Coyote Blog

With articles about solar prices coming down, and living in Phoenix (one of the best solar sites in America), I yet again have priced out solar for our home.  The short answer is that it makes sense, IF you don't mind reaching into the pockets of all your neighbors.

For this analysis, I will use the prices here.  The $72,167 cost for a 11.76kW system is pretty competitive at $6.13 per watt installed  (this is rated watts, not actual -- see footnote).  The panels themselves can be bought for about $3 per watt, with about $1 a watt for other equipment like inverters and $2 per watt for installation.  Do-it-yourself packages for a similar size system are here and go for around $4-$4.50 per watt.

The solar company estimates that this system in Phoenix will save me$2,779 a year on my electric bill.  I have not checked their math, but I assume they are not under-estimating this number in their marketing literature.  Taking this savings, we get a payback on the installation of about 26 years.   This ignores future electricity price increases, but also ignores the time value of money.  At 8% over 20 years, it has a net present value of  NEGATIVE $41,558.   At the end of the day, this is a terrible return -- in fact a huge value destruction.

But I began this post saying a solar investment might make sense.  How?  Well, that is where your willingness to reach into your neighbor's pocket comes in.  Our solar company estimates the following tax breaks and rebates on the system described above:

• Utility rebate:  $35,280
• State income tax credit: $1,000
• Federal income tax credit:  $21,650

So, in building this $72,167 improvement on my house, I get to use $57,930 of other peoples' money**.  As Steve Martin says in the Jerk:  "That takes the pressure off!"

Like in many other cases, other peoples' money suddenly makes solar a good investment.  Now we are looking at $2,779 a year in savings from a net investment of $14,237, or about a five year payback.    Over 20 years even assuming no inflation and an 8% cost of money that has an NPV of $12,081.

So -- I officially reverse my past conclusions that home solar does not pay.  It can in fact be a good investment -- for you.  For the country, it is a terrible investment.   Your neighbors are contributing $57,930 in subsidies while you receive just $12,081 in benefits.  The remainder, just over $45,000, is a dead-weight loss to the economy.  It is money destroyed by the government.

This is surprisingly like the ethics problem of pulling a lever to get a million dollars but someone you don't know in China dies.  The only difference is that you get $12,000 and someone you don't know loses $58,000.

** Footnote: Yeah, I know, theoretically the utility rebate is a substitute for the capital spending and not a wealth transfer.  But trust me, it's a wealth transfer.  To understand this, we have to shift from rated solar watts to actual capacity in watts.  In Phoenix, one of the best solar sites in the world, panels produce only about 25% of their rated capacity in a day (6 equivalent sun hours per day divided by 24 total hours in a day).  So, on average, a 100 watt panel is producing 25 watts.

This means that by APS paying about $3 per rated watt in rebates, they are paying about $12 per actual watt.  And there is no way this is what they are paying for other capacity.  A typical brand new power plant might be $2-$3.50 per watt.  So at $12, this is clearly a transfer mandated by the PUC, and not a smart substitute for capital expenditure.   Besides, if this payment made economic sense for the utility, there would not be an annual cap on the amount paid out.

As wealth transfers go, this is a particularly egregious one, as it tends to add costs to the electric bills of the poor and middle class so rich folks can build hobby solar systems so they can tell their friends at cocktail parties that they are "green."

Update: All of this is not to say that I am so good a person as to not take the money that is being put at my doorstep.  I'm still thinking about it.

This is awesome, from Carpe Diem:

On a purchasing power parity basis, France, Japan, and Germany would all be the poorest states in the United States, based on per capita GDP.  People on the coasts don't benchmark their education or health care spending against Mississippi, except perhaps to make the case that Mississippi is spending too little.  So why do they benchmark their spending against Germany or France.  Of course we spend more on health care per capita - we spend more than these countries per capita on everything from TV's to cars to movie tickets.

Most licensing efforts are nominally sold based on some public or consumer good but almost always end up being mostly about protecting politically connected incumbent businesses against new competitors.   Nowhere is this more obvious than in liquor licensing.

If you want to start a new liquor-based business (restaurant or bar) in Phoenix, it is going to cost you a hundred grand just for the license.

