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Posts Tagged ‘Infrastructure’

Back in April, I observed that, “If you would have loudly condemned a policy under Obama but support a similar policy under Trump, you’re the problem.”

We now have a good test case.

The President already has demonstrated – repeatedly – that he likes to spend other people’s money.

But now he’s unleashing his inner Obama, having reached a tentative deal with Chuck Schumer and Nancy Pelosi for a $2 trillion infrastructure blowout.

Notwithstanding the GOP’s supposed belief in the Constitution and limits on the role of the federal government, there are plenty of Republicans on Capitol Hill (especially on the committees that will get to direct this money to various campaign contributors) who will gladly join this spending orgy.

The relevant question, though, is whether there are some good GOPers to stop this boondoggle.

The Washington Post reports that there are some holdouts.

A $2 trillion infrastructure deal outlined this week by President Trump and top Democrats is already losing momentum, as the president’s own chief of staff is telling people inside and outside the administration that the effort is too expensive… Democratic leaders in Congress…said they were pleasantly surprised by the president’s willingness to back a large-scale spending effort. …But the initiative has run into immediate opposition from Republicans who balk at the hefty price tag and from conservative allies who are pushing lawmakers to block it. …Earlier in the administration, Trump praised Sen. Elizabeth Warren (D-Mass.) — a potential 2020 foe — for her ideas because, in his view, she was determined to spend more than Republicans. He would tell aides to get a list of projects and “let’s just spend it,” in the words of one former administration official. …Trump always wanted to spend more. …raising fuel tax rates by 35 cents and pegging them to rise with inflation would generate only about a quarter of the necessary revenue over 10 years. …Getting the remaining $1.5 trillion would involve much more significant tax increases… But even fully reversing the corporate income tax cut, which dropped the rate from 35 percent to 21 percent, would not close the gap

One obvious takeaway from this article is that taxes eventually will increase if Republicans don’t get serious about spending restraint.

Indeed, I’ve already warned that Trump’s profligacy is making tax increases more likely.

And another takeaway is that a blank-check approach would violate my rules for sensible infrastructure policy.

The editors at National Review share my concern about the plan for a bipartisan budget-busting package.

Some time ago, President Trump’s team produced a $1.5 trillion infrastructure plan, which was really a $200 billion infrastructure plan with some wishful thinking attached. …now the president has joined forced with Nancy Pelosi and Chuck Schumer on something new: a $2 trillion infrastructure plan, which also is composed mainly of wishful thinking. …What could possibly go wrong? You can tell this is backward by the fact that the triumvirate has settled on a price tag — an incomprehensibly large one — but is remarkably fuzzy on what’s to be bought with that $2 trillion. …We have been here before, with Barack Obama and his “shovel-ready” projects. The lesson of Obama’s failed stimulus bill — which was in considerable part an infrastructure program — is that doing things backwards does not work. …figuring out how to pay for this is at the bottom of the current agenda. …This is not a sane way to proceed. …The infrastructure scheme deserves to die an early and unlamented legislative death.

It should just “die an early an unlamented legislative death.” It never should have been born in the first place.

I’m not surprised that Trump is supporting a pork-filled budget plan for infrastructure. As I warned back before the 2016 election, he’s a big-government Republican.

What’s not clear, though, is how many GOP lawmakers will support his Greek-style approach to the transportation budget.

Suffice to say that I’m worried. It seems that many Republicans are Bushies rather than Reaganites.

I’ve updated a previous set of images to highlight the problem.

P.S. The correct infrastructure policy for Washington is to have no infrastructure policy. That’s because transportation should be handled by state and local government. Or, even better, the private sector. In my fantasy world, we’d shut down the Department of Transportation and repeal the federal gas tax.

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There are some remarkable stories of the private sector showing initiative when governments fail to maintain infrastructure.

