No Exit

Sartre famously wrote, “L’enfer, c’est les autres” (“Hell is other people”).  In his recent speech, Fed Vice Chairman Stanley Fischer, assisted, as he says, by William English of the Board’s staff, supplies an example of hell being the “other policy.”

The last substantive paragraph of Fischer’s speech includes the following summary of current FOMC policy:

The Committee has indicated that the Federal Reserve will, in the longer run, hold no more securities than necessary to implement monetary policy efficiently and effectively.  But that statement leaves open the question of when we should begin to reduce the size of our balance sheet.  Because the tools I mentioned earlier — the payment of interest on reserve balances and the overnight reverse repurchase facility — can be used to raise the federal funds rate independent of the size of the balance sheet, we have the flexibility to adjust the size of our balance sheet at the appropriate time.  With the federal funds rate still quite low and expected to rise only gradually, I think there is some benefit to maintaining a larger balance sheet for a time.  Doing so should help support accommodative financial conditions and so reduce the downside risks to the economic outlook in the event of a future adverse shock to the economy.  Consistent with this view, the Committee has decided to continue to reinvest principal payments from its securities portfolio until normalization of the federal funds rate is well under way.  The decision about when to cease or begin phasing out reinvestment will depend on how economic and financial conditions and the economic outlook evolve.

From this statement one gathers a number of facts.

Georgia Judge Rejects Challenge to School Choice

Great news from the Peach State, where a superior court judge dismissed a constitutional challenge to Georgia’s scholarship tax credit (STC) law. The Institute for Justice intervened to defend the law on behalf of five tax-credit scholarship recipients. Currently, more than 13,000 Georgia students receive tax-credit scholarships to attend the schools of their choice.

School choice opponents alleged that the STC violated the state constitution’s historically anti-Catholic Blaine Amendment, which prohibits the state from publicly funding religious schools, among other provisions. However, citing precedent from the U.S. Supreme Court and several state supreme courts, Judge Kimberly M. Esmond Adams held that tax-credit eligible donations constitute private funds, not public expenditures:

Courts that have already considered whether a tax credit is an expenditure of public revenue have answered this question in the negative. Of particular importance is Arizona Christian Sch. Tuition Org. v. Winn, 131 S. Ct. 1436 (2011), where the United States Supreme Court found that taxpayers lacked standing to challenge a scholarship tax credit program under the Establishment Clause of the United States Constitution that was almost identical to the Program at issue here. Like Georgia’s Program, the Arizona program provided that taxpayers could receive a credit for donations made to independent scholarship organizations which then provided scholarships for students to attend private schools. […] Plaintiffs have not presented any arguments for why this Court should not follow this persuasive authority.

The fact that tax-credit eligible donations are private funds is the primary reason that STC laws have a perfect track record in the state courts thus far. It’s also why tax credits are the most liberty-friendly means of financing educational choice, as the late, great Andrew J. Coulson never tired of reminding us. In response to the U.S. Supreme Court’s similar ruling five years ago, Andrew wrote:

The rationale underlying the Court’s ruling highlights a unique advantage that tax credits have over other ways of funding education: they expand both freedom of choice for parents and freedom of conscience for taxpayers.

Plaintiffs had argued that cutting a person’s taxes is equivalent to spending government money, and so taxpayers were being compelled to support religion when credits were used for donations to religious [scholarship organizations]. The Court said, “that is incorrect.”

Unlike the funding of public schools, which is compulsory for all taxpayers, participation in [a] tax credit program is voluntary. If an individual chooses not to donate to [a scholarship organization], his taxes are collected just as they have always been, and those dollars cannot be used for any sectarian purpose. Furthermore, if a taxpayer does choose to make a donation, he is free to select the STO most consistent with his own values. […]

There are other ways of funding universal choice in education, but only tax credits (either for parent’s own education expenses or for donations to [scholarship organizations]) respect the freedom of conscience of taxpayers as well as the freedom of choice of parents. If we truly wish our schools to help build strong, harmonious communities, there is no better way than to adopt such programs at the state level on a grand scale.