In fact, the sales price for existing licenses has dropped in recent years, with prices for a bar license in the Phoenix area slipping from $100,000 to $85,000 or $90,000, he said.

And these are the numbers with record-low demand.  Why does Arizona (or most other states) limit the number of licenses at all?  Why not just issue them to all comers, and let the market sort out who is successful and who is not?  Certainly we would likely see a lot more interesting restaurant startups if there was not an effective $100,000 tax on starting a restaurant imposed by the state.

State officials used to pretend the reason was to protect the community from being overrun by, er, dining choices or bars or whatever, but nowadays they don't even bother with such justifications and just give the true reason - they are protecting incumbents from competition.

Arizona hadn't awarded licenses since the late 1980s before the 2005 law passed. That was largely because holders of existing licenses didn't want to diminish their resale value.

Well, I am a holder of several existing Arizona licenses and I say -- open the floodgates!

Like Franken, I can freehand draw the US with all fifty states from memory.  But I start from the opposite corner, in Washington state.  But, I can also drink a beer while standing on my head, and used to (when I played rugby) race people saying I would drink one upside down in the time they drank two normally.

For the betting man, here is the lock of the week:  Obama, in his Wednesday speech, will outline a plan that does one thing but describe it as something nearly opposite.  This is a common political game, so it always is a good bet with any politician, but Obama has sharpened this approach into an art form.

The more interesting bet, which is probably more like 50/50, is whether Obama will

1. Offer only incremental changes, to make sure he gets something passed he can call health care reform, but will describe it to the radical end of his base as sweeping change, -OR-
2. Offer nearly the exact same core plan that is in the House bill that has so many folks concerned, but via changes in wording and euphemisms describe it to a worried public as something much more moderate.

I am honestly torn as to which it will be.  How are y'all betting?

I suppose we all fantasize about being a teenager again.  One reason not to be young again:  My son's high school soccer team played at 4PM the other day in Phoenix.  Game time temperature:  114F.

Not many people have seen it, but one of my favorite movies is Interstate 60.  It has a story thread through the movie, but what it really becomes is a series of essays on freedom and slavery.  One the best parts is the town where everyone is a lawyer.  The only way anyone makes money is when someone breaks the law, so their laws are crafted such that it is impossible not to break the law.

The town of Jericho, Arkansas sounds very similar.  It has 174 residents, no businesses, but a police force of 6 that tries to find ways to support itself.  Apparently, everyone in town is constantly in court for traffic citations.  When one man got fed up, and yelled at the police in court for their stupid speed traps, the police shot him - right in the courtroom.  In a scene right out of Interstate 60, the DA, after investigating the shooting, couldn't remember the name of the police officer who did the shooting and said no charges would be filed against the police, but that misdemeanor charges were being considered against the man shot.  Probably for littering, due to his bleeding on the floor.

Via Radley Balko (who else?)

Kevin Drum shows this chart as evidence we need government health care like the rest of the "civilized" world:

I write back in the comments:

I wonder if the graph you show is a bug or a feature.  My guess is that you could draw the same chart in the same shape with the US on the far left for consumption of items as diverse as "big screen TVs" and "pro sports tickets."  We would chalk up spending in any other area as simply a result of wealth.  Why not on health care?  Why is it so bad that we spend more money on something like health care which is arguably less frivolous and more critical than TV's or baseball games?

I would understand it if the argument was that we are not getting our money's worth, but that meme is just about dead.  The evidence is pretty clear that though life expectancy in the US is lower than some of these other countries, this is due to issues unrelated to health care (specifically murders and auto accidents).  When the cause of death is limited to things amenable to the health care system, the US ranks #1 in the world in life expectancy.  This is not even to mention the customer experience in accessing the health care system, which for all its irritations, is still ranked the best in the world.  We pay the most, and get the best results, because we can afford the best.

It makes me nervous that you think this is a problem.

PS- I certainly think there are efficiencies that could be wrung out from the health care system if people actually shopped with their own money for their own health care, as they do for every other product and service they buy.  This is proved out in the falling prices for non-insurance covered health procedures, such as laser eye surgery.  But it is a laugh to think the government will wring these savings out.  The government has never, ever, ever made a process more efficient.  All it can do to cut costs is a) institute price controls on suppliers, which eventually lead to shortages and reduced R&D and/or b)  Eliminate services.

