Latest Cato Research on Energy and Environment en Resilient Transportation in a World of Black Swans Randal O&#039;Toole <p>The coronavirus pandemic is what risk analyst <a href="">Nassim Taleb</a> would call a&nbsp;<a href="">black swan</a>, by which he means an unexpected event that sends major shock waves throughout the economy. Black swans are unpredictable in detail, but it is very predictable that they will take place. The September 11, 2001 attacks; 2005 Hurricane Katrina; and 2008 financial crisis were all black swans.</p> <p>Because they are unexpected, we haven’t done enough to make our economy and society resilient in the face of black swans. Our transportation system, for example, was disrupted in one way or another by all of the above‐​listed black swans.</p> <p>In order to thrive in spite of such events, the United States needs a&nbsp;resilient transportation system, one that can keep operating both during and after black‐​swan events. It must be relatively immune from terrorist attacks, protect its users from infectious diseases, help people flee and recover from natural disasters, and not be disabled by a&nbsp;loss of revenues during recessions and depressions.</p> <p>The good news is we already have such a&nbsp;system. The bad news is that powerful political forces have been seeking to dismantle it for many years, and have been partially successful at doing so. The system is motor vehicles and highways, and they are quite possibly the most resilient transportation modes ever designed.</p> <p>Highways are rarely targeted by terrorists because they are so diffuse and there are so many alternate routes if one road is disrupted. Personal automobiles are the safest form of transportation during a&nbsp;pandemic. The fact that 93 to 98 percent of American households have ready access to an automobile makes them the ideal mode for evacuation during natural disasters. And due to its low operating costs&nbsp;the highway system is far less likely to be disrupted by declining revenues during recessions and depressions than airlines, railroads, or transit systems.</p> <p>Despite these advantages, anti‐​auto groups have joined with urban planners to reduce the resiliency of our transportation network. They have opposed construction of new roads to keep up with population growth and successfully reduced the capacity of many arterials in what are called road diets, which convert street lanes to exclusive bus or bicycle lanes.</p> <p>Fortunately, most Americans intuitively understand the benefits of automobiles: 91.5 percent of American households own at least one car and 95.4 percent of American workers live in a&nbsp;household with at least one car (and of those who don’t, 20 percent still manage to drive alone to work, possibly in employer‐​supplied cars). To make our transportation system more resilient, the most important thing government can do is get out of the way.</p> <p>That means ending subsidies to all forms of transportation and funding it instead exclusively out of user fees. Ending subsidies to roads would add about a&nbsp;penny per passenger mile to the costs of driving; ending subsidies to urban transit would add $1.01 per passenger mile to the cost of riding transit.</p> <p>We also need to stop road diets and instead construct new roads (funded, of course, out of user fees) to meet the needs of a&nbsp;growing population. I&nbsp;also suggest that states develop evacuation plans that would include reversing lanes on multi‐​lane roads so that more people can leave an area threatened by natural disasters such as fires, floods, storms, or volcanos with a&nbsp;minimum amount of congestion.</p> <p>Without biasing people’s personal choices in favor of one mode or another, these and similar steps can help the United States stay prepared for the next Black Swan, whether it be a&nbsp;natural disaster, pandemic, or some other completely unexpected turn of events. For more information about why motor vehicles and roads are the most resilient form of transportation and how we can reinforce the resiliency of that system, see my recent&nbsp;<a href="">policy brief</a>&nbsp;on the subject.</p> Mon, 06 Apr 2020 13:55:34 -0400 Randal O'Toole COVID-19 Is No Excuse to Bail out Urban Transit Randal O&#039;Toole <div class="lead text-default"> <p>Among the many special interest groups lining up for a&nbsp;share of the trillion‐​dollar bailout bills is the transit industry. Transit agencies are&nbsp;demanding&nbsp;that Congress give them at least a $25 billion bailout. New York’s Metropolitan Transportation Authority (MTA) alone wants a&nbsp;$4 billion bailout.</p> </div> , <div class="text-default"> <p>Transit, however, neither needs nor deserves a&nbsp;bailout. It doesn’t need it because it already gets two‐​thirds of its operating costs from taxpayers, so it could cut service by a&nbsp;third and keep operating even if no one rode its buses and trains. Even the most efficient operations, such as the New York MTA, get almost half their operating funds from taxpayers, so they could cut service by a&nbsp;third and keep operating off tax dollars and the fares paid by those customers who are still riding.</p> <p>Nor is a&nbsp;bailout needed to help transit employees. Transit agencies tend to hire too few transit operators and then pay huge amounts in overtime. A&nbsp;few years ago, the&nbsp;New York Times&nbsp;reported&nbsp;that, thanks to overtime, more than 8,000 MTA employees earn more than $100,000 a&nbsp;year, and some more than $200,000. At the same time, the&nbsp;highest paid city employee&nbsp;in Madison, Wisconsin was a&nbsp;bus driver.</p> </div> , <aside class="aside--right aside--large aside pb-lg-0 pt-lg-2"> <div class="pullquote pullquote--default"> <div class="pullquote__content h2"> <p>Instead of bailing out transit, it’s time to start thinking about phasing out the subsidies we give it.</p> </div> </div> </aside> , <div class="text-default"> <p>The solution is for transit agencies to cut service to a&nbsp;level they can afford and keep all their employees on the payroll, but for only 40&nbsp;hours a&nbsp;week. Some employees might not be able to keep up the lavish lifestyles they’ve been living, but everyone is making sacrifices in this pandemic.</p> <p>Another reason transit doesn’t deserve a&nbsp;bailout is because it has consistently put its own interests ahead of its customers. Transit agencies in New York, Washington, Boston, and elsewhere have known for years that their infrastructure was deteriorating, yet instead of fixing it they decided to build new infrastructure that they can’t afford to maintain.</p> <p>New York decided to spend $16.8 billion on the&nbsp;Second Avenue subway&nbsp;rather than restore its existing subway system. Virginia and Maryland, which contribute to the DC Metrorail system, decided to build the $6.8 billion&nbsp;Silver Line&nbsp;and $2.5 billion&nbsp;Purple Line&nbsp;rather than maintain the core Metrorail network. Boston decided to spend $2.3 billion building a&nbsp;new&nbsp;light‐​rail line to Medford&nbsp;rather than maintain its decrepit and unsafe rail system.</p> <p>The transit industry’s approach to the recent pandemic is similarly selfish. Instead of telling people the truth—which is that they are safest traveling in their own vehicles—transit agencies have encouraged people to ignore the risks of riding transit. Denver’s Regional Transit District promises that it is “wiping down its handrails” once a&nbsp;day, which is reassuring so long as each bus and rail vehicle only carries one passenger a&nbsp;day. Seattle’s Sound Transit responded firmly to the crisis by “putting posters on vehicles&nbsp;reminding everyone” to wash their hands.</p> <p>The reality is that there’s not much room for transit in a&nbsp;world of social distancing. We saw the same problem with natural disasters, which are another reason to encourage autos over transit. When Hurricane Katrina hit, New Orleans had the second‐​lowest rate of auto ownership of any major city in the country. Those with cars got out; those who relied on transit did not. When Hurricane Rita hit a&nbsp;few weeks later, Houston, with one the nation’s highest rates of auto ownership, saw four million people successfully evacuate.</p> <p>Whether it be earthquakes, hurricanes, tornadoes, wildfires, or volcanoes, just about every part of the country is at risk of some natural disaster or another. Automobiles are the best way to get people away from such disasters and the best way to deliver emergency supplies to those who stay.</p> <p>Cars are also more energy efficient, per passenger mile, than transit in 484 out of the nation’s 488 urban areas and more climate‐​friendly in 480 out of those areas. And low‐​income people don’t particularly need transit. As a&nbsp;demographic group they&nbsp;have been shifting to driving: people who earn under $35,000 a&nbsp;year were significantly less likely to commute by transit in&nbsp;2018&nbsp;than&nbsp;2010,&nbsp;while transit’s major growth market is people who earn more than $75,000 a&nbsp;year.