The opponents of educational choice are likely to appeal the judge’s decision. Let us hope their appeal meets the same fate as all of its predecessors. 

A Streetcar Named Undesirable

New York is far denser than any other large American city, with an average of 27,000 people per square mile compared with 2,500 to 4,000 for most American cities. Although the city is criss-crossed by an extensive subway system, there are still some neighborhoods that are more than half a mile from a subway station.

So naturally, what those neighborhoods need is an ultra-low-capacity, high-cost form of urban transit: a streetcar. At least, that’s what Mayor Bill de Blasio thinks: last week, he proposed to spend $2.5 billion building a 16-mile streetcar line connecting Brooklyn with Queens.

This is such a dumb idea that even transit advocates oppose it. Streetsblog observes that the proposed streetcar route doesn’t easily connect with subway stations that would give riders access to Manhattan. It also argues that bus-rapid transit  (which New York calls “select bus service”) makes a lot more sense than streetcars.

TransitCenter advocate and Brooklyn resident John Orcutt argues that “the American streetcar ‘renaissance’ of the past 15 years has mainly turned out turkeys”: slow (“Reporters for The Oregonian, CharlotteFive and Atlanta magazine have all laced up sneakers and outraced their local streetcars on foot”), expensive (“L.A.’s streetcar has seen its initial cost estimate more than double”), and underperforming (“ridership on Salt Lake City’s S-Line is less than half of planning projections”).

TransitCenter head David Bragdon, who previously was president of Portland’s Metro Council, agrees. “Most streetcar projects in the U.S. provide slow, unreliable service that does not serve many people,” Bragdon noted, urging New York not to “repeat the mistakes of other places and spend $2.5 billion if the result is not useful transportation for riders.”

While Portland often claims its streetcar is a great success, it has inflated ridership numbers by at least 19 percent and gained most of the ridership it by offering free rides to most passengers for the first dozen years of operation. Even though it supposedly started collecting fares from all riders in 2012, average fare revenues in 2014 were still just 4 cent per trip, showing that no one is enforcing the fare.

TransitCenter also questions de Blasio’s claim that streetcars will generate enough new development to pay for themselves. “Much of the property adjacent to the route is undergoing large-scale development without the spur of a new transit proposal,” says a TransitCenter blog post. “Would more value be realized by supporting transit projects of proven effectiveness in other parts of the city?” In fact, as I’ve repeatedly pointed out, streetcars don’t generate any economic development unless that development gets additional subsidies. Even Portland’s city auditor agrees.

Few of the critics have commented on the high cost of de Blasio’s proposal. Portland spent just under $150 million on its 3.3-mile Eastside streetcar line, which it said somewhat proudly was the most expensive streetcar line ever built. De Blasio’s line would cost more than $150 million per mile. Labor costs in New York may be somewhat higher than in Portland, but I don’t know of any inherent reason why construction costs should be more than three times as much as elsewhere.

Nor does anyone raise the capacity issue. For safety reasons, a single streetcar line can only support about 20 cars per hour. When jammed full, with most people standing and packed together more closely than most Americans are willing to accept, a streetcar is rated to hold about 134 people, for a throughput of 2,680 people per hour in each direction. By comparison, New York City’s subways can move close to 50,000 people per hour, and buses on city streets with a dedicated lane and parking strip can easily move more than 10,000 people per hour (and nearly double that on double-decker buses), most of them comfortably seated. Plus, if a bus breaks down, others can go around it while if a streetcar breaks down most of the line must shut down as they are built with few passing tracks.

Also little noted is the conflict between bicycles and in-street rails. New York has seen a quintupling in bicycle commuting since 2000, and streetcar tracks are a major hazard to these cyclists. A survey of 1,520 Portland cyclists revealed that two-thirds “have experienced a bike crash on tracks.”