  • In response to dithering by government, residents and businesses in Hawaii put up $4 million to fix an important community road.
  • Smugglers in Russia repaired a road to facilitate untaxed trade between Russian and Belarus.
  • I also wrote about a guy in England who was fed up with the slow pace of road repairs and built a private toll road.

Regarding the final example, here’s a video on his project.

I’m particularly amused that this example of practical libertarianism (I’m guessing without the cost overruns that are inevitable with government) was made possible because zoning laws (normally an obstacle to sensible land use) basically allowed the organizer to ask for forgiveness afterward rather than permission beforehand.

To be sure, these isolated examples are hardly a sign that infrastructure is going to be privatized in the United States.

But maybe we can at least learn a lesson on whether we should have more centralization and control from Washington, versus more decentralization and private-sector involvement.

Regarding the former, Chris Edwards explained for FEE that the federal gas tax should not be increased since politicians impose taxes for the ostensible purpose of building and maintaining roads, but then they divert the money to other programs that buy more votes.

…a federal gas tax increase makes no sense. State governments own America’s highways, and they are free to raise their own gas taxes whenever they want. Indeed, 19 states have raised their gas taxes just since 2015, showing the states are entirely capable of raising funds for their own transportation needs. …Also consider that gas taxes used to be a more pure user charge for highways, but these days gas tax money is diverted to inefficient nonhighway uses such as transit. …About 20 percent of those funds (about $8 billion) are diverted to transit and other nonhighway uses. …In 2016, state governments raised $44 billion from fuel taxes, and they diverted 24 percent—14 percent to transit and 10 percent to other activities. …The states also raised $38 billion from vehicle fees. They diverted 34 percent of those funds—13 percent to transit and 21 percent to other activities.

Regarding the latter, the City Manager of Milford, Delaware, wrote a column for the Washington Post about benefiting from private financing for road repairs.

…when I heard that a Domino’s marketing campaign was paying municipalities to repair potholes in return for credit for the work, I quickly responded. …Our role was easy. In exchange for a $5,000 check, Domino’s wanted its logo and a tag­line saying “Oh yes we did” in spray chalk on the road next to each repair. …In two weeks, they fixed more than 40 potholes of different sizes — about 20 to 25 percent of the potholes that appeared after the winter. …The program has elicited some complaints about what it means that a pizza chain is funding basic government projects. …But we saw this as a great idea for our community. …In many communities, there’s a constant competition between paying for police and paying for everything else. …if we demonstrate good stewardship of our resources, then hopefully fewer people will complain about paying taxes. …sometimes that means letting Domino’s pick up the tab.

Incidentally, sometimes “anarchists” decide to fix potholes without even waiting for permission.

Let’s close with some libertarian-themed humor.

Some people apparently thing that roads wouldn’t exist in the absence of government. This is an anti-empirical sentiment since many of the first main arteries in America were private roads. And we still have private highways being built today.

Not to mention plenty of neighborhood developments and office parks (or even stairs) that are examples of privately financed and privately maintained infrastructure.

Yet there are still doubters, so this sarcastic image is for them.

Speaking of sarcasm, this next image is a clever combination of two concepts.

First, politicians have an insatiable appetite to tax us over and over again.

Second, they don’t fulfill the responsibilities that they claim only government can handle.

The bottom line is that Washington should have no role in infrastructure. And even if you think infrastructure should be handled by state and local government, that definitely does not (or should not) imply a large public sector.

P.S. Here’s some more libertarian-themed infrastructure humor.

P.P.S. To be balanced, libertarians can be mocked because of our disdain for public goods.

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I started my end-of-year “best and worst” series back in 2013, but didn’t begin my start-of-year “hopes and fears” series until 2017.

In that first year, I got part of what I hoped for (some tax reform and a bit of regulatory easing) and part of what I feared (no Medicaid and Medicare reform), but I mostly felt relieved that some of my fears (border-adjustment tax and an infrastructure boondoggle) weren’t realized.