Update: OMG, we need government take over of the automotive sector, because we spend more money on cars than any other country, and by the left's logic that is a sign of failure of the status quo.

Apparently I have entered into a contract, which keeps getting amended, but no one ever sends me a copy or asks for my signature.

I heard an angry town-hall participant in Texas claim health insurance was not a right. If you could not pay for it, you should not have it. That's neither realistic nor desirable. Everyone requires certain goods and services, such as food and shelter. There exists an implicit social contract that people who cannot afford these goods will get them from the state.

The last time I understood that we entered into a social contract was in the late 18th century, when we exited our old relationship with Great Britain and entered a new one defined by the Constitution.  But I am pretty sure that government provision of food, shelter, and health care were not in this contract.

Then, in the 1930s, we were told"food" is in the contract.  Then, in the 1960's, we were told "shelter" is on the list.  Now apparently health care is on the list.  Can someone send me a copy of this contract, so I can know what else is on it?

Isn't it ironic that the only "contract" the Left respects is the kind that I don't sign, don't consent to, and don't enter of my own free will?   Of course, a contract that one party doesn't consent to and only enters into by force is not a contract at all.  As Wikipedia puts it for the definition of a contract, "Agreement [to a contract] is said to be reached when an offer capable of immediate acceptance is met with a 'mirror image' acceptance (ie, an unqualified acceptance)."

The World Wildlife Fund made an ad showing hundreds of planes zeroing in on the World Trade Center to highlight...um...I'm not sure what.  Somehow this is linked with tsunamis and pandas, but most of the world has just linked it with the WWF being idiots.   Print and video ad shown at the link.

The post title refers to this.

Kevin Drum says:

The Consumer Product Safety Improvement Act makes it illegal to sell toys that haven't been tested for lead content.  In general, I think that's a perfectly fine idea.

He can't understand, though, why its effects seem so perverse and Draconian when its core is such a "perfectly fine idea."  It is amazing to me that the law of unintended consequences is so hard even for seasoned political observers to grasp.

A sensible restriction might be that a child cannot by any reasonable use of the product ingest more than X concentration of lead.  But of course that is not what the government does.  The government requires that every toy undergo expensive testing and batch tracking (almost like that of an aircraft part).  This is not by any means the same as simply requiring products to limit lead exposure.  It is a one-size-fits-all regulation of process, rather than true safety.  It imposes huge testing and tracking expenses on products that can't possibly have any lead in them.

And, like many laws of this kind, it imposes a huge penalty on small competitors and new entrants and rewards larger toy makers who both have the scale to pay for the testing and the political clout to shape the law in their favor.  In fact, the big winner from the legislation has actually been Matel, the company whose recalls actually led to the law in the first place.

The Consumer Product Safety Improvement Act (CPSIA) requires third-party testing of nearly every object intended for a child's use, and was passed in response to several toy recalls in 2007 for lead and other chemicals. Six of those recalls were on toys made by Mattel, or its subsidiary Fisher Price.

Small toymakers were blindsided by the expensive requirement, which made no exception for small domestic companies working with materials that posed no threat.

"¦

So while most small toymakers had no idea this law was coming down the pike until it was too late, Mattel spent $1 million lobbying for a little provision to be included in the CPSIA permitting companies to test their own toys in "firewalled" labs that have won Consumer Product Safety Commission approval.

The million bucks was well spent, as Mattel gained approval late last week to test its own toys in the sites listed above"”just as the window for delayed enforcement closed.

Instead of winding up hurting, Mattel now has a cost advantage on mandatory testing, and a handy new government-sponsored barrier to entry for its competitors.

Update: Brad Warbiany has similar thoughts.

Via Steve Chapman at Reason:

[President Obama] says though the United States spends more per person on medical care than any other nation, "the quality of our care is often lower, and we aren't any healthier. In fact, citizens in some countries that spend substantially less than we do are actually living longer than we do."

That's one of the favorite rationales for a government-led overhaul. But it gives about as realistic a picture of American medicine as an episode of Scrubs.

It's true that the United States spends more on health care than anyone else, and it's true that we rank below a lot of other advanced countries in life expectancy. The juxtaposition of the two facts, however, doesn't prove we are wasting our money or doing the wrong things.