</p> <p>Instead of bailing out transit, it’s time to start thinking about phasing out the subsidies we give it. Private transit will still exist in those cities where people use it. But we need to stop treating transit like it is some kind of magical talisman that will solve all of our problems when in fact it is just a&nbsp;selfish special interest group that is parasitizing our cities.</p> </div> Thu, 02 Apr 2020 12:59:36 -0400 Randal O'Toole Posse Comitatus and Interstate Travel Bans Gene Healy <p>In the space of a few hours on Saturday, President Trump went from <a href="">threatening</a> an ALL-CAPS federal “QUARANTINE of developing ‘hot spots’, New York, New Jersey, and Connecticut” to… having CDC issue a <a href="">“strong Travel Advisory”</a> for the tristate area instead.</p> <p>It’s hardly the first time this president has floated some eye‐​poppingly authoritarian proposal, only to back away from the Rubicon shortly thereafter. By now, the pattern should be familiar:</p> <blockquote><p>Trump hits “send tweet” on some crank theory of absolute executive power. Law professors and pundits cancel their weekend plans, scrambling to figure out “Can he <em>do</em> that?”—only to realize, weeks later, that they needn’t have taken him literally or seriously.</p> </blockquote> <p>But when I wrote that in <a href="">Reason magazine</a> a year ago, “weekend plans” were still a thing. In the pre‐​COVID‐​19 era, it was usually safe to take the president’s autocratic reveries with a grain of salt. We’re in new territory now. The pressures for bold action in times of crisis have led <a href="">far cooler‐​headed presidents</a> to make desperate and dangerous moves, and there are <a href="">far rougher days ahead</a>. Our radically changed circumstances make this particular proposal worth worrying about.</p> <figure role="group" class="align-right filter-caption"><div data-embed-button="image" data-entity-embed-display="view_mode:media.blog_post" data-entity-type="media" data-entity-uuid="9563ca0d-a231-46f0-b1c3-f83d02f9af72" data-langcode="en" class="embedded-entity"> <img srcset="/sites/ 1x, /sites/ 1.5x" width="640" height="448" src="/sites/" alt="How Would a Tristate Lockdown Be Enforced?" typeof="Image" class="component-image" /></div> <br /><figcaption><div class="figure-caption text-sans-alternate">Where would the federal government get the manpower to enforce a Tristate‐​area quarantine? </div> </figcaption></figure><p>A number of questions come to mind<strong>: </strong>first among them, “can he <em>do</em> that?”—is there any plausible legal authority for a domestic Travel Ban encircling three states and some 30 million Americans? Second, if he tried, how could the feds enforce it? And finally, just how nightmarish would that scenario be?</p> <p>Let’s start with the legal question. The key statute for federal quarantine authority is the <a href="">Public Health Service Act</a> (PHSA), which has been used, in recent outbreaks, primarily for international travel restrictions. However, the PHSA also provides authority to issue regulations aimed at preventing disease spreading across state lines, and authorizes the apprehension and examination of</p> <blockquote><p>[A]ny individual reasonably believed to be infected with a communicable disease in a qualifying stage and (A) To be moving or about to move from a State to another State.…</p> </blockquote> <p>The PHSA seems to envision individual testing, not interstate blockades. Regulations issued under its authority:</p> <blockquote><p>may provide that if upon examination any such individual is found to be infected, he may be detained for such time and in such manner as may be reasonably necessary.</p> </blockquote> <p>That language does not appear to support a federal power to impose a <a href="">cordon sanitaire</a> around the Tristate Area unless virtually any person attempting to leave can be “reasonably believed” to already have COVID-19. Still, even more tortured interpretations of federal law have prevailed, at least temporarily, in past crises. I wouldn’t necessarily count on the courts to enjoin this one.</p> <p>If the administration opted for an <a href="">“enforceable quarantine,”</a> how would the feds enforce it? “One option,” as George W. Bush <a href="">put it</a> in the wake of the Katrina debacle, “is the use of a military that’s able to plan and move.”</p> <p>Indeed, for an operation on the scale Trump suggested, it may be the only option. “Neither the Public Health Services Act nor CDC regulations specifically authorize military enforcement of federal quarantine orders. But neither HHS nor CDC possess sufficient resources to enforce mass quarantines,” observes Jesse T. Greene in a 2015 <em>Harvard National Security Journal</em> article, “<a href="">Federal Enforcement of Mass Involuntary Quarantines</a>” (here’s hoping <em>your</em> social‐​distancing reading list consists of somewhat more soothing titles).</p> <p>One potential obstacle to the use of federal troops for quarantine enforcement is the <a href="">Posse Comitatus Act</a> (PCA), the longstanding federal statute that makes it a criminal offense to use U.S. military forces to “execute the laws.” Still the PCA has never been an insurmountable barrier to using standing armies at home. By its terms, the statute doesn’t apply where Congress has elsewhere “expressly authorized” the use of federal troops to execute the laws. The PHSA doesn’t fit the bill, but, according to Greene and <a href="">other analysts</a>, another set of statutes might.</p> <p>Those are the <a href="">Insurrection Acts</a>, based on Congress’s <a href="">constitutional power</a> to “To provide for calling forth the Militia to execute the Laws of the Union, suppress Insurrections and repel Invasions.” Those authorities were last invoked in 1992, when President George H.W. Bush sent in U.S. Marines and Army infantry to help <a href="">quell the L.A. Riots</a>.</p> <p>Under <a href="">10 USC §252</a>, Congress has delegated to the president the power to call out federal troops when “unlawful obstructions, combinations, or assemblages, or rebellion against the authority of the United States, make it impracticable to enforce the laws of the United States in any State.” That language tracks with most uses of the Insurrection Acts historically, from the Whiskey Rebellion to the L.A. Riots. It’s a little tougher to see families attempting to cross state lines in the face of a federal quarantine as “unlawful combinations” or “rebellion against the authority of the United States.” The authority granted by the Insurrection Acts is “intentionally narrow and would not seem to allow federal troops to be used in a humanitarian situation like suppressing a pandemic,” Mark F. Cancian <a href="">writes</a> in a recent analysis for CSIS; still, “lawyers can be quite imaginative in finding ways to stretch statutory text.”</p> <p>There’s good reason to resist that move. Soldiers are trained to be warriors, not peace officers — which is as it should be. But putting full‐​time warriors into a civilian policing situation can result in serious collateral damage to American life and liberty.</p> <p>Greene, the author of the article on “Federal Enforcement of Mass Involuntary Quarantines,” supports military enforcement in certain circumstances. But he also acknowledges the grave risks entailed in the use of standing armies at home. He notes that the U.S. Coast Guard, which is not covered by the Posse Comitatus Act, “has organized to avoid problems like the one that occurred in 1992 when Marines accompanied LAPD officers.”</p> <blockquote><p>The Coast Guard has special units where Coast Guardsmen are trained to follow the “warrior mindset,” meaning they are focused on using overwhelming force. But, the Coast Guard never allows personnel in those special units to operate outside their units because “a 20 year old can’t just flick a switch in his head from warrior to enforcer mindset.”</p> </blockquote> <p>Greene recounts an incident from the 1992 Marine deployment to Los Angeles.</p> <blockquote><p>Police officers responded to a domestic dispute, accompanied by marines. They had just gone up to the door when two shotgun birdshot rounds were fired through the door, hitting the officers. One yelled ‘cover me!’ to the marines, who then laid down a heavy base of fire .… The police officer had not meant ‘shoot’ when he yelled ‘cover me’ to the marines. [He] meant … point your weapons and be prepared to respond if necessary. However, the marines responded instantly in the precise way they had been trained, where ‘cover me’ means provide me with cover using firepower .… over two hundred bullets [were] fired into that house.