For 2018, none of my hopes (government collapse in Venezuela and welfare reform) became reality, but we dodged one of my fears (Trump killing NAFTA) and moved in the wrong direction on another (a bad Brexit deal).

Time for third edition of this new tradition. It is the first day of the year and here are my good and bad expectations for 2019.

We’ll start with things I hope will happen in the coming year.

  • Hard Brexit – There is a very strong long-run argument for the United Kingdom to have a full break with the European Union. Unfortunately, the political establishment in both London and Brussels is conspiring to keep that from happening. But the silver lining to that dark cloud is that the deal they put together is so awful that Parliament may vote no. Under current law, that hopefully will lead to a no-deal Brexit that gives the U.K. the freedom to become more free and prosperous.
  • Supreme Court imposes limits of Washington’s power – I didn’t write about the fight over Brett Kavanaugh’s nomination to the Supreme Court because I don’t know if he believes in the limits on centralized power in Article 1, Section 8. But I’m semi-hopeful that his vote might make the difference in curtailing the power of the administrative state. And my fingers are crossed that he might vote with the Justices who want to restore the Constitution’s protection of economic liberty.
  • Gridlock – Some people think gridlock is a bad thing, but it is explicitly what our Founders wanted when they created America’s separation-of-powers system. And if the alternative to gridlock is politicians agreeing to bad policy, I will cheer for stalemate and division with great gusto. I will be perfectly content if Trump and House Democrats spend the next two years fighting with each other.
  • Maduro’s ouster – For the sake of the long-suffering people of Venezuela, I’m going to keep listing this item until it eventually happens.
  • Limits on the executive branch’s power to impose protectionism – Trade laws give a lot of unilateral power to the president. Ideally, the law should be changed so that any protectionist policies proposed by an administration don’t go into effect unless also approved by Congress.
  • Chilean-style reform in Brazil – Brazil recently elected a president who is viewed as the Trump of Latin America. But he might be the good kind of populist who uses his power to copy Chile’s hugely successful pro-market reforms.

Here are the things that worry me for 2019.

  • Trump – The President does not believe in small government, so I’m concerned we may get the opposite of gridlock. In my nightmare scenario, I can see him rolling over to Democrat plans for a higher minimum wage, infrastructure pork, wage subsidies, and busting (again) the spending caps.
  • Recession-induced statism – If there’s an economic downturn this year, then I fear we might get an Obama-style Keynesian spending orgy in addition to all the things I just mentioned.
  • More protectionism – Until and unless there are limits on the president’s unilateral power, there is a very real dangers that Trump could do further damage to global trade. I’m particularly concerned that he might pull the U.S. our of the very useful World Trade Organization and/or impose very punitive tariffs on auto imports.
  • Fake Brexit – This is the flip side of my hope for a hard Brexit. Regardless of the country, it’s not easy to prevail when big business and the political elite are lined up on the wrong side of an issue.

Sadly, I think my fears for 2019 are more likely than my hopes.

And I didn’t even mention some additional concerns, such as what happens if China’s economy suffers a significant downturn. I fear that is likely because there hasn’t been much progress on policy since the liberalization of the 1980s and 1990s.

Or the potential implications of anti-market populism in important European nations such as Germany, Sweden, and Italy.

Last but not least, we have a demographic sword of Damocles hovering over the neck of almost every nation.

That was a problem last year, it’s a bigger problem this year, and it will become an even-bigger problem in future years.

We know the right answer to this problem, but real solutions are contrary to the selfish interests of politicians.

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While folks on the left sometimes imply that libertarians are autistic dorks, we do have a sense of humor. Even about our own unusual traits.

But we also like to mock big government, and that’s why we have some new material for our collection of Libertarian humor.

We’ll start with this bit of satire. I don’t know if it accurately captures the preferences of feminists, but it definitely summarizes how we feel about government.

Speaking of “basic functions,” that presumably includes infrastructure.

However, I don’t want Washington to be in charge of such matters. Though that doesn’t mean I have great confidence that any government at any level will do a good job.