It only proves that lots of things affect mortality besides medical treatment. Heath Ledger didn't die at age 28 because the American health care system failed him.

One big reason our life expectancy lags is that Americans have an unusual tendency to perish in homicides or accidents. We are 12 times more likely than the Japanese to be murdered and nearly twice as likely to be killed in auto wrecks.

In their 2006 book, The Business of Health, economists Robert L. Ohsfeldt and John E. Schneider set out to determine where the U.S. would rank in life span among developed nations if homicides and accidents are factored out. Their answer? First place.

That discovery indicates our health care system is doing a poor job of preventing shootouts and drunk driving but a good job of healing the sick. All those universal-care systems in Canada and Europe may sound like Health Heaven, but they fall short of our model when it comes to combating life-threatening diseases.

Via Cafe Hayek:

American Postal Workers Union president William Burrus complains that "It is deeply troubling that Journal editors advocate ending the Postal Service's exclusive right to sort and deliver mail.  The Postal Service must remain a public service if we are to honor our nation's commitment to serve every American community "“ large or small, rich or poor, urban or rural "“ at affordable, uniform rates"

My family has  a ranch that is absolutely in the middle of nowhere in Wyoming - it is 30 minutes by dirt road from a town of 2,000.  The USPS delivers mail to a box 3 miles away from the ranch, and does it 3 days a week.  The USPS will not deliver overnight mail.   UPS delivers 6 days a week right to our door, including overnight mail.

The word "uniform" is the key -- what the USPS government protected monopoly buys us is a massive cross-subsidy, where city dwellers subsidize rural communities, Alaska, and Hawaii.   Further, because the USPS knows that these subsidized routes are cost black holes, they tend to cut back on service to try to save money.  The result is that no one is served well, as is often the case when a large cross-subsidy exists -- cities pay more for their mail, and everyone gets worse service.

From the comments of this post, which wondered why Americans are so opposed to the climate bill when Europeans seem to want even more regulation.  Leaving out the difference in subservience to authority between Europeans and Americans, I wrote this in the comments:

I will just say:   Because it's a bad bill. And not because it is unnecessary, though I would tend to argue that way, but for the same reason that people don't like the health care bill - its a big freaking expensive mess that doesn't even clearly solve the problem it sets out to attack. Somehow, on climate change, the House has crafted a bill that both is expensive, cumbersome, and does little to really reduce CO2 emissions. All it does successfully is subsidize a bunch of questionable schemes whose investors have good lobbyists.

If you really want to pass a bill, toss the mess in the House out. Do this:

1. Implement a carbon tax on fuels. It would need to be high, probably in the range of dollars and not cents per gallon of gas to achieve kinds of reductions that global warming alarmists think are necessary. This is made palatable by the next step....
2. Cut payroll taxes by an amount to offset the revenue from #1. Make the whole plan revenue neutral.
3. Reevaluate tax levels every 4 years, and increase if necessary to hit scientifically determined targets for CO2 production.

Done. Advantages:

1. no loopholes, no exceptions, no lobbyists, no pork. Keep the legislation under a hundred pages.
2. Congress lets individuals decide how best to reduce Co2 by steadily increasing the price of carbon. Price signals rather than command and control or bureaucrats do the work. Most liberty-conserving solution
3. Progressives are happy - one regressive tax increase is offset by reduction of another regressive tax
4. Unemployed are happy - the cost of employing people goes down
5. Conservatives are happy - no net tax increase
6. Climate skeptics are mostly happy -- the cost of the insurance policy against climate change that we suspect is unnecessary is never-the-less made very cheap. I would be willing to accept it on that basis.
7. You lose the good feelings of having hard CO2 targets, but if there is anything European cap-and-trade experiments have taught, good feelings is all you get. Hard limits are an illusion. Raise the price of carbon based fuels, people will conserve more and seek substitutes.
8. People will freak at higher gas prices, but if cap and trade is going to work, gas prices must rise by an equal amount. Legislators need to develop a spine and stop trying to hide the tax.
9. Much, much easier to administer. Already is infrastructure in place to collect fuel excise taxes. The cap and trade bureaucracy would be huge, not to mention the cost to individuals and businesses of a lot of stupid new reporting requirements.
10. Gore used to back this, before he took on the job of managing billions of investments in carbon trading firms whose net worth depends on a complex and politically manipulable cap and trade and offset schemes rather than a simple carbon tax.