</p> </blockquote> <p>A few years later, a Marine Corps anti‐​drug patrol operating under the so‐​called drug war exceptions to the Posse Comitatus Act, <a href="">shot and killed</a> an 18‐​year‐​old American high school student who was herding goats near his family’s farm in Redford, Texas. An internal Pentagon investigation of the incident said that the soldiers were ill prepared for contact with civilians, as the Marines’ military training had instilled ‘‘an aggressive spirit while teaching basic combat skills.”</p> <p>Worse still, Greene suggests that the military’s current Standing Rules for the Use of Force (SRUF) would exacerbate that problem, raising the risk of shoot‐​to‐​kill incidents in any federal quarantine. The SRUF may lead active‐​duty troops to believe they can use deadly force to stop Americans attempting to leave a quarantined area. To ameliorate that problem, Greene proposes replacing the current rules with revised SRUF designed to guard against lethal escalation “and ensure respect for the due process rights of quarantined persons.” But a better answer is to avoid such missions entirely.</p> <p>Would interstate blockades enforced by federal troops do enough good to justify such a radical and risky departure from the American tradition of civilian law enforcement? How much, at this point, would they “flatten the curve”?</p> <p>I’m not an epidemiologist, and I refrain even from playing one on Twitter. But actual experts in the containment of infectious diseases seem to <a href="">recoil from Trump’s idea</a>. The rush to get out of town before the clampdown “could end up creating more flight from New York and more chains of transmission,” <a href="">argues</a> Johns Hopkins’ Dr. Amesh Adalja. “The energy required to even begin to enforce something like that is probably better spent on core public health response activities,” echoes his colleague Joshua Sharfstein.</p> <p>None of the above is to suggest that the US military <em>shouldn’t</em> help fight the COVID-19 pandemic. The Pentagon is the <a href="">largest employer</a> in the world and has manpower and assets <a href="">it can bring to bear</a> in this fight—without using soldiers against citizens. </p> Wed, 01 Apr 2020 14:00:46 -0400 Gene Healy Congress Should Be Skeptical of Transit Industry Demand for Bailouts Randal O&#039;Toole <p>According to <em>Metro Magazine</em>, transit agencies are now “demanding” that Congress give them <a href=";utm_medium=enewsletter&amp;utm_campaign=20200324-NL-MET-Express-BOBCD200318002&amp;omdt=NL-MET-Express&amp;omid=1108537216&amp;oly_enc_id=4680G4294556D0Y">$25 billion in bailouts</a> due to COVID-19. This is roughly two years’ worth of federal subsidies to transit.</p> <p>Unlike the airlines and other industries that get all or nearly all of their revenues from customers, transit agencies already get 50 to 90 percent of their operating funds from taxpayers. That means that, even with no customers, they could keep buses and trains running at reduced schedules.</p> <p>But why are transit systems running anyway? In this time of social distancing, the safest form of transportation is your private automobile.</p> <p>Research has shown that “mass transportation systems offer an <a href="">effective way of accelerating</a> the spread of infectious diseases within communities.” Agencies say they are staying open for the sake of “<a href="">medical staff, first responders and other essential workers</a>.”&nbsp;In other words, they are encouraging health care and other “essential” people to use the form of transportation whose riders are nearly <a href="">six times more likely</a> to suffer from upper respiratory infections than those who don’t ride transit.</p> <p>Rather than give transit even more subsidies on top of subsidies, we ought to shut it down. We should then seriously consider ending subsidies to&nbsp;transit systems when the current crisis is over. Even New York should think about alternate arrangements as its transit systems have more than $120 billion in debts, unfunded maintenance backlogs, and unfunded health care obligations making them clearly unsustainable.</p> <p>Other than&nbsp;New York, transit is an environmental and social justice disaster, as I’ll show in a&nbsp;forthcoming Cato paper. It uses more energy per passenger mile than the average car&nbsp;In 484 out of 488 urban areas and emits&nbsp;more greenhouse gases in 480 of those urban areas.</p> <p>Low‐​income commuters were significantly less likely to ride transit to work in 2018 than in 2010,&nbsp;while transit’s major growth market is people who earn more than $75,000 a&nbsp;year. They don’t need the kind of subsidies we are giving transit, and transit agencies certainly don’t need $25 billion in bailouts today.</p> Fri, 27 Mar 2020 13:57:26 -0400 Randal O'Toole We Were Warned Randal O&#039;Toole <p>We were warned. After September 11, 2001, historian Stephen Ambrose <a href="">told us what to do</a>.</p> <p>“One of the first things you learn in the Army is that, when you and your fellow soldiers are within range of enemy artillery, rifle fire, or bombs, don’t bunch up,” wrote Ambrose in the <em>Wall Street Journal</em>. Now that the U.S. was under attack from terrorists, Ambrose urged the nation as a&nbsp;whole to learn the same lesson: “don’t bunch up.” “In this age of electronic revolution,” he noted, “it is no longer necessary to pack so many people and office into such small space as lower Manhattan.”</p> <p>Ambrose’s advice was ignored. Manhattan’s population has grown by 100,000 people since 2001. Fitting this number of people on a&nbsp;23‐​square‐​mile island is only possible because of transit systems that force people to pack themselves into buses and railcars.</p> <p>Now, we are getting another lesson. Due to a&nbsp;novel virus, we are told to “socially distance” ourselves. But no one is telling us to drive our cars instead of riding transit. Instead, the transit agencies are still operating and giving out platitudes like we’re “<a href="">wiping down the handrails</a>” every day. Seattle’s Sound Transit is firmly responding to the crisis by “<a href="">putting posters on vehicles</a> reminding everyone” to wash their hands. San Francisco BART says it is running ten‐​car trains all day so people can stand as far from one another as possible.</p> <p>It’s not just transit. The 9/11 attack had no effect on urban planners’ demands that we pack ourselves into denser and denser cities. Just last week, an affiliate of <a href="">Smart Growth America</a> issued a&nbsp;<a href="">report</a> saying that we should deal with congestion through densification which, the report admitted, would make congestion worse. No doubt the same organization is now coming up with some spin claiming that we would all be immune to the coronavirus if only we lived in denser cities.</p> <p>Density–bunching up–makes us more vulnerable to terrorist attacks. It makes us more vulnerable to novel diseases. It makes us more vulnerable to crime, invasions of privacy, and traffic accidents. It makes us waste more time in congestion. Contrary to planners’ claims, people living in dense areas also pay higher taxes.</p> <p>Densities and transit‐​dependence also makes us more vulnerable to natural disasters. When <a href="">Hurricane Katrina</a> hit New Orleans, 1,200 people died, mostly because New Orleans had the <a href="">second‐​lowest rate of auto ownership</a> (next to New York) of any major city in the country. At the time, some urban planners had the gall to say that fewer people would have died if auto ownership rates had been even lower. In fact, a&nbsp;few weeks later, <a href="">Hurricane Rita</a> hit Houston, which has much higher auto ownership rates. Four million people successfully evacuated, nearly all by car, and fatalities were only a&nbsp;tenth of Katrina’s.</p> <p>Some might argue that a&nbsp;few events over two decades shouldn’t dictate social policy. But what should dictate social policy? Should it be the personal preferences of individuals and families? The overwhelming majority of those individuals and families prefer to live in low‐​density housing and travel in private automobiles. We don’t need social policy to change that.</p> <p>Instead, urban planners want to impose policies on us to get people on transit and into high‐​density housing. They want urban‐​growth boundaries that make land too expensive for single‐​family housing. They want to dedicate arterial lanes to buses and bicycles so the increased traffic congestion will force people to stop driving. They aren’t even sure why they want these things, but they’ve managed to convince many people that single‐​family homes and private automobiles are wasteful and evil despite the fact that both are more energy efficient than the alternatives of multifamily housing and transit.