Which is the theme from these three images from Columbia University’s Xavier Sala-i-Martin.

We’ll start with some evidence of poor coordination by the bureaucrats in charge of street and the bureaucrats in charge of sidewalks.

I already knew governments had problems with lines on roadways, but this even surprises me.

And I’m not even sure how to describe this bit of road planning. Makes this sign seem like genius by comparison.

Last but not least, this item from Powerline is a perfect way to conclude today’s collection. Maybe John Stossel was right when he wrote that the private sector deserves a bigger role.

The bottom line if that you’ve asked a very silly question if the answer is more government.

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When I argue with my statist friends about the proper size and scope of government, they accuse me of not wanting public services.

My typical response is to explain that I am a strong supporter of markets as the method to get high-quality roads, schools, and healthcare.

But I’m wondering whether this answer pays too much attention to the trees and doesn’t focus on the forest.

After all, the debate isn’t whether we should be Liberland or Venezuela. It’s whether government should be bigger or smaller compared to what we have now.

So the next time I tussle with my left-leaning buddies, I’m going to share this chart (based on data from the IMF’s World Economic Outlook database) and ask them why we can’t be like the fast-growing, small-government nations of Asia.

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To elaborate, not only do jurisdictions such as Hong Kong and Singapore enjoy impressive growth, they also get very high scores for infrastructure, education, and health outcomes.

In other words, these nations are role models for “public sector efficiency.”

What they don’t have, by contrast, are expensive welfare states that seem to be correlated with poor outcome for basic public services.

For all intents and purposes, I want to focus the debate on how much government is necessary to get the things people want, sort of like I did in Paris back in 2013.

I asked the audience whether they thought that their government, which consumes 57 percent of GDP, gives them better services than Germany’s government, which consumes 45 percent of GDP. They said no. I then asked if they got better government than citizens of Canada, where government consumes 41 percent of GDP. They said no. And I concluded by asking them whether they got better government than the people of Switzerland, where government is only 34 percent of economic output… Once again, they said no.

I assume (hope) Americans also would say no given these choices. And hopefully they would say yes when asked if we should be like Hong Kong and Singapore.

P.S. If I rotated the above chart clockwise by 90 degrees we’d have a pretty good approximation of the downward-sloping portion of the Rahn Curve.

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Happy New Year!

We listed yesterday the good and bad policy developments of 2017, so now let’s speculate about potential victories and defeats in 2018.

Here are two things I hope will happen this year.

  • Welfare reform – If my friends and contacts on Capitol Hill are feeding my accurate information, we may see a bigger and better version of the 1996 welfare reform in 2018. The core concept would be to abolish the dozens of means-tested programs (i.e., redistribution programs targeted at low-income people) in Washington and replace them with a “block grant.” This could be good news for federal taxpayers if the annual block grant is designed to grow slowly. And it could be good news for poor people since state government would then have the ability and flexibility to design policies that help liberate recipients from government dependency.
  • Collapse of Venezuela – Given the disastrous deterioration of the Venezuelan economy, it’s difficult to envision how the Maduro dictatorship can survive the year. Yes, I know the regime is willing to use the military to suppress any uprising, but I suspect hungry and desperate people are more likely to take chances. My fingers are crossed that the corrupt government is overthrown and Venezuela becomes another Chile (hopefully without a transition period of military rule).

Here are two things I fear may happen in 2018.

  • Pulling out of NAFTA – America dodged a bullet in 2017. Given Trump’s protectionist instincts, I worried he would do something very dangerous on trade. But pain deferred is not the same thing as pain avoided. The President has made some very worrisome noises about NAFTA and it’s possible he may use executive authority to scrap a deal that has been good for the United States.
  • A bad version of Brexit – Given the statist mindset in Brussels and the continent’s awful demographics, voting to leave the European Union was the right decision for our British friends. Simply stated, it makes no sense to stay on a sinking ship, even if it sinking slowly. But the net benefits of Brexit depend on whether the United Kingdom seizes the moment and adopts pro-growth policies such as tax cuts and free-trade pacts. Sadly, those good reforms don’t appear likely and it appears instead that the feckless Tory leadership will choose to become a satellite member of the EU, which means living under the thumb of Brussels and paying for harmonization, bureaucratization, and centralization. The worst possible outcome in the short run, though at least the U.K. is better positioned to fully extricate itself in the future.