Payroll taxes are basically a sales tax on labor.  I am fairly indifferent in substituting one sales tax for another, and would support this shift, particularly if it heads of much more expensive and dangerous legislation.

Update: Left out plan plank #4:  Streamline regulatory approval process for nuclear reactors.

Update #2: Readers of TJIC wonder if this is effective, calling it just a rebate of the tax.  I answered in the comments as follows:

I think "rebate" is the wrong way to think of it. Of COURSE if you paid a higher price and then had the exactly that amount rebated to you, then it would not be a very powerful incentive. But that is not what is being proposed.

I think things are easier if you consider payroll taxes to be a sales tax on labor, which they are in effect. So we have a sales tax regime, with differing tax levels on different types of products. If we raise taxes on one item, but drop taxes on the others, then sales of that one item are certainly going to suffer. Its price just went up relative to all the other things we buy. Let's imagine a simplified world where we can buy any of 10 items (call them A, B, C, etc), each priced at $10, and we have $100 in income. Now imagine the same world tilted such that we have $105 of income and all items are $10 except "A" which now costs $20 each. On average, most people will buy less "A" and more of other stuff.

I'm a libertarian, so I grit my teeth at such games. I don't like the taxes in the first place. I don't like the government playing outcomes games with taxes. But my point is that if we are going to insist on doing something to limit CO2, then shifting the sales tax burden so that total taxes are the same but taxes on fuels are higher while taxes on labor are lower strikes me as a substantially lower cost solution than any of the other alternatives being suggested.

When insurance covers routine expenses, perverse incentives often follow.  Here is an example I found today shopping for a company to replace my car's windshield -- This sure looks to be an absolutely blatant kickback (image from a glass company website here).

All the pitches on my Google search are like this.  Here is another one:

But here is the winner, at least as far as I got through the google search:

Don't you have to wonder about a $1,000 rebate on a procedure that retails for perhaps $250?

I am not a lawyer, nor do I play one on the Internet, but it certainly appears that the glass companies are charging the insurance companies for more than the glass replacement would normally go for in a competitive marketplace, and then splitting the extra money defrauded from the insurance company with the consumer.   Another way of putting it is that in selecting a glass company for an insurance-covered repair, the consumer is acting as an agent for the insurance company, and as such an agent the consumer is taking a monetary inducement from a particular vendor to throw business to that vendor.

Arizona has explicit no-fault legislation banning insurance companies from raising insurance rates due to broken windshields.  I wonder what there is to stop someone, then, from heaving a rock at his/her windshield every other week?  Further, I wonder what stops such offers, which look like blatant kickbacks to me, from being either illegal or prosecuted?  I can only guess that in the weird interest-group-politics that substitute nowadays for ethics that its OK to commit fraud if the little guy is the beneficiary and unloved insurance companies are the victim.

It is easy to find examples of police enforcing made-up laws.  Here is an example from the Department of Homeland Security:

"There are certain things that the press cannot do when it comes to national security, and filming federal buildings is one of them," said Luis Martinez, a spokesperson for the Dept. of Homeland Security.

This is a total crock.  If it were true, no tourist would ever leave Washington DC -- they would all end up in jail.  Via Carlos Miller, who is doing a great job blogging about the growing efforts by police to make public photography illegal.  Mr. Miller, by the way, is still fighting in court against charges that he committed the ultimate no-no (as far as police are concerned) -- photographing a police officer in public.

Police have decided that the way to avoid having problems like the Rodney King beating which was caught on film is too.... prevent anyone from filming them!  The police can fix just about any evidence, they will back each other up in even the most outrageous of stories, but the one thing they can't fix is video, so they want it banned.  Lacking cooperation from legislatures in actually banning video, they have decided to ban it de facto if not de jure through their actions on the streets, hoping a cowed public will not question their actions.

Apparently, Massachusetts companies that have bought influence via Ted Kennedy are worried about their future.

As an update on my rail subsidy post, I saw a relevant post from the Thin Green Line yesterday.  At least, I suppose, transit supporters are honest:

When I talked to Dave Snyder earlier this month about a fix for mass transit in the Bay Area, he told me, "Somehow or another we've got to get more money from driving."