</p> <p>Urban planners have been wrong about almost all of their grandiose plans in the past. They once <a href="">cleared “slums”</a> that forced the people who lived in them to move to even lower‐​quality housing elsewhere. They once built high‐​rises for low‐​income people that proved so unlivable that some were <a href="">torn down</a> after as little as 17&nbsp;years. They once tried to reduce toxic air pollution by increasing traffic congestion that actually increased that pollution. We should stop listening to them.</p> <p>Despite the reassurances of transit agencies that have irresponsibly encouraged people to bunch up on their vehicles, transit ridership is down by 50 percent or more in many cities. That’s a&nbsp;good thing, but <a href="">Amtrak</a> and <a href="">transit agencies</a> are already asking for bailouts to make up for their loss of fare revenues, even though existing subsidies make up more than three‐​quarters of transit funds and half of Amtrak’s funds so they could easily deal with reduced ridership simply by reducing service.</p> <p>The American Public Transportation Association has sent out a&nbsp;notice to its members asking them to support “$12.875 billion [in federal funding] for public transit to offset direct costs and revenue losses of COVID-19.” That would effectively double federal subsidies to an industry whose customer base has been declining for years.</p> <p>The federal government has already said that transit agencies can <a href=";utm_medium=enewsletter&amp;utm_campaign=20200317-NL-MET-Express-BOBCD200311002&amp;omdt=NL-MET-Express&amp;omid=1108537216&amp;oly_enc_id=4680G4294556D0Y">spend federal funds</a> dedicated to capital improvements on operating costs instead so they can continue to operate empty buses and trains. Everyone wants a&nbsp;bailout, but transit agencies, whose ridership has fallen in each if the past five years, are least deserving of one.</p> <p>Don’t bail out government‐​subsidized transit. Better to end the subsidies completely and let the agencies wither and die. Instead, help people who don’t have automobiles buy fuel‐​efficient cars so they can drive in vehicles that are safe from novel viruses. Give transportation vouchers to people who can’t drive so they can use taxis, ride‐​hailing services, or private transit while encouraging transportation providers (at least during times like these) to sterilize the vehicles after each use.</p> <p>These policies will cost a&nbsp;lot less than the $54 billion a&nbsp;year we are spending on urban transit, which is a&nbsp;blight on our society that most cities, other than New York, don’t even need. And New York won’t need it either once people and jobs stop bunching up and move out to lower‐​density areas, as happened years ago in Chicago and other big cities.</p> <p>Next, stop encouraging densification. Stop subsidizing transit‐​oriented developments. Stop demanding that single‐​family neighborhoods be rezoned for denser housing (which, paradoxically, will actually make housing less affordable). Abolish urban‐​growth boundaries and other restrictions on development at the urban fringe. If someone wants to live in a&nbsp;high‐​density building, that’s fine, but let the market determine how people live, not <a href="">urban planning dogma</a> based on a&nbsp;<a href="">crazy lady</a> who was right to question the high‐​rise housing projects but wrong to think that, because she liked Greenwich Village, it was the model for all urban life.</p> <p>Social distancing–not bunching up–is the appropriate response in the presence of a&nbsp;novel disease. But it will still be the appropriate response after the COVID-19 virus is no longer a&nbsp;threat. Let’s hope people learn the lesson this time. For that to happen, we may need some government distancing.</p> Wed, 18 Mar 2020 11:49:45 -0400 Randal O'Toole Steve H. Hanke discusses COVID-19 and the economy on BBC Radio Wed, 18 Mar 2020 03:13:02 -0400 Steve H. Hanke Refocusing on the Consumer Wed, 11 Mar 2020 03:00:00 -0400 Ahmad Faruqui Public Utilities as Social Agencies Tue, 10 Mar 2020 14:45:49 -0400 Kenneth W. Costello The Risk of Too Much Air Safety Regulation Tue, 10 Mar 2020 13:59:31 -0400 Dennis L. Weisman, Peter Van Doren Oil in the Time of Corona Emma Ashford <div class="lead text-default"> <p>Yesterday, in the time it took me to discover that my local Target was completely out of hand sanitizer, the price of oil dropped by over 30%. For those playing the home game, that’s the worst oil market shock since Saddam Hussein invaded Kuwait in 1991, kicking off the Gulf War.</p> </div> , <div class="text-default"> <p>The precipitous drop in global oil prices was prompted by two factors: long‐​term fears of declining demand as a&nbsp;result of coronavirus, and the failure of the OPEC+ group to come to an agreement on production cuts, prompting Saudi Arabia to ramp up production and effectively declare war on Russia and other major producers.</p> <p>With coronavirus continuing to spread, there’s little likelihood things will improve any time soon. For producers, this means lean times and strained budgets. For consumers, it means cheaper oil. That’s usually a&nbsp;good thing, but in the context of a&nbsp;global pandemic, there’s only so much cheap oil can boost demand.</p> <p>You might want to fasten your seatbelts. It’s going to be a&nbsp;bumpy ride.</p> </div> , <aside class="aside--right aside--large aside pb-lg-0 pt-lg-2"> <div class="pullquote pullquote--default"> <div class="pullquote__content h2"> <p>You might want to fasten your seatbelts. It’s going to be a&nbsp;bumpy ride.</p> </div> </div> </aside> , <div class="text-default"> <p><strong>Oil Goes off a&nbsp;Cliff</strong></p> <p>The economic indicators have&nbsp;<a href="" target="_blank">been there for a&nbsp;while</a>&nbsp;for those who were looking. While the stock market largely continued its blissfully unaware rise through January and February, analysts have been warning that the shortfall in demand created by coronavirus — as China, South Korea and other Asian economies almost entirely shut down for weeks to enact quarantines — was going to have knock‐​on effects in the global economy.</p> <p>We’re now starting to see that impact: supply chain disruptions, stock market panic, and — perhaps most importantly — lowered demand for oil in some of the world’s biggest economies.</p> <p>The sudden drop in prices was kicked off by the splintering of the OPEC+ agreement between Russia and the members of OPEC (most notably Saudi Arabia). With Russia unwilling to agree to further production cuts, the deal fell apart, leading the Saudis to promise increased production, swamping markets with new supply.</p> <p>Remember supply and demand from Economics 101? This is what happens when supply increases at the same time as demand drops. The world market is now awash in oil, and very few people are buying.</p> <p>There are a&nbsp;variety of theories for why the Russians and Saudis chose to start a&nbsp;price war: some think they’re worried about US shale production, while others have suggested that the Saudis are trying to help Trump by providing cheap gasoline. I’m not persuaded by either.</p> <p>The most plausible explanation is instead that both Russia and Saudi Arabia are engaged in a&nbsp;conflict not for price, but for market share. And thanks to coronavirus, it’s a&nbsp;war for share of a&nbsp;declining market. Rather than sharing the burden of dropping demand through OPEC+, each is trying hard to force the other — or someone else — to bear more of the cost. If they can seize market share, they might be able to maintain a&nbsp;decent revenue stream even with lower oil prices.</p> <p>Neither, of course, would be particularly upset if that cost were primarily borne by US shale producers. But the Saudis already tried to put shale out of business in 2014 through lower prices, and it failed. Today, the evidence suggests that Russia and Saudi Arabia are less focused on shale, and more on preserving their markets — and the income that props up their regimes — in a&nbsp;challenging time.</p> <p><strong>America the Petrostate</strong></p> <p>What does all of this mean for the US economy? Well, the&nbsp;<a href="" target="_blank">president took to Twitter</a>&nbsp;on Monday morning to point out that low oil prices are good for American consumers, and good for the economy. Of course, as he himself noted as recently as January 8, “… America has achieved energy independence… we are now the number‐​one producer of oil and natural gas anywhere in the world.”</p> <p>In an impressive change of pace from his usual fact‐​challenged repertoire, the president is largely right about both. The United States is both a&nbsp;major consumer of oil, as well as the largest producer of oil on the planet. Under normal circumstances, there now may be as much downside as upside for America from a&nbsp;historic drop in oil prices.</p> <p>Of course, circumstances are anything but normal. That positive effect relies on Americans dialing up consumption of oil as prices fall: building more stuff, buying more things, driving further, and engaging in more tourism. None of which seems particularly likely in the context of authorities cautioning Americans not to cruise or fly long‐​distances, to engage in ‘social distancing,’ and prepare to self‐​quarantine if necessary.