Washington Metro’s Problem: Too Much Money

The terrible Washington Metrorail crash that killed nine people has led to calls for more money for transit. Yet the real problem with Washington Metro, as with almost every other transit agency in this country, is that it has too much money – it just spends the money in the wrong places.

“More money” seems to be the solution to every transit issue. Is ridership down? Then transit agencies need more money to attract more riders. Is ridership up? Then agencies need more money because fares only cover a quarter of the costs.

Yet the truth is that urban transit is the most expensive form of transportation in the United States. Where the average auto user spends about 24 cents per passenger mile, transit costs more than 80 cents per passenger mile, three-fourths of which is subsidized by general taxpayers. Subsidies to auto driving average less than a penny per passenger mile. Where autos carry 85 percent of American passenger travel, transit carries about 1 percent.

When Congress began diverting highway user fees to transit in 1982, it gave transit agencies incentives to invest in high-cost transportation systems such as subways and light rail when lower-cost systems such as buses would often work just as well. Once they build the high-cost systems, the transit agencies never plan for the costs of reconstructing them, which is needed about every 30 years. The Washington Metro system, which was built as a “demonstration project” in the 1970s, is just a little ahead of the curve.

Now over 30 years old, Washington’s subways are beginning to break down. Before the recent accident, some of the symptoms were broken rails, smoke in the tunnels, and elevator and escalator outages.

Now we learn that the National Transportation Safety Board told Metro in 2006 to replace the cars that crashed on Monday because they were in danger of “telescoping,” which is what killed so many people in Monday’s accident. Also, the brakes were overdue for maintenance. Metro responded that it planned to eventually replace the obsolete cars, but didn’t have the money for it.

But it does have money to build an expensive new rail line to Tysons Corner and, eventually, Dulles Airport. Planners had originally recommended running bus-rapid transit along this route, but that wasn’t expensive enough so Metro decided to go with rails instead – at ten times the cost of the bus line.

The simple problem is that we have forgotten about the need to weigh revenues and costs. Instead, transit has become a favorite form of pork barrel and, for the slightly more idealistic, a method of social engineering, meaning a part of the Obama administration’s campaign to “coerce people out of their cars.”

That’s one more government program we can do without.

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How Many Uninsured Are There?

The Wall Street Journal’s Numbers Guy tackles the question:

The Census Bureau estimates that the number of uninsured amounts to 45.7 million people. But the agency might be over-counting by millions due to faulty assumptions…

Even though legislation won’t cover many of them, illegal immigrants are especially difficult to enumerate: Few raise their hands to be counted. Prof. [Jonathan] Gruber estimates they make up about 13% of the uninsured today, or nearly six million people of that 45 million number…

Of the rest, some people are eligible for health insurance but don’t know it and many can afford it but don’t want it. About 43% of uninsured nonelderly adults have incomes greater than 2.5 times the poverty level, according to a report released Tuesday by the business-backed Employment Policies Institute.

He left out a few things, though.

The estimate of 46 million uninsured, which comes from a less-than-ideal government survey, has been the occasion of a fraud on the public.  For 20 years, the Church of Universal Coverage told us that 40-some million Americans are uninsured for the entire year.  Then, experts including the non-partisan Congressional Budget Office said that no, 40-some million is the number who are uninsured on any given day, and a lot of those people quickly regain coverage.  The number of Americans who are uninsured for the entire year is actually 20-30 million.  Yet the Church of Universal Coverage kept using that 40-some million estimate as if nothing had happened – even though the meaning of that estimate had completely changed.

The Congressional Budget Office also reports that as many as 15 percent of those 20-30 million chronically “uninsured” are eligible for government programs, so they’re effectively insured.

According to economists Mark Pauly of the University of Pennsylvania and Kate Bundorf of Stanford, as many as three-quarters of the uninsured could afford coverage but choose not to purchase it.  Again, according to the Congressional Budget Office, 60 percent of the uninsured are under age 35, and 86 percent are in good-to-excellent health.

Government intervention has made health insurance unnecessarily expensive for them, so these folks quite sensibly don’t want to be ripped off.  Mandating that they buy coverage is really about hunting them down and taxing them.

Higher Taxes for Health Care, Fewer Jobs

President Obama broke his pledge not to raise taxes on lower- and middle-income families with his large tobacco tax increase back in February. It appears that the increase is not just hurting tobacco consumers, but also hurting workers in the cigar industry. From Tampa Bay Online:

Tampa will lose part of its cigar heritage in August when Hav-A-Tampa shuts its factory near Seffner and lays off about 495 employees, closing a factory that has been operating since 1902.