However, I thought this was a hilarious lack of perspective:

...one side effect of the green revolution has been a growing awareness of how much roads cost. I imagine you'd be surprised to learn that building a road"”not maintaining it, just building it"”costs more than $16 per square foot.

I have no doubt that this person, who is a strong light rail supporter, honestly thinks this is a lot of money.  But I did the math in my comments on his post:

$16 per square foot for highway should be considered a bargain. This means that a twenty foot wide two-lane highway is $320 per linear foot.

The Phoenix light rail system cost $1.4 billion (thats building it, not maintaining it) for 20 miles, which at 34,000 boardings per week day is carrying somewhat less traffic than the capacity of a two lane highway. However, it cost $13,258 per linear foot, or 41 times your highway numbers. Which is why highway users easily pay the full cost of their transportation infrastructure through their gas taxes, but transit users don't even come close.

In Phoenix, light rail fare revenues cover only 7% of its operating and capital costs. Which always has me scratching my head when people say light rail is somehow more "sustainable." If running trains requires, as you suggest, draining resources from millions of people just to move thousands, how is it sustainable?

Should we just change the name now from "Senate seat" to Duke of Massachusetts now?

With Massachusetts having paid its final respects to Senator Edward M. Kennedy, the politics of succession begins in earnest this week - candidates will emerge, a race will take shape, and the Kennedy clan will have to reveal whether it wants to keep the seat in the family....

"Joe Kennedy, as emotionally drained as he must be, cannot help but be moved by the outpouring of affection and respect that has come from people all over the country in the last several days,'' said Dan Payne, a longtime Democratic media consultant. "I'm not saying he is going to run, but he wouldn't be human and he wouldn't be a Kennedy if he didn't give serious thought to running for the so-called Kennedy seat.''

I am somehow reminded of this story about George Washington, who turned down power after his army had beaten the British in the Revolutionary War.  All of Europe expected him to claim power.  Instead:

Give the last word to Washington's great adversary, King George III. The king asked his American painter, Benjamin West, what Washington would do after winning independence. West replied, "They say he will return to his farm."

"If he does that," the incredulous monarch said, "he will be the greatest man in the world."

That is what was considered greatness in that age - the willingness NOT to pursue power, even when by military success or family name such power could easily be had.  Unfortunately we celebrate just the opposite today, singing eulogies for a man and a family that do nothing but seek power.

I have always wondered - when politicians do something like this, do they actually believe in their hearts they are doing the right thing or do they fully know that they are cynically trying to appear to take action while actually doing absolutely nothing useful. The former may almost be scarier than the latter

OBAMA ASKS FEDERAL WORKERS TO SACRIFICE "” By 0.4 percent! "Citing the current economic recession "” and the Sept. 11 terrorist attacks eight years ago "” President Obama says he will use emergency powers to cut the programmed across-the-board January increase in federal employees' pay from 2.4 percent to 2.0 percent, according to a letter he sent to House Speaker Nancy Pelosi"¦"

I have worked full time for 26 years.  Number of years I have had a programmed, guaranteed annual salary increase to be paid irregardless of my performance:  zero.

Via Carpe Diem:

Pro-labor policies pushed by President Herbert Hoover after the stock market crash of 1929 accounted for close to two-thirds of the drop in the nation's gross domestic product over the two years that followed, causing what might otherwise have been a bad recession to slip into the Great Depression, a UCLA economist concludes in a new study.

"These findings suggest that the recession was three times worse "” at a minimum "” than it would otherwise have been, because of Hoover," said Lee E. Ohanian, a UCLA professor of economics.

The policies, which included both propping up wages and encouraging job-sharing, also accounted for more than two-thirds of the precipitous decline in hours worked in the manufacturing sector, which was much harder hit initially than the agricultural sector, according to Ohanian.

"By keeping industrial wages too high, Hoover sharply depressed employment beyond where it otherwise would have been, and that act drove down the overall gross national product," Ohanian said. "His policy was the single most important event in precipitating the Great Depression."

