The Worst of Both Worlds

July/​August 2014 • Policy Report

Around the world, most new rail transit lines are either heavy rail, which are built in exclusive rights of way, or light rail, which often cross through city streets. What many don’t realize is that the terms light and heavy refer to people‐​moving capacities, not the actual weight of the equipment. As Cato senior fellow Randal O’Toole writes in “The Worst of Both: The Rise of High‐​Cost, Low‐​Capacity Rail Transit” (Policy Analysis no. 750), a number of cities have recently built a hybrid form of rail transit that combines the cost disadvantages of heavy rail with the capacity limits of light rail. This seems to be a worldwide trend, from Honolulu to Mumbai. “Rail lines built at light‐​rail costs are questionable enough, as in nearly every case buses can move more people just as comfortably (if not more so), just as fast (if not faster), and at a far lower cost,” O’Toole writes. In fact, buses share infrastructure with cars and trucks, reducing their cost, while the use of high‐​occupancy vehicle or high‐​occupancy toll lanes would allow buses to avoid congestion during even the busiest times of day. “The willingness of many rail advocates to support high‐​cost, low‐​capacity rail lines calls into question the entire rail agenda,” he continues. Supporters of low‐​capacity lines are not truly interested in transportation, nor are supporters of high‐​cost lines truly interested in urban efficiencies. If they are not willing to draw the line against such projects, then there is little reason to believe their claims about the benefits of other rail projects.

Michigan governor Rick Snyder and Sen. Rand Paul (R-KY) recently proposed a regional visa program that would allow immigrants to live and work exclusively in Detroit or other cities in the United States. In “State‐​Based Visas: A Federalist Approach to Reforming U.S. Immigration Policy”(Policy Analysis no. 748), Brandon Fuller, a research scholar at New York University, and Sean Rust, a practicing attorney, argue that a regional immigration option through a statebased visa program would create a temporary work permit that would allow participating states to manage the flow and regulate the quantity of temporary migrants who want to live and work within their borders. “Ideally, law‐​abiding visa holders would be eligible for renewal and free to apply for permanent residency during their stay in the United States,” they add. Although overseen by the federal government, a state‐​based visa program would allow state governments to craft a better‐​functioning work‐​visa program “that is more adaptable to their local economic conditions than the present system run by the federal government” — perhaps even supplying lessons for future federal work‐​visa programs. A statebased visa program would direct immigration to the states that want it without forcing much additional immigration on those that do not. “Unlike existing employment‐​based visas that tie foreign workers to one firm, state‐​based visa holders would be free to move between employers in the state — leading to thicker, more equitable, and more efficient local labor markets,” the authors write. A state‐​based visa would increase prosperity by allowing additional migration to portions of the country and economy that demand them. Fuller and Rust conclude that successful international experiences with regional visas in Australia and Canada provide some valuable policy lessons and hint at the major economic benefits of such a policy in the United States.

In 2005, Congress passed a law seeking to create a national identification system by weaving together the states’ driver‐​licensing systems. According to the federal government’s plan, within three years state motor‐​vehicle bureaus would begin issuing driver’s licenses and identification cards according to federal standards, and data about drivers would be shared among governments nationwide. In “REAL ID: State‐​by‐​State Update” (Policy Analysis no. 749), Cato senior fellow Jim Harper reviews the outlook on the program, revealing that some states’ legislatures have backtracked on their opposition to the national ID law. Initially, states across the country rejected what Harper calls an “unfunded federal surveillance mandate.” Half the state legislatures in the country passed resolutions objecting to the REAL ID Act or bills outright barring their states from complying. Almost a decade later, there is no national ID, but Congress continues to funnel money into the federal government’s national ID project. The federal government has spent more than a quarter billion dollars on REAL ID. Now the motor vehicle bureaus in certain states are quietly moving forward with REAL ID compliance — contrary to state policy. This could create problems, according to Harper. “A national ID system could be used to administer more and more intimate tracking and control of all Americans’ lives,” he writes. With any luck, REAL ID seems to have deteriorated federally. “However, the state‐​by‐​state status check reveals that it is by no means dead at the state level, and so opponents of a U.S. national ID system must remain vigilant,” he writes.

Throughout history there has been a consistent fear of bank runs, particularly regarding large institutions during times of crisis. The financial crisis of 2007-09 was no exception. The Financial Crisis Inquiry Commission, which was created after the crisis to investigate its causes and triggering events, highlighted no less than 10 cases of runs at individual institutions. In “Run, Run, Run: Was Financial Crisis Panic over Institution Runs Justified?” (Policy Analysis no. 747), Vern McKinley, a research fellow at the Independent Institute, argues that those runs were a major consideration in the shifting policy responses that authorities employed during the crisis. In the early stages of the crisis, troubled institutions facing runs were dealt with through a scattered blend of voluntary mergers, outright closures, and bailouts. “By late September 2008 and thereafter, panic had descended on the Treasury and the major financial agencies,” McKinley writes. “That resulted in the decision to backstop the full range of large institutions, as government officials feared a collapse of the entire financial system.” However, serious analysis of the risks facing the financial sector was sorely lacking and outright misstatement of the facts was evident. “It did not have to be that way,” he adds. Simple rules elaborated by Walter Bagehot and Anna J. Schwartz involving a systemic review of the condition of the financial system, prompt intervention, and consideration of the condition of individual institutions could have prevented the numerous ill‐​advised bailouts. McKinley concludes that application of these considerations could have avoided the panic by the authorities and the strategy of bailouts for the megabanks.

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