</p> <p>In short, it’s looking like a&nbsp;rough road ahead for the US economy as we all figure out — together — what it looks like to face a&nbsp;potential global pandemic with no clear leadership, and no plans to prevent it.</p> <p>But we can at least console ourselves that our economy is diversified. Unlike Russia, Saudi Arabia, Iraq, Nigeria or others, we’re not frantically trying to shore up our government’s finances by preserving our share of a&nbsp;rapidly shrinking global oil market.</p> <p>Now if you’ll excuse me, I’m off to wash my hands again.</p> </div> Tue, 10 Mar 2020 10:31:46 -0400 Emma Ashford OPEC+ or OPEC-? Emma Ashford, John Glaser, Ellen Wald <p>Emma Ashford and John Glaser are joined by political scientist Ellen Wald to discuss how global oil markets interact with U.S. foreign policy.</p> <p><strong>Show Notes</strong></p> <ul> <li><a href="" target="_blank">Ellen Wald website</a></li> <li>Event: <a href="" rel="noopener noreferrer" target="_blank">The Iran Crisis and American Energy Security</a></li> <li><a href="" target="_blank">Ellen Wald on <em>Forbes​.com</em></a></li> <li>Rosemary Kelanic and Charles Glaser, <a href="" target="_blank"><em>Crude Strategy: Rethinking the U.S. Military Commitment to the Persian Gulf</em></a></li> </ul> Mon, 09 Mar 2020 08:30:00 -0400 Emma Ashford, John Glaser, Ellen Wald Randal O’Toole’s research on transit is cited on WKRC’s The Brian Thomas Show Wed, 04 Mar 2020 11:12:20 -0500 Randal O'Toole Steve H. Hanke discusses the 95% rule on the Utility + Function podcast Wed, 04 Mar 2020 11:01:42 -0500 Steve H. Hanke Randal O’Toole’s article, “VIA is a money guzzler, not a transit solution,” is cited on KTSA’s The Sean Rima Show Mon, 24 Feb 2020 12:45:55 -0500 Randal O'Toole Collusive Investments in Technological Compatibility: Lessons from U.S. Railroads in the Late 19th Century Daniel P. Gross <div class="lead text-default"> <p>In the early morning hours of Monday, May 31, 1886, railroads across the American South simultaneously stopped running their trains, and over the following 36&nbsp;hours teams of workers manually narrowed 13,000&nbsp;miles of railroad track from a&nbsp;5′ 0″ to 4′ 9″ gauge (track width) to be compatible with the standard being used throughout most of the rest of the country. Today, the gauge change is celebrated as a&nbsp;remarkable feat of engineering and coordination and is referenced in research and popular press as an example of standardization. However, whenever the story is told, a&nbsp;typically forgotten detail is that these railroads were also running a&nbsp;cartel.</p> </div> , <div class="text-default"> <p>Collusion has been illegal in the United States since the Sherman Antitrust Act of 1890 out of concern for consumer welfare and market efficiency—and railroads were one of its original targets. But often overlooked is the possibility that, in some settings, collusion may also contribute to the creation of unexpected new sources of value, such as standardization. This value creation might even in principle change predictions for the effects of market power on total surplus. I&nbsp;bring these issues into focus by examining the gauge change, which instantly integrated the South into the national transportation network, making it possible for goods and passengers to move effortlessly into and out of the region without costs and delays to interchange</p> <p>Using historical data from the Southern railroad and steamship cartel, I&nbsp;first chronicle the gauge change and show that it triggered a&nbsp;redistribution of freight traffic into the South from steamships to railroads but did not affect total shipments on sampled routes through 1890. Over the same period, records show that the cartel maintained its prices, implying that railroads did not pass through any of the cost savings achieved by the conversion. Guided by this evidence, I&nbsp;then develop a&nbsp;simplified model of the market for North‐​South freight shipment and show that the cartel may have both facilitated the conversion to standard gauge, by providing a&nbsp;venue for coordination and a&nbsp;means of recouping the investment, and concurrently softened its effects on prices and total shipments by limiting pass‐​through of carriers’ resultant cost savings. Complementing the evidence from cartel data, evidence from railroads’ stock returns around the time of the event indicates that investors perceived large financial returns to standardization. The effects of the gauge change were thus large yet potentially defined by the industry’s collusive conduct.</p> <p>The earliest U.S. railroads were constructed as local and regional enterprises to serve local needs. At the time, opinion over the optimal gauge varied, and without the vision of a&nbsp;national network, distinct gauges were adopted around the country. As the national network began to emerge, these incompatibilities became increasingly costly, and railroads gradually converged on a&nbsp;common gauge via conversion and new construction such that by the 1880s nearly all U.S. railroads were on a&nbsp;4’8.5″ standard gauge—except for those in the South. Data from <em>Poor’s Manual of Railroads</em> confirm that whereas other regions had 95 percent or more of their track in standard gauge, 75 percent of track in the South was on an incompatible 5′0″ “Southern” gauge (even more if excluding Virginia and North Carolina), and accounts indicate that the available adapter technologies were a&nbsp;substantial and costly second‐​best option to a&nbsp;fully integrated network. In early 1886, members of the Southern Railway &amp;&nbsp;Steamship Association (SRSA) cartel, which together comprised a&nbsp;majority of mileage in the South, agreed to convert all track to a&nbsp;standard‐​compatible 4′9″ gauge en masse over the two days of May 31 and June 1, 1886, with traffic halting on May 30 and resuming by the evening of June 1, effortlessly traversing the former breaks in gauge. The conversion was carefully planned, seamlessly executed, and well‐​documented by contemporaries.</p> <p>The cartel’s primary purpose was to support noncompetitive pricing by Southern carriers through the creation and administration of a&nbsp;traffic pool. To implement the pooling arrangement, the SRSA compiled monthly records of freight traffic borne by individual carriers to and from Southern cities where two or more members operated, which were later reported to cartel members for key routes. I&nbsp;use these data to estimate the effects of the gauge change on merchandise shipments from the North into the South. I&nbsp;compare within‐​route traffic borne by rail and steamship before and after the gauge change, allowing the effects to vary with route length: because breaks in gauge imposed a&nbsp;fixed cost of interchange on through shipments, the unit costs on each route vary with distance. Steamships are a&nbsp;natural comparison group for all‐​rail traffic, as seaborne freight circumvented the breaks in gauge and was therefore operationally unaffected by the conversion to a&nbsp;standard‐​compatible gauge.</p> <p>The cartel records yield a&nbsp;balanced panel of 52 routes with inbound merchandise shipments data pre‐ and post‐​standardization. Within this sample, I&nbsp;find that the gauge change caused a&nbsp;sharp increase in all‐​rail traffic relative to steamship traffic, with the effect strongest on shorter routes and dissipating after roughly 700–750&nbsp;miles. When split across the two all‐​rail pathways into the South, I&nbsp;find relatively larger increases for the less trafficked routing.</p> <p>Market share models return similar results, indicating a&nbsp;redistribution of traffic from steamships to railroads, with effects dissipating at similar distances. However, I&nbsp;find no differential growth in total shipments on shorter and longer routes through 1890: the effects are limited to substitution across modes. One possible explanation is that adjustment on the aggregate margin took several years, and the period I&nbsp;examine is too short for these effects to appear in the data; another is that the choice of mode was more sensitive to breaks in gauge than shipment overall. However, the presence of the cartel is a&nbsp;distinctive feature of the setting, and its potential importance is accentuated by evidence that cartel prices did not decline following the gauge change.