After the stock market crash, Hoover met with major leaders of industry and cut a deal with them to either maintain or raise wages and institute job-sharing to keep workers employed, at least to some degree, Ohanian found. In response, General Motors, Ford, U.S. Steel, Dupont, International Harvester and many other large firms fell in line, even publicly underscoring their compliance with Hoover's program. Reluctant to lower wages due to Hoover's entreaties, employers in the manufacturing sector responded by reducing the work week and laying off workers. By September 1931, the manufacturing sector was already hurting: Hours clocked by workers had fallen by 20% (see chart above) and employment by 35%.

Wow, its sure lucky we don't have a President today reacting to a recession with profoundly pro-labor policies. Otherwise we might be doing something stupid, like screwing secured creditors in favor of routing value to unions or protecting union health benefits at the cost of everyone else's health care.

I wondered today what kind of subsidy a rider on the Phoenix Light Rail system was receiving.  Hillary Foose, the public information officer of Metro light rail, was kind enough to send me a link to this board presentation.   Since the rail system opened mid-fiscal year, I will use their own projections for the 2009/2010 fiscal year.

Public accounting is a pain in the butt for someone used to private finances, because it is all cash accounting rather than accrual and they mix together capital expenditures with operating expenditures.  But the table on page 62 carves out the operating budget for the existing 20-mile line from the development and capital budgets.    Here are the key numbers:

Fare Revenue:  $8,985,159

Operating Expenses:  $33,733,168

So already on an operating basis we have a 73% subsidy.  But we have sunk $1.4 billion of capital money into building the line  (actually this is a little low as Metro has spent tens of millions more this year).  Unfortunately, in government accounting, there is no depreciation or interest charge that shows up.   So I am going to charge them with the payment on a 30-year $1.4 billion 5% note, which would be just over $91 million a year.

Totaling the $91 million with the other operating expenses, we get a 93% subsidy for light rail.  This means the true cost of the $1.75 ticket for a light rail ride is actually $25!  METRO says that light rail riders love the service.  I should think anyone who gets a $25 service for $1.75 should be happy.

Another way to look at the subsidy is on a per rider basis.  So far, METRO has averaged about 17,000 round trip riders per weekday (based on about 34,000 boardings per day).   The $115.8 million annual subsidy (capital+expense minus revenues) works out to just over $6,800 per rider per year that the rest of us (who may not live or work near the line**) pay each current rider.

There are a number of ways in which I have likely understated the subsidy:

1. I used their June revenue projections, which likely will continue to be revised downwards as ridership continues to slump
2. I used their own expense projections, and we know how often governmental bodies hit their expense numbers
3. I assumed no new capital spending necessary over a 30 year life.  Rail experience has shown this to be overly-optimistic.  Rail lines have to be rebuilt every 15-20 years or so.  They take tons of capital maintenance dollars.   When we look back twenty years from now, we'll likely come to the conclusion I grossly understated the capital charge.

**Footnote: Since over a third of the capital to build the line came from the Feds, many of the people subsidizing the METRO riders don't even live in this state.

Update: The other thing I left out is lost parking revenue.  The revenue numbers for fares is in fact overstated.  It should net out lost parking revenues, for example at baseball games.  This is the only time I ride the Metro, because I substitute a $2.75 Metro round trip ticket for a $10 city garage parking expense.  But the city has never acknowledged this cannibalization.

Update #2: I have posted an update here

I am always amazed at the lengths to which some folks will try to put lipstick on the light rail pig.  One example I found today.  Michael Graham Richard wrote on treehugger in June:

The sprawling city of Phoenix, of all places, is showing us how light rail should be done. They just opened a 20 mile line with 28 stops last December, and ridership statistics are beating all forecasts (evidence that the same might be true in other cities where they are afraid to invest because their forecasts are too low) with 40,000 daily riders instead of the 25,000 expected.

But here are the ridership figures from Valley Metro, who runs Phoenix Light Rail.  This is weekday ridership (actually number of daily boardings) -- weekend ridership is much less:

• Jan:  30,617
• Feb:  35,277
• Mar:  34,376
• Apr:  37,386
• May:  33,553
• Jun:   29,469
• Jul:  26,554

It is hard to see where one gets a 40,000 figure, especially since a true daily rider/boarding figure would have to average in the lower Saturday/Sunday numbers.