The real purpose of the streetcar is to give the owners of housing projects that are currently under construction along its proposed route a Disneyland-like ride they can use to distinguish their projects from others in the city. They won’t get it very soon, however: de Blasio’s plan calls for construction to begin no sooner than 2019 and completion in 2024. For a lot less money, the city could start a locally branded bus service in a few months that wouldn’t cause as much congestion and wouldn’t create a street hazard for cyclists.

The irony is that de Blasio campaigned for office on the claim that, unlike his predecessors, he wouldn’t cowtow to developers. Now, when the city has far higher transportation priorities elsewhere, he wants to blow $2.5 billion on a toy train that, at best, will slightly enhance the value of developments that are being built anyway and at worst add to congestion and make streets more dangerous for cyclists.

Poverty’s Decline and Its Causes

It is always refreshing to see journalists draw attention to the incredible decline in world poverty. An article that did just that appeared yesterday in the Christian Science Monitor. The piece shines a spotlight on three heartening facts in particular. 

First, poverty is decreasing. Not only have poverty rates fallen, but the total number of people in poverty has decreased. This is incredible when one considers population growth—there are more people alive today who aren’t in poverty than ever before. The Brookings Institution projects poverty will be practically eliminated by 2030. 

Second, average incomes are rising. World per capita GDP, adjusted for inflation and differences in the cost of living, has never been higher. And average income growth is not limited to developing countries: the average American has more disposable income left after basic expenses

Finally, humanity is healthier. Globally, average life expectancy is at an all-time high, largely due to plummeting infant mortality rates. More people have enough to eat and enjoy access to clean drinking water and improved sanitation facilities. The developed world has also seen health gains, with cancer death rates falling for both men and women in the OECD countries. 

The article attributes improvements in well-being to three main factors: the fall of communism, the rise of trade and globalization, and the courage of those who stood up against tyranny. 

While the CSM article gives some credit to international aid programs, it is important to recognize that aid is not a good driver of economic development. Even vocal aid-proponent Bono acknowledges that international aid and charity pale in comparison to the prosperity-creating power of people engaging in market exchange. 

When given the freedom to do so, it is truly remarkable what ordinary people can achieve. Consider the utter transformation of Singapore from poverty to riches – that is the power of economic freedom!

Court Swats Away Immunity for Obviously Reckless Police Behavior

On Friday, a federal appellate court issued an opinion in Stamps v. Town of Framingham, holding that a SWAT team officer who points and accidentally fires a loaded semi-automatic weapon at a subdued 68-year-old grandfather is not immune from facing a lawsuit for using excessive force in violation of the Fourth Amendment.

Eurie Stamps was the stepfather of Joseph Bushfan, whom the police suspected of dealing crack. Effectuating a search warrant on Stamps’s apartment, the SWAT team raided the apartment at midnight on January 5, 2011.  Stamps—whose presence the SWAT team was aware of and who was not suspected of any wrongdoing—lay prostrate and motionless on the ground with his hands out while Officer Duncan guarded him. During the time that Duncan was guarding him, Duncan moved his finger to the trigger and accidentally fired, killing Stamps.

The real story is how this seemingly obvious outcome—that juries should be able to decide whether officers who finger the trigger of loaded guns pointed at non-threatening individuals use excessive force—even became an issue. At the district court, Officer Paul Duncan claimed that his actions aren’t subject to scrutiny because of a doctrine entitled qualified immunity. As I wrote in September:

Under the doctrine of “qualified immunity,” government officials—including police officers—are immune from suit if their actions don’t violate a “clearly established” constitutional right. The crux of Duncan’s argument is that when his weapon discharged, he became immune from suit even if pointing an assault rifle at Stamps was an unconstitutional act by itself—because there’s no clearly established right against accidental death.