Several things conspired to hurt Altadis’ sales, McKenzie said, including the recession and the growth of indoor smoking bans. The bans have especially hurt sales in cold-weather states, where it’s impractical to smoke a cigar outdoors in the winter, he said.

However, the company attributed much of its trouble to the State Children’s Health Insurance Program, or SCHIP, a federal program that provides health insurance to low-income children. It is funded, in part, by a new federal tax on cigars and cigarettes. McKenzie couldn’t say how much sales of Hav-A-Tampa cigars had fallen off, but the numbers have dropped significantly, he said.

Previously, federal excise taxes on cigars were limited to no more than a nickel, said Norman Sharp, president of the Cigar Association of America trade group. The tax increase, which took effect April 1, raises the maximum tax on cigars to about 40 cents, Sharp said.

This health-tobacco legislation raised taxes $65 billion over 10 years. Imagine the damage that would be caused by the giant health bill currently moving through Congress, which will cost $1 trillion or more over 10 years.

Hat Tip: Tad DeHaven

Buy American, Destroy American Jobs

The “buy America” provision in the misnamed stimulus bill was supposed to protect jobs in the U.S.  Alas, by encouraging foreign protectionism, the measure is likely to end up destroying American jobs.

Indeed, the provision has all the earmarks of a grand political fiasco.  Reports the Financial Times:

Confusion reins. For fear of missing out on contracts, many companies are demanding that all their suppliers are Buy American-compliant regardless of any exemptions.

“Those companies that can comply are of course thrilled and are trumpeting that in their marketing. Those that cannot are in agony and are losing business and cutting workers,” says David Ralston, a government procurement lawyer at Foley & Lardner. “The many companies that find themselves in the gray areas are calling their lawyers.”

Canada’s government has been an early and vocal lobbyist against the measures, sending officials to Washington to warn that a trade war is brewing. Canadian municipalities threatened to attach “do not Buy American” provisions to their own public projects after manufacturers were cut out of US stimulus projects, but have agreed to hold off while the national government tries to resolve the problem.

Canada wants to broker a bilateral trade agreement on government contracts which would extend all the way down to the level of local authority. The US trade representative says it is open to the idea.

While this would quieten the Canadians, it could spark cries of protest from the US’s other trading partners. The British ambassador has given several speeches in recent weeks chastising the US over Buy American and the way it is being implemented. The Europeans are watching closely. But could the US write bilateral deals with them all? Buy American’s supporters in Congress would surely kick back.

The Chamber of Commerce is proposing a compromise. It has called on the administration to tell municipalities to act as if they were signatories to the federal government’s agreements. “I think there is enough flexibility for OMB [the Office of Management and Budget] to make that change. I don’t have a crystal ball but for multiple reasons it would make sense for them to do it,” says Chris Braddock, the Chamber’s procurement expert.

On Monday all groups with a stake in the debate submitted their written comments to the OMB, the White House department handling the stimulus. The administration must now write the final rules on how to implement Buy American.

The U.S. has gained enormously from the expansion of trade in recent years.  We all will lose if Washington now encourages a global retreat from free markets.

Maine’s Supply-Side Democrats

The class-warfare crowd in Washington wants bigger government and higher tax rates, so it’s a bit shocking to see that a group of Northeastern Democrats are slashing tax rates. Yet that is exactly what Maine’s politicians are doing. The Governor even makes the common-sense observation (that so far has escaped President Obama’s attention) that there won’t be any jobs without investors and entrepreneurs. The Wall Street Journal approves:

This month the Democratic legislature and Governor John Baldacci broke with Obamanomics and enacted a sweeping tax reform that is almost, but not quite, a flat tax. The new law junks the state’s graduated income tax structure with a top rate of 8.5% and replaces it with a simple 6.5% flat rate tax on almost everyone. Those with earnings above $250,000 will pay a surtax rate of 0.35%, for a 6.85% rate. Maine’s tax rate will fall to 20th from seventh highest among the states. To offset the lower rates and a larger family deduction, the plan cuts the state budget by some $300 million to $5.8 billion, closes tax loopholes and expands the 5% state sales tax to services that have been exempt, such as ski lift tickets. This is a big income tax cut, especially given that so many other states in the Northeast and East – Maryland, Massachusetts, New Jersey and New York – have been increasing rates. “We’re definitely going against the grain here,” Mr. Baldacci tells us. “We hope these lower tax rates will encourage and reward work, and that the lower capital gains tax [of 6.85%] brings more investment into the state.” …One question is how Democrats in Augusta were able to withstand the cries by interest groups of “tax cuts for the rich?” Mr. Baldacci’s snappy reply: “Without employers, you don’t have employees.” He adds: “The best social services program is a job.” Wise and timely advice for both Democrats and Republicans as the recession rolls on and budgets get squeezed.