I’m adding a new feature to my hopes-and-fears column this year.

These are issues where I think it’s likely that something consequential may occur, but I can’t figure out whether I should be optimistic or pessimistic. I sort of did this last year, listing Obamacare reform and Italian fiscal crisis as both hopes and fears.

It turns out I was right to be afraid about what would happen with Obamacare and I was wrong (or too early) to think something would happen with Italy.

Here are three things that could be consequential in 2018, but I can’t figure out whether to be hopeful or fearful.

  • Infrastructure reform or boondoggle – I put an “infrastructure boondoggle” as one of my fears last year, but the President and Congress postponed dealing with the issue. But it will be addressed this year. I’m still afraid the result may be a traditional pile of pork-barrel spending, but it’s also possible that legislation could be a vehicle for market-based reform.
  • Normalization of monetary policy – I try to stay clear of monetary policy, but I also recognize that it’s a very important issue. Indeed, if I was to pick the greatest risk to the economy, it’s that easy-money policies (such as artificially low interest rates) have created a bubble. And bursting bubbles can be very messy, as we learned (or should have learned) in 2008. The Federal Reserve supposedly is in the process of “normalizing” monetary policy. I very much hope they can move in the right direction without rattling markets and/or bursting bubbles.
  • A China bubble – Speaking of macroeconomic risks, I’m very glad that China has partially liberalized and I’m ecstatic that reform has dramatically reduced severe poverty, but I also worry that the government plays far too large a role in the banking sector and interferes far too much in the allocation of capital. I’m guessing this eventually leads to some sort of hiccup (or worse) for the Chinese economy, and all I can do is cross my fingers and hope that the government responds with additional liberalization rather than the bad policies being advocated by the OECD and IMF.

By the way, I fully expect the Democrats to sweep the 2018 elections. And since the Party is now much farther to the left than it used to be, that could lead to very bad news in 2019 – particularly if Trump unleashes his inner Nixon.

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In 2011, I wrote about how taxpayers were getting pillaged to finance a new metro line in Fairfax County, Virginia.

But you won’t be surprised to learn that California taxpayers are getting screwed even worse.

I’ve since learned, however, that the real experts at wasting money are in the Big Apple. Earlier this year, as part of a column on why the federal government shouldn’t be involved with infrastructure, I shared some depressing details about a far more expensive subway project in New York City.

And now the New York Times has a must-read report about how another big infrastructure project in NYC is an even more absurd boondoggle. The story starts with an anecdote

The budget showed that 900 workers were being paid to dig caverns for the platforms as part of a 3.5-mile tunnel connecting the historic station to the Long Island Rail Road. But the accountant could only identify about 700 jobs that needed to be done, according to three project supervisors. Officials could not find any reason for the other 200 people to be there. …“All we knew is they were each being paid about $1,000 every day.”

Nice “work” if you can get it, as the old saying goes. A pretend job that pays $1,000 per day.

That makes the gravy train for federal bureaucrats seem miserly by comparison.

Unfortunately, that anecdote is just the tip of the iceberg. The entire project is a monument to how money gets wasted in New York City.

The estimated cost of the Long Island Rail Road project, known as “East Side Access,” has ballooned to $12 billion, or nearly $3.5 billion for each new mile of track — seven times the average elsewhere in the world. …a host of factors have contributed to the transit authority’s exorbitant capital costs. …public officials have stood by as a small group of politically connected labor unions, construction companies and consulting firms have amassed large profits.