The district court rightly rejected that argument, which Cato categorized as both “dangerous and bizarre” in our brief. The U.S. Court of Appeals for the First Circuit was plain in its rejection as well: “The defendants’ proposed rule has the perverse effect of immunizing risky behavior only when the foreseeable harm of that behavior comes to pass.” It seems that the court agreed with Cato’s position that “foreseeable accidents don’t remove liability from the harming actor . . . immunizing an officer from liability for the foreseeable result of his intentional actions [is improper].” Indeed, the court noted the “widespread agreement” of other federal courts in rejecting exactly that sort of argument.

Thus, because Officer Duncan’s actions were not immunized, the case goes back to the jury to determine whether he is liable for his actions, and what the damages should be. (In all likelihood, Duncan will now settle the case because it’s hard to imagine that a jury won’t rule for Stamps’s family here.)

This decision comes at a time when SWAT raids across the country creates pressing issues on the proper use of government force in effectuating criminal arrests. In a militarization case with nearly identical facts, Kane v. Lewis, Cato filed a brief noting that “SWAT team deployments have increased more than 1,400% since the 1980s … .  SWAT teams and tactical units were originally created to address high-risk situations, such as terrorist attacks and hostage crises. Today, however, these extreme situations account for only a small fraction of SWAT deployments; they’re used primarily to serve low-level drug-search warrants.”

Federal courts should continue to rein in the use of militarized SWAT teams – and indeed government officials abusing their powers in all contexts – improving respect for law enforcement officers as well as protecting arrestees and innocent bystanders.

Unintended Consequences of Proffer Reform in Virginia

The Virginia legislature is moving forward with so-called “proffer” reform.  Proffers are local amenities such as parks, computers for schools, architectural changes and other benefits provided by housing developers to local governments in exchange for a relaxation of zoning restrictions on new housing development.  A bill to restrict these deals has passed the state’s House of Representatives and is moving through its Senate. While this prohibition on a “gray market” may appear to be good policy reform, the result will likely be less development and higher housing prices.  The reform seeks to ban all proffers that do not address “an impact that is specifically attributable to a proposed new residential development…”.

Local groups are famously resistant to housing development. This makes sense to some extent, because new development can impose external costs on existing residents in the form of traffic congestion and overutilized municipal infrastructure.  An ideal resolution of such external costs would be an explicit market for zoning change.  Such a market would allow developers to explicitly negotiate with relevant community groups and homeowners associations.  The consent of existing residents for new denser more urban development would be obtained in exchange for cash and/or home buyouts.  The payments would compensate existing residents for change.

Given that such explicit markets for zoning change do not exist, how should municipalities negotiate with housing developers? Some, such as Steve Teles from Johns Hopkins University and Jonathan Rauch from the Brookings Institution have argued that allowing a broad scope of for negotiation with less transparency can yield better political outcomes. Inability to accept community demands for ancillary benefits can prevent new developments from ever getting off the ground. Similarly, William Fischel of Dartmouth has long argued that allowing highly-specific tradeoffs for community support can make sense in many cases.

The Virginia bill would restrict local powers to negotiate highly specific development agreements without adding any mechanism that facilitates either an explicit or an alternative “gray” market to ensure that restrictions would encourage development. While it may seem sleazy to allow communities to demand computers for schools in exchange for denser development, if cash were exchanged for denser development, the cash recipients might very well use the cash for computers rather than a park or wider roads.  While the gray market is imperfect, putting more restrictions on it will make development less rather than more likely.

This blog post was coauthored with Cato research assistant Nick Zaiac.

Just Give Us the Data! End-of-Term Org-Chart Edition

Public oversight of government and internal managment could both improve dramatically with an authoritative, machine-readable representation of what the federal government is. Right now, there isn’t a list of all of the federal government’s agencies, bureaus, programs, and projects. That’s a big part of why the government is run so badly and so impervious to change. The government is illegible, even to many insiders.

Happily, the Obama Administration recently promised to produce a machine-readable federal government organization chart. And it promised to do so in a matter of months. That’s something the administration can do to leave a lasting legacy and fulfill an important part of his promise of more transparent government, something we touted here in a 2008 policy forum, Just Give Us the Data!