And who cares if it meets some sandbagged forecast or not?  Is 40,000 even a reasonable number?  Note that even at the higher 40,000 figure this implies just 20,000 round trip customers.  This higher ridership number would still make the capital cost of the $1.4 billion line to be $70,000 per round trip rider, and ABSURD subsidy.

Update: The ridership numbers will likely pick up when Arizona State is back in school.  ASU and the baseball stadium are about the only major destinations on the line through dispersed, low-density Phoenix (it goes through our "downtown" but that is not saying much  -- it is not a big center of employment).  Did we really build light rail as another subsidy for ASU students?

Update #2: Let's say there are 50,000,000 big city commuters in the US in cities outside of Boston/NY/Chicago with large transit systems.   Serving these commuters at $70,000 each would create a capital cost of $3.5 trillion for light rail.   Who on the planet really thinks this is reasonable?  Sure, you would get some network effects as you built out lines that increased ridership, but these would be offset by diminishing returns (presumably the first Phoenix line was built on the most promising corridor, and all future corridors will be less promising).

John Stossel has a story on errors found in new textbooks in Texas public schools  (the word "we," for example, was misspelled).

One high school textbook misspelled the word "we." When describing an actor's "role" in a play, the book spells it "r-o-l-l."

A 9th grade literature book refers to a poem as a piece of 21st century literature, even though it was written in 1911 and the author died in 1933.

How do you misspell the word "we"? They spelled it, "wee."

The publishing companies said the textbooks were just first drafts that would be "cleaned up" before they make it into classrooms. But that doesn't wash with the TV station:

(P)ublishers said the same thing about math books... in 2007 that were eventually found to contain more than 100,000 mistakes...

Those math books are now in classrooms, and teachers continue to find errors.

Stossel is usually pretty quick to the jugular, but I think he misses the true reason for the screw-up.  In a private market, suppliers must compete on price and performance because they know that companies will buy their product based on those criteria.  In the government market, however, suppliers often can sidestep that whole product quality hassle and shortcut the process via political lobbying.  Get a few key legislators or other government officials on your side, and that textbook order or military toilet seat contract is yours.  Get John Murtha on your side, for example, and you can make money selling the government just about anything, or even nothing.

I think it's pretty clear that like defense contractors, municipal bond underwriters, and other government suppliers, textbooks suppliers have shifted resources from the product to political lobbying.  Makes one pretty excited about prescription drug procurement under government health care, huh?  Do we really want to see arguments for Viagra vs. Cialis played out on the house floor, as we do today for political footballs like the V-22 Osprey?

I walked in on my wife watching Oprah interview Tania Harding.  Eeeeeeyuk.   I thought -- could there be any TV show I would want to watch less?

Well, actually, it turns out there was:  A three day royal funeral and ongoing slobbery kiss for Ted Kennedy, a man who literally got away with murder and dedicated his life to trying to hide his poor impulse control better than the rest of his family hides theirs.  I watched about 5 minutes of the spectacle and all I could see was a man being revered for, uh, being related to people folks really liked a lot.  What's next, a public funeral for John Lennon's brother?  It is just so weird to me that people revere this family not in spite of, but actually because, they are so relentless in trying to exercise power over us all.

Postscript: I am confused on the military service qualifications to be buried in Arlington, as was Ted Kennedy.  My sense is that Arlington is pretty full, and that being buried there is reserved as a special honor for those with unique or heroic service (like that of Ted's brother).  I am having a  hard time in this Wikipedia description of Ted Kennedy's military service finding what put him over the top for burial at Arlington:

Kennedy enlisted in the United States Army in June 1951.   Following basic training at Fort Dix, he requested assignment to Fort Holabird for Army Intelligence training, but was dropped after a few weeks without explanation. He went to Camp Gordon for training in the Military Police Corps.  In June 1952, he was assigned to the honor guard at SHAPE headquarters in Paris.His father's political connections ensured he was not deployed to the ongoing Korean War.  While stationed in Europe he travelled extensively on weekends and climbed the Matterhorn.  He was discharged in March 1953 as a private first class.

I suppose that managing not to get oneself killed pursuing a rich-kid hobby like mountain climbing is an accomplishment within the Kennedy family, but I am not sure it merits an Arlington burial.