</p> <p>To evaluate the cartel’s role in facilitating the gauge change and whether collusive pricing might have constrained total shipments, I&nbsp;develop a&nbsp;simplified model of the market for freight transport on a&nbsp;North‐​South route. I&nbsp;first use it to show how the existence of the cartel may have facilitated standardization by providing incentives for undertaking the costly investment and a&nbsp;venue for coordinating the regional shift to a&nbsp;different common‐​gauge equilibrium, and then I&nbsp;demonstrate how collusion could have shaped the effects on prices, quantities, and market shares. Although traffic will shift from steamships to all rail in any market structure, collusion reduces the pass‐​through of railroads’ cost savings to prices and in turn the growth in total shipments, relative to a&nbsp;counterfactual in which railroads and steamships set prices competitively—and if cartel price adjustments are even moderately costly (e.g., due to internal renegotiation costs), prices and total shipments may not change at all. As it were, stock returns to U.S. railroads at the time of the conversion indicate that investors believed it would generate a&nbsp;windfall for Southern railroads, particularly those where the gauge breaks were once located.</p> <p>This episode is an example of an unconventional dividend from collusion: the standardization of Southern railway gauge. The enabling role of the cartel made it possible for firms to internalize the externalities of their technology choices and provide an opportunity to coordinate on decentralized changes, such as the conversion of 13,000&nbsp;miles of railroad track and the recovery of the fixed cost of conversion.</p> <p><strong>NOTE:</strong> <br> This research brief is based on Daniel P. Gross, “Collusive Investments in Technological Compatibility: Lessons from U.S. Railroads in the Late 19th Century,” Management Science, forthcoming, <a href="" target="_blank">https://​www​.nber​.org/​p​a​p​e​r​s​/​w​26261</a>.</p> </div> Wed, 12 Feb 2020 13:50:00 -0500 Daniel P. Gross EPA’s FY 2021 Budget Sets Out to Dupe Congress (again) William Yeatman <p>The EPA’s annual <a href="">budget</a> just came out, and it’s as confusing as ever—by insidious design.</p> <p>All agencies have <a href="">CFO offices</a> whose responsibility is to work with the White House&nbsp;to produce a&nbsp;budget for congressional consideration. In addition to crunching numbers, agency CFOs also provide lawmakers&nbsp;with two qualitative descriptions: a “budget‐​in‐​brief” and a “budget justification.” These documents are supposed to play a&nbsp;crucial role in Congress’s power of the purse. After all, Congress cannot be a&nbsp;responsible&nbsp;steward of public funds&nbsp;if lawmakers have no idea how appropriations are spent.</p> <p>Maybe it’s just me, but I&nbsp;think these documents&nbsp;should be easy‐​peasy. A&nbsp;useful budget justification would:</p> <ul> <li>Identify the regulatory program;</li> <li>Identify the office or division in the agency that is executing the program;</li> <li>Identify the statutory basis of the program (is it discretionary or is it required by statute?);</li> <li>Identify how much is being spent on the program.</li> </ul> <p>Presto! All it takes is 4&nbsp;bullet points per program. With this simple template, lawmakers could easily glean enough facts to make informed choices with the nation’s pocketbook.</p> <p>In practice, alas, the EPA’s budget descriptions have been far from simple. In a&nbsp;word, these documents have been gobbledygook.</p> <p>A few years ago, I&nbsp;tried&nbsp;to make sense of the agency’s <a href="">FY 2017 budget justification</a>. I’d been following the EPA&nbsp;for a&nbsp;decade, so I&nbsp;felt&nbsp;qualified to understand the document. Yet after a&nbsp;few frustrating weeks, I&nbsp;remained bewildered by the agency’s Kafkaesque presentation.</p> <p>Instead of organizing its budget justification by office or statute, the EPA employed an indecipherable matrix of conceptual goals and organizational labels. Over the course of 1,200 pages, the document described 170 of these matrix combinations, using&nbsp;airy prose that failed to impart even the most basic information (such as, “which office is spending the money?”).</p> <p>It slowly dawned on me that the confusion was intentional. By making it impossible to “follow the money,” the agency hoped&nbsp;to defeat congressional oversight.</p> <p>On reviewing&nbsp;prior budget justifications,&nbsp;I&nbsp;discovered that this&nbsp;obfuscation extended at least to the George W. Bush administration.</p> <p>I’d not given much thought to the matter&nbsp;until today, on seeing a&nbsp;story about the <a href="">EPA’s FY 2021 budget</a>. Having had my curiosity piqued, I&nbsp;investigated the EPA’s current&nbsp;<a href="">justification</a>, hopeful that our business‐​minded president had imposed some needed discipline on agency accounting.</p> <p>No dice. The FY&nbsp;2021 document&nbsp;relies on the same incomprehensible&nbsp;matrix.</p> <p>To be sure, there’s plenty of blame to share. Not a&nbsp;single member of Congress has the wherewithal to demand an EPA&nbsp;budget that makes sense.&nbsp;</p> Tue, 11 Feb 2020 17:21:21 -0500 William Yeatman Road Pricing Should Be Central to UK Infrastructure Reform Ryan Bourne <div class="lead text-default"> <p>To the unaccustomed ear, it can seem almost alien. But heading outside of London over Christmas, a&nbsp;carless city‐​dweller like me was struck by how often people talk about driving. From planning journeys to bemoaning traffic, raging about potholes to regaling tales of accidents, Britain’s roads occupy a&nbsp;central place in most families’ lives and conversation.</p> </div> , <div class="text-default"> <p>Chancellor Sajid Javid believes better transport infrastructure can be economically transformative. For most Britons, roads are the day‐​to‐​day transport infrastructure they experience.</p> <p>Political debates&nbsp;<a href="" target="_blank">might be dominated by High Speed 2</a>, calls for metro schemes in cities, and demands for bus subsidies in towns. In reality, cars so vastly outweigh public transport use that any economically meaningful infrastructure push must put the capacity and efficiency of the road network at its heart.</p> <p>Cars account for almost two‐​thirds of all transport journeys in England and 78pc by distance, vastly exceeding rail (3pc and 11pc) and buses (5pc and 4pc). To put it more starkly, the average UK household spends £81 per week on transport, of which over three‐​quarters goes toward purchasing or running costs of personal vehicles. Rail, bus, and coach fares account for an average weekly sum of £5.80.</p> <p>Despite this, our politicians regularly prioritise public transport investment over roads, even when the case for doing so is not economically sound. In the 2010 Comprehensive Spending Review, the coalition government cancelled, deferred, or placed under strategic review road projects with benefit‐​cost ratios (BCR) of 3.2, 4.2, and 6.8, respectively. At the same time, they ploughed on with HS2 with its BCR of 1.2, while local public transport schemes tend to have BCRs of just 1.8.</p> <p>Motorists’ raw deal can be seen again by looking at net exchequer contributions. For 2018/19, rail enjoyed a&nbsp;net subsidy of £7.1bn. Spending on roads was larger at £10.2bn, but a&nbsp;massive £34.4bn of revenue was collected from fuel and vehicle excise duties.</p> <p>Yes, fuel duty is supposed to account for the negative broader consequences of driving — not least carbon emissions, localised air pollution, and noise. But fuel duty rates are much higher than can be justified by these externalities. Drivers get whacked.</p> <p>Anti‐​car zealots usually bring up unaccounted‐​for social costs of driving arising from congestion, which are real and do impose large costs on other drivers and businesses (often raising consumer prices due to higher freight costs too). But congestion is a&nbsp;consequence of government failures to deliver responsive capacity and efficient pricing.</p> <p>Government statistics show that between 2017 and 2018, there was an increase in average delay time on 71pc of the near 7,000 key areas of the strategic road network. If the economics doesn’t convince the Chancellor of the need to put roads as his number one transport priority, perhaps politics will.</p> <p>The worst regions outside London for average delay times on roads are the North West, West Midlands, and Yorkshire and Humber, areas where the Conservatives gained 30 seats in the 2019 election.</p> <p>The policy lesson here is not to unthinkingly plough more money into road building. What the data shows is that, economically, getting road infrastructure right is vastly more important in<a href="" target="_blank">&nbsp;improving the UK’s productivity performance</a>&nbsp;and quality of life than other transport modes.</p> <p>We all know what we want from the road network: well‐​maintained roads, reduced congestion, and fewer bottlenecks, with policy neutral between forms of transport. Yet today, anti‐​economic investment decisions and an inefficient use of road capacity holds Britain back.