In other words, the story’s headline is no exaggeration.

The special deals for unions are jaw-dropping.

Trade unions, which have closely aligned themselves with Gov. Andrew M. Cuomo and other politicians, have secured deals requiring underground construction work to be staffed by as many as four times more laborers than elsewhere in the world, documents show. …Worker wages and labor conditions are determined through negotiations between the unions and the companies, none of whom have any incentive to control costs. The transit authority has made no attempt to intervene to contain the spending.

The featherbedding belies belief.

Mr. Roach, a California-based tunneling contractor, was…stunned by how many people were operating the machine churning through soil to create the tunnel. “I actually started counting because I was so surprised, and I counted 25 or 26 people,” he said. “That’s three times what I’m used to.” …documents reveal a dizzying maze of jobs, many of which do not exist on projects elsewhere. There are “nippers” to watch material being moved around and “hog house tenders” to supervise the break room. Each crane must have an “oiler,” a relic of a time when they needed frequent lubrication. Standby electricians and plumbers are to be on hand at all times, as is at least one “master mechanic.” Generators and elevators must have their own operators, even though they are automatic. …In New York, “underground construction employs approximately four times the number of personnel as in similar jobs in Asia, Australia, or Europe,” according to an internal report by Arup, a consulting firm that worked on…many similar projects around the world.

The international cost comparisons are the most persuasive part of the story.

Taxpayers in New York City are paying far more to get far less.

…transit construction is booming around the world. At least 150 projects have been initiated since 1990, according to a recent study by Yale University researcher David Schleicher. The approximate average cost of the projects — both in the U.S. and abroad — has been less than $500 million per track mile, the study concluded. “There was one glaring exception,” Mr. Schleicher said. “New York.”

If you want a partial explanation of why this staggering level of graft and corruption is allowed, this sentence is a good place to start.

The unions working on M.T.A. projects have donated more than $1 million combined to Mr. Cuomo during his administration, records show.

And I’m sure huge amounts of money have also been diverted to city politicians as well.

It’s almost as if the whole thing is a racket, with politicians and union bosses conspiring to rip off taxpayers.

“Almost”? I must be getting soft in my old age. Let me rephrase that sentence: It is a racket to rip off taxpayers.

But let’s be fair. I don’t want to imply that it’s all the fault of the unions. The contractors also buy off the politicians.

…the…main engineering firm: WSP USA, …has donated hundreds of thousands to politicians in recent years, and has hired so many transit officials that some in the system refer to it as “the M.T.A. retirement home.”

Speaking of the M.T.A., the bureaucrats also get a sweet deal, with the rest of us picking up the tab.

More than a dozen M.T.A. workers were fined for accepting gifts from contractors during that time, records show. …A Times analysis of the 25 M.T.A. agency presidents who have left over the past two decades found that at least 18 of them became consultants or went to work for authority contractors, including many who have worked on expansion projects. “Is it rigged? Yes,” said Charles G. Moerdler, who has served on the M.T.A. board since 2010.

There’s a lot more to read in the article, including details on how a big French infrastructure project is being built at far lower cost.

It’s basically a perfect example of what Milton Friedman said about what happens when you get to spend other people’s money.

For instance, the story also has grim data about cost overruns, which are a routine feature of government infrastructure scams, both in America and other nations.

But one thing that isn’t in the report is the degree to which Washington is subsidizing this wretched boondoggle.

This is the part that irks me. I wouldn’t get too upset if New York City politicians were conspiring with interest groups to rip off New York City taxpayers. Heck, I wouldn’t even care if they were ripping off taxpayers from elsewhere in the state.

But the fact that I’m also paying for this pork-barrel project is very distressing. And it helps to explain why I want to shut down the Department of Transportation in Washington. That’s the real moral of this story.

P.S. Trump’s infrastructure plan will be unveiled next year. I’m not overflowing with optimism, but hope springs eternal that maybe he’ll listen to my advice.

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