Trading Washington for Tbilisi?

Alliances often are advanced, as with NATO expansion, as a cheap way of keeping the peace.  After all, it is said, no one would dare challenge America.  But while alliances can deter, deterrence can fail – with catastrophic consequences.  Both World Wars I and II featured failed alliances and security guarantees.  Oops!

If deterence fails, the guaranteeing state either has to retreat ignominously or plunge into war, neither of which is likely to be in America’s interest.  Moreover, promising to defend other nations encourages them to be irresponsible:  after all, why not adopt a risky foreign policy if Washington is willing to back you up, nuclear weapons and all?  It’s a form of moral hazard applied to foreign policy.

That appears to be the case with the country of Georgia.  There’s a lot of disagreement over the character of Mikhail Saakashvili’s government, even among libertarians.  But a new European Union panel has amassed evidence that President Saakashvili is a bit of a foreign policy adventurer.  Reports Spiegel online:

Unpublished documents produced by the European Union commission that investigated the conflict between Georgia and Moscow assign much of the blame to Georgian President Mikhail Saakashvili. But the Kremlin and Ossetian militias are also partly responsible.

From her office on Avenue de la Paix, Swiss diplomat Heidi Tagliavini, 58, looks out onto the botanical gardens in peaceful Geneva. The view offers a welcome respite from the stacks of documents on her desk, which deal exclusively with war and war blame. They contain the responses, from the conflicting parties in the Caucasus region – Russia, Georgia, South Ossetia and Abkhazia – to a European Union investigative commission conducting a probe of the cause of the five-day war last August. The documents also include reports on the EU commission’s trips to Moscow, the Georgian capital Tbilisi and the capitals of Abkhazia and South Ossetia, dossiers assembled by experts and the transcripts of interviews of diplomats, military officials and civilian victims of the war.

The Caucasus expert, nicknamed “Madame Courage” by the Zurich-based Swiss daily Neue Zürcher Zeitung, is considered a specialist on sensitive diplomatic matters. The Caucasus issue is the most difficult challenge she has faced to date. The final report by the commission she heads must be submitted to the EU Council of Ministers by late July. In the report, Tagliavini is expected to explain how, in August 2008, a long-smoldering regional conflict over the breakaway Georgia province of South Ossetia could suddenly have escalated into a war between Georgia and its much more powerful neighbor, Russia. Who is to blame for the most serious confrontation between East and West since the end of the Cold War?

In addition to having a budget of €1.6 million ($2.2 million) at her disposal, Tagliavini can draw on the expertise of two deputies, 10 specialists, military officials, political scientists, historians and international law experts.

Much hinges on the conclusions her commission will reach. Is Georgia, a former Soviet republic, a serious candidate for membership in NATO, or is the country in the hands of a reckless gambler? Did the Russian leadership simply defend South Ossetia, an ally seeking independence from Georgia, against a Georgian attack? Or did Russia spark a global crisis when its troops occupied parts of Georgia for a short period of time?

The confidential investigative commission documents, which SPIEGEL has obtained, show that the task of assigning blame for the conflict has been as much of a challenge for the commission members as it has for the international community. However, a majority of members tend to arrive at the assessment that Georgian President Mikhail Saakashvili started the war by attacking South Ossetia on August 7, 2008. The facts assembled on Tagliavini’s desk refute Saakashvili’s claim that his country became the innocent victim of “Russian aggression” on that day.

In summarizing the military fiasco, commission member Christopher Langton, a retired British Army colonel, claims: “Georgia’s dream is shattered, but the country can only blame itself for that.”

Whatever the justification for President Saakashvili’s conduct, it certainly isn’t the kind of policy to which the U.S. should tie itself.  Yet including Georgia in NATO would in effect make President Saakashvili’s goals those of the American government and, by extension, the American people.

How many Americans should die to ensure that George gets to rule South Ossetia and Abkhazia?  Should we risk Washington for Tbilisi?  These are questions the Obama administration should answer before it joins the Bush administration in pushing NATO membership for Georgia.  The American people deserve to know exactly what risks the Obama administration plans to take with their lives and homelands before adding yet another fragile client state to Washington’s long list of security dependents.