</p> <p>What can be done? Targeted investments can undo serious blockages and pothole filling can reduce damage to cars. If the Government is to finance transport infrastructure, then delivering it to obtain the biggest economic bang‐​for‐​the‐​buck at least seeks to mimic market signals. As&nbsp;<a href="" target="_blank">Sajid Javid’s infrastructure war‐​chest opens</a>&nbsp;next month, we can pore over projects selected and funds allocated, assessing the opportunity cost of his choices.</p> <p>But getting the road network right is about more than public spending. We also need the structural changes needed to make efficient use of any given road network. That requires grappling with the congestion challenge.</p> <p>Rather than imposing high taxes on cars, we now have the technology for dynamic road pricing, varying by time and location. Such a&nbsp;regime would charge near zero when traffic is free‐​flowing, but high prices at rush hour. When combined in future with&nbsp;<a href="" target="_blank">driverless cars</a> that automatically adjust routes in real time, the potential efficiency gains are huge.</p> <p>But the benefits aren’t just immediate. Road pricing also helps improve investment decisions. First, because the smoothing of traffic flows would negate the need to build expensive new capacity to meet rush hour needs that would otherwise prove wasteful outside peak times. Second, because the price signals themselves would prove an invaluable guide to informing where new investment really is needed.</p> <p>A Government‐​run system of road pricing is no panacea. Political incentives for “vote buying” through prestige infrastructure projects or even, now, politically‐​motivated pricing, would remain. Ideally, to mitigate such problems, we’d privatise certain routes or parts of the network, allowing private tolling or city‐​wide congestion pricing, which goes a&nbsp;long to delivering the same results but one step divorced from political control.</p> <p>As a&nbsp;first step, though, “unleashing Britain’s potential” via better transport infrastructure requires recognition that our road network is of primary importance. A&nbsp;sign of success for this Government’s aims would be if we could reach a&nbsp;state where driving didn’t induce so many angst‐​filled conversations.</p> </div> Thu, 06 Feb 2020 11:01:22 -0500 Ryan Bourne Johan Norberg discusses going organic on Free to Choose Media’s Dead Wrong Wed, 05 Feb 2020 11:46:12 -0500 Johan Norberg David B. Kopel discusses the Regional Transportation District on CPTV’s Colorado Inside Out Sat, 01 Feb 2020 10:57:28 -0500 David B. Kopel Chelsea Follett discusses pollution on WPRO’s The Matt Allen Show Wed, 29 Jan 2020 10:32:04 -0500 Chelsea Follett National Environmental Policy Act: “An unlimited license to write papers” Peter Van Doren, Caleb O. Brown <p>The Trump Administration plan to roll back regulatory review for large government infrastructure projects won’t have much of an impact on environmental quality. Peter Van Doren explains why.</p> Tue, 28 Jan 2020 16:37:54 -0500 Peter Van Doren, Caleb O. Brown Cato Institute event, “Rethinking America’s Highways,” is cited on WABE’s Closer Look with Rose Scott Tue, 28 Jan 2020 11:57:18 -0500 Cato Institute Suriname: the Next Big Oil Player? Doug Bandow <div class="lead text-default"> <p>The Republic of Suriname might become South America’s newest energy power.&nbsp;American Apache and French Total just announced the discovery or significant oil deposits offshore.</p> </div> , <div class="text-default"> <p>Suriname is both poor and thinly populated. It also is highly reliant on natural resources. However, with its president accused of human rights abuses, the government bedeviled by corruption, and China’s influence on the rise, the Trump administration might not be so pleased with Suriname’s expected financial windfall.</p> <p>The country’s status as a&nbsp;former Dutch colony sets it apart from its neighbors. Suriname gained independence in 1975, but Dutch is still the official language. Geographically, Suriname is the continent’s smallest. The population is only 600,000, but ethnically is South America’s most diverse. The per capita income is just $6310, about a&nbsp;tenth of America’s; on that measure, according to the International Monetary Fund, the country is ranked 87 out of the 186 countries. Seven of ten people fall below the poverty line.</p> <p>For such a&nbsp;small state the expected energy windfall could be substantial. However, the impact of such a&nbsp;development on America will be modest. And not necessarily positive—for Washington, at least.</p> </div> , <aside class="aside--right aside pb-lg-0 pt-lg-2"> <div class="pullquote pullquote--default"> <div class="pullquote__content h2"> <p>Who will be the principal beneficiary of nature’s newly discovered bounty? It may take years to discover the answer.</p> </div> </div> </aside> , <div class="text-default"> <p>Policy in Paramaribo generally isn’t very consequential for Washington. Suriname’s economy has been heavily reliant on minerals, particularly bauxite and oil. Alcoa stopped mining the latter in 2015; undeveloped reserves will be costly to reach and extract. The country has become a&nbsp;heavy exporter of gold and other precious minerals. Resources account for roughly 85 percent of exports and 27 percent of government revenues. Suriname also relies on agriculture, exporting bananas, rice, and shrimp.</p> <p>The oil discovery might prove to be of greater interest to American interests. With the Trump administration dedicated to forcing energy providers off the market—sanctioning Iran and Venezuela and seizing Syria’s oil—any additional, nearby supply would be useful. Indeed, the Suriname field highlights the continuing transformation of the energy marketplace.</p> <p>Because of fracking, in particular, the U.S. became the world’s largest energy producer, surpassing Saudi Arabia and Russia in 2014 and increasing its lead in subsequent years. Of course, the marketplace is international, but there is good news there as well. New oil and gas fields continue to be discovered, reducing the significance of the Middle East. During the first quarter of 2019 alone pools of oil and/​or gas were discovered off Angola, Australia, Bolivia, Cyprus, Egypt, Guyana, Indonesia, Iran, Mexico, Morocco, Norway, South Africa, and the United Kingdom. Rystad Energy exulted: “From a&nbsp;global perspective, the push for substantial new discoveries shows no signs of slowing down.” For the year roughly eight billion barrels of oil equivalent was found, with the largest sources being Russia, Guyana, and Cyprus.</p> <p>However, Washington might be uneasy about Suriname’s future direction. Like many Third World states, corruption is a&nbsp;serious problem. For instance, in 2018 Transparency International rated Suriname as 43 out of 100 (with 0&nbsp;most corrupt), which placed it at 73 of 180 countries covered. Even Freedom House, an organization that focuses on promoting democratic rights and civil liberties, warned that “corruption is a&nbsp;pervasive problem in government, and attacks on judicial independence and due process, underscored by the president’s interference in his own murder trial, remain a&nbsp;concern.”</p> <p>GAN Integrity went into more detail, explaining that: “Corruption is an obstacle to business in Suriname. It is especially prevalent in public procurement, in the awarding of licenses and in the customs sector. Corruption stems from a&nbsp;lack of regulation and legal anti‐​corruption measures.” The problem is “moderate” involving the judicial system, public services, and tax administration. Risks are “high” in customs administration and “very high” in national resources and public procurement.</p> <p>This suggests that a&nbsp;massive influx of funds will be vulnerable to theft and abuse. That tendency elsewhere has led to talk of a “Resource Curse,” in which what should be an enormous blessing turns out to be almost debilitating. There are critics of the idea and some resource‐​rich states do well economically. However, Harvard University’s Jeffrey Frankel concluded that “The relationship on average is slightly negative. The negative correlation is not very strong, making almost as many resource successes as a&nbsp;failure. But it certainly suggests no positive correlation between natural resource wealth and economic growth.”</p> <p>Stanford’s Larry Diamond approaches the issue from a&nbsp;different perspective, noting that of 23 nations in which energy accounts for 60 percent or more of exports, “not a&nbsp;single one is a&nbsp;real democracy.” Resource wealth also appears to increase the likelihood of violent conflict, with control of those resources one objective.</p> <p>There are steps that Paramaribo could take to prepare for the expected bounty, but that presumes responsible governance. Among the great resource successes are Botswana, Canada, Chile, and Norway. However, Suriname’s underlying weaknesses are serious and suggest severe problems to come.