun and a badge.
My column this week in Forbes is about the declining rate of entrepreneurship and startups in the US.
A recent study by the Beauru of Labor Statistics confirmed a potentially disturbing trend — that the number of new startup businesses in the United States has declined since 2006, and the number of jobs created by those startups has been in decline for over a decade.
This is not just a result of the recent recession. These declines pre-date the current recession, and besides, startup activity has always held up well in past recessions as unemployed workers try entrepreneurship as a path back to prosperity.
There are likely a myriad of economic and demographic reasons for this decline, but certainly the growth of government power in the economy must be seen as a major contributor. Government intervention in commerce nearly always favors large companies over small, even if that was not its specific intent, for a couple of reasons:
- Increasingly complex and pervasive regulations on everything from labor practices to salt content tend to add a compliance cost burden that is more easily born by larger companies
- Large, entrenched competitors are becoming more facile at manipulating government to create barriers to competition from upstart companies with different business models.
The role of government in throttling entrepreneurship has been evident for years, in the enormous differentials between US and European business startup rates. Historically, the US has had entrepeneurship rates 3-4 times higher than in the large European industrial countries, due in large part to the barriers these latter countries place in the way of business creation. But the US, with its current bi-partisan drive towards a corporate state, may soon be engaged in a race to the bottom with these other countries.
I go on to discuss each of these two points in more depth.
About 20 years ago I did a rail transit study for McKinsey & Company with a number of European state rail companies, like the SNCF in France. With my American expectations, I was shocked to see how overstaffed these companies were. At the time, the SNCF had more freight car maintenance personnel than they had freight cars. This meant that they could assign a dedicated maintenance person to every car and still get rid of some people.
Later in my consulting career, I worked for Pemex in Mexico, where the over-staffing was even more incredible. I realized that in countries like France and Mexico, state-run corporations were first and foremost employment vehicles run for the benefit of employees, and, as distant second, value-delivery vehicles and productive enterprises.
Over the last 20 years, I have seen more and more of this approach to public agencies coming to the US. If nothing else, the whole Wisconsin brouhaha hopefully opened the eyes of many Americans to the fact that public officials and heads of agencies feel a lot more loyalty to their employees than they do to taxpayers.
I see this all the time in my business, which is private operation of certain state-run activities (e.g. parks and recreation). I constantly find myself in the midst of arguments that make no sense against privatization. I finally realized that the reason for this is that they were reluctant to voice the real reason for opposition -- that I would get the job done paying people less money. This is totally true -- I actually hire more people to staff the parks than the government does, but I don't pay folks $65,000 a year plus benefits and a pension to clean the bathrooms, and I don't pay them when the park is closed and there is not work to do. I finally had one person in California State Parks be honest with me -- she said that the employees position was that they would rather see the parks close than run without government workers.
Of course, if this argument was made clear in public, that the reason for rising taxes and closing parks was to support pay and benefits of government employees, there might be a fight. So the true facts need to be buried. Like in this example from the Portland transit system, via the anti-planner.
In 2003, TriMet persuaded the Oregon legislature to allow it to increase the tax by 0.01 percent per year for ten years, starting in 2005. In 2009, TriMet went back and convinced the legislature to allow it to continue increasing the tax by 0.01 percent per year for another 10 years. Thus, the tax now stands at $69.18 per $10,000 in payroll, and will rise to $82.18 per $10,000 in 2025.
At the time, TriMet promised that all of this tax increase would be dedicated to increasing service, and as of 2010, TriMet CFO Beth deHamel claims this is being done. But according to John Charles of the Cascade Policy Institute, that’s not what is happening.
Poring over TriMet budgets and records, Charles found that, from 2004 (before the tax was first increased) and 2010, total payroll tax collections grew by 34 percent, more than a third of which was due to the tax increase. Thanks to fare increases, fares also grew by 68 percent, so overall operating income grew by about 50 percent, of which about 7 percent (almost $20 million) was due to the increased payroll tax.
So service must have grown by about 7 percent, right? Wrong. Due to service cuts made last September, says Charles, TriMet is now providing about 14 percent fewer vehicle miles and 12 percent fewer vehicle hours of transit service than it provided in 2004 (comparing December 2004 with December 2010). TriMet blamed the service cuts on the economy, but its 50 percent increase in revenues belie that explanation.
By 2030, according to TriMet’s financial forecast (not available on line), the agency will have collected $1.63 billion more payroll taxes thanks to the tax increase. Yet the agency itself projects that hours and miles of service in 2030 will be slightly less than in 2004.
Where did all the money go if not into service increases? Charles says some of it went into employee benefits. TriMet has the highest ratio of employee benefits to payroll of any transit agency. At latest report, it actually spends about 50 percent more on benefits than on pay, and is the only major transit agency in the country to spend more on benefits than pay. This doesn’t count the unfunded health care liabilities; by 2030, TriMet health care benefits alone are projected to be more than its payroll.
From a commenter at Instapundit
It seems to me that whenever there is a threat of a government shutdown, it’s portrayed as just this side of a tsunami-level disaster. When government workers – teachers, sanitation workers, etc – go on strike, it’s portrayed as the middle-class worker sticking up for himself. Why is it that a government shut-down caused by a desire to spend less money is different than a government shutdown caused by workers failing to do their jobs – isn’t the effect the same?
Its been a long day here. As many of your know, my company privately operates public recreation facilities. We operate nearly 150 campgrounds and other parks on US Forest Service land, helping to reduce the cost of these facilities and keep them open despite declining budgets.
Because we pay all the expenses for the campgrounds and do not accept any government money (we operate solely using the gate fees paid by visitors), keeping these facilities open is not at all dependent on government appropriations. As such, the facilities we operate have never been subject to closure in past government shut downs. The Grand Canyon has to close because it is operated with government employees, but the public recreation areas we operate do not.
Or at least that was the position of the Forest Service until last night. However, this morning, the USFS began to take the position we had to close, despite the fact that the law does not require it. Through most of the day I have had to be on the phone pushing back against this bad idea.
At first, I thought it was some sort of scheme to purposefully make the cost of the shutdown worse, by shutting down public recreation facilities that did not need to be shut down. However, I have come to understand that this is likely driven by a need for "consistency." Senior administration officials were concerned it would be confusing to the public if the National Park Service was totally closed but a substantial number of US Forest Service sites remained open. I have spent a lot of time trying to convince folks that it was dumb to close literally thousands of the most popular recreation sites in the country merely in the name of mindless consistency.
Hopefully we will win the day, and we are starting to see some evidence the Forest Service will see it our way, and allow private operators who do not take Federal money or use Federal employees to remain open serving the public during the busy Easter week.