</p> <p>Indeed, there could be adverse geopolitical consequences for Washington. In 2015 Dino Bouterse, the president’s son, was caught in a&nbsp;sting offering to give Hezbollah a&nbsp;base in his nation in exchange for $2 million. Arrested in Panama, he was extradited to New York and subsequently convicted, receiving a&nbsp;16‐​year sentence. He had previously been convicted and imprisoned for drug trafficking in Suriname; after his release, he was appointed to the government’s counter‐​terrorism force. Although there is no evidence that Hezbollah or any other pariah organization or state is seeking to move into Suriname, this episode is unsettling. Arguably it was foreshadowed decades ago: after staging a&nbsp;coup in 1980, Bouterse&nbsp;<em>pere</em>&nbsp;sought support from Cuba, Grenada, and Nicaragua, all communist dictatorships, and Libya, then ruled by the mercurial yet radical Muammar Khadafy.</p> <p>President Desi Bouterse’s wandering geopolitical eye is made worse by his indifference to human rights. He and a&nbsp;group of sergeants staged a&nbsp;military coup in 1980 and he eventually consolidated power. Even after restoring civilian rule in 1987 he remained army chief. He was elected and reelected president, by Suriname’s parliament, in 2010 and 2015. He is seeking reelection this year. As president he declared the anniversary of the coup to be a&nbsp;national holiday.</p> <p>Accused of murdering 15 democracy activists two years after taking power, he was convicted of the crime in November and sentenced to 20&nbsp;years in prison. One witness described him as “calm and cold‐​blooded.” However, his supporters view the prosecution as political; some blame the Netherlands. Most important, while president he is immune from arrest—which may be one reason why at age 74 he is seeking reelection.</p> <p>He faces other disturbing charges. He is suspected of, but was never prosecuted for, ordering the murder more than 40 people during a&nbsp;civil war started by his former bodyguard and fellow Maroons, descended from Africans brought to the Americas originally as slaves. Despite international pressure, no one ever was prosecuted for that crime. In 2000 Bourtese was convicted in absentia in the Netherlands for drug trafficking. The European Union’s law enforcement agency, Europol, maintains an arrest warrant for him. Wikileaks cables indicated that he was involved in the drug trade through 2006. There also is evidence of his connection to Colombia’s Communist FARC guerrillas, reportedly trading weapons for cocaine. He pardoned a&nbsp;second son after the latter’s conviction for murder and robbery (and an unsuccessful attempt to rob the Dutch ambassador’s residence).</p> <p>How Bourtese will use the impending financial bounty is an open question. However, few imagine that it will be for the good of his people. Even if the money makes it into the government treasury, the enhanced cash flow will tempt Bourtese to spend wildly to win reelection, a&nbsp;common enough reaction in electoral democracies around the world. The revenue also likely will encourage borrowing: Paramaribo’s current international debt is about $2.4 billion, a&nbsp;pittance for Washington but about 71 percent of Suriname’s GDP.</p> <p>And the government has few good influences. Relations with the Netherlands are fraught, since that government prosecuted him and cut aid transfers. He couldn’t travel elsewhere in Europe even if he wanted to, given the Europol warrant. The U.S. is a&nbsp;major trading partner and provides assistance for various purposes, including drug interdiction and law enforcement. However, the relationship seems correct rather than enthusiastic: The State Department says the two governments “enjoy a&nbsp;constructive partnership.”</p> <p>Moreover, the People’s Republic of China’s role in Suriname has been increasing. During a&nbsp;state visit to Beijing in November Bourtese’s hosts agreed to $300 million in loans for 14 projects, on top of roughly $500 million of existing debt. That puts the country among the PRC’s top ten debtors on a&nbsp;percentage basis. Beijing’s role as banker could grow. China likely will be interested in gaining increased access to Suriname’s natural resources and has the wherewithal to help fund their development.</p> <p>Another reason Bourtese may prefer dealing with the PRC is the latter’s disinterest in embarrassing human rights issues. They matter a&nbsp;lot to Europe, not much to the Trump administration, and not at all to Beijing. At the very least, the possibility of going to China will constrain the Netherlands and other EU members as well as Washington from asking for too much in any dealings, no matter how the oil field is developed and resulting revenues are spent.</p> <p>Still, even though that nation’s new energy potential seems to implicate almost all of today’s big issues, Suriname matters little in international affairs. Who will be the principal beneficiary of nature’s newly discovered bounty? It may take years to discover the answer.</p> </div> Wed, 22 Jan 2020 08:52:13 -0500 Doug Bandow Johan Norberg discusses the truth about the scarcity of resources on Free to Choose Media’s Dead Wrong Tue, 21 Jan 2020 10:37:11 -0500 Johan Norberg Taxpayers Eat Another Solar Energy Flop David Boaz <p>Looks like another federally backed solar energy plant has gone bust. Bloomberg News <a href="">reports</a>, “A $1 Billion Solar Plant Was Obsolete Before It Ever Went Online.”</p> <blockquote><p>In 2011 the $1 billion [Crescent Dunes] project was to be the biggest solar plant of its kind, and it looked like the future of renewable power. <a href="">Citigroup Inc.</a> and other financiers invested $140 million with its developer, <a href="">SolarReserve Inc.</a> Steven Chu, the U.S. Department of Energy secretary at the time, offered the company [$737 million in] government loan guarantees, and Harry Reid, then the Senate majority leader and senior senator from Nevada, cleared the way for the company to build on public land.</p> </blockquote> <p>The state of Nevada <a href="">chipped in</a> another $119.3 million tax abatements over 20&nbsp;years. But, Chris Martin and Nic Querolo write at Bloomberg,</p> <blockquote><p>By the time the plant opened in 2015, the increased efficiency of cheap solar panels had already surpassed its technology, and today it’s obsolete—the latest panels can pump out power at a&nbsp;fraction of the cost for decades with just an occasional hosing‐​down.…</p> <p>The plant’s technology was designed to generate enough power night and day to supply a&nbsp;city the size of nearby Sparks, Nev. (population 100,000), but it never came close. Its power cost NV about $135 per megawatt‐​hour, compared with less than $30 per MWh today at a&nbsp;new Nevada photovoltaic solar farm, according to BloombergNEF, which researches fossil fuel alternatives.</p> </blockquote> <p>It all reminds me of another giant taxpayer‐​funded failure of the Obama administration’s green‐​energy enthusiasm, Solyndra. Visiting the Solyndra solar‐​panel factory in Fremont, California, in May 2010, President Obama declared, “The true engine of economic growth will always be companies like Solyndra.” But despite $535 million in federal loan guarantees, <a href="">Solyndra declared bankruptcy</a> 16 months later.</p> <p>Plenty of people in and around the Obama administration genuinely believed that fossil fuels were dangerous and unsustainable. But as I&nbsp;<a href="">wrote</a> in 2018&nbsp;in American Consequences magazine,</p> <blockquote><p><span>when governments pick winners, politics usually rears its ugly head. Official investigations and reporters dug into the story and found that, as the <em>Washington Post</em> <a href=""><span>reported</span></a>, “Obama’s green‐​technology program was <a href=""><span>infused with politics</span></a> at every level… Political considerations were raised repeatedly by company investors, Department of Energy bureaucrats and White House officials.”</span></p> <p><span><span><span><span><span><span><span><span><span>The family funds of Oklahoma billionaire George Kaiser, a&nbsp;big Obama fundraiser, owned a&nbsp;third of Solyndra. As the company was failing, Kaiser wrote to a&nbsp;Solyndra board member, “Why don’t you pursue your contacts with the WH?” Two months later the board member wrote Kaiser, “The DOE really thinks politically before it thinks economically.” Solyndra’s lobbyists met at least three times with an aide to top White House official Valerie Jarrett.</span></span></span></span></span></span></span></span></span></p> </blockquote> <p><span><span><span><span><span><span><span><span><span>Government subsidies can bring any business into existence. But apparently even subsidies can’t ensure the production of something useful.</span></span></span></span></span></span></span></span></span></p> Tue, 21 Jan 2020 09:31:06 -0500 David Boaz