Monthly Archives: January 2017

Fraud-Free Voting Fallacy

26 Thursday Jan 2017

Posted by in Democracy, Voter Fraud

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I posted the following on December 1, 2016. It seems timely today. The bottom line: voter fraud is very unlikely to have swung the popular vote in favor of Hillary Clinton, but it is all too common.

Democrats have long asserted that voter fraud is rare. Recently, we heard from them that questioning the results of an election would “undermine democracy”. In fact, voter fraud is routinely characterized by the left as “fake news“, and even worse, as a racist narrative! How convenient. But in the wake of the Donald Trump victory, we’ve been hearing about electronic voter fraud from the same crowd that’s been imagining Ruskiis under their beds for months (to steal a phrase from Glenn Reynolds). Fear not: voting machines are not connected to the internet!

This week, however, Donald Trump stirred the pot once again by tweeting that he would have won the popular vote if not for the “millions” of illegal votes for Hillary Clinton. Hilarity ensued, and not only on the left. All the pundits say that Trump has no data to support his claim. He probably never looked for it, and he probably doesn’t care. As Ed Driscoll notes at Instapundit, perhaps “stray voltage” is simply part of his plan.

Trump’s claim really does sound outrageous, but a review of the recent history of actual and potential election fraud shows that it might not be as radically far-fetched as we’ve been told. DiscovertheNetworks.org (DTN) provides a three-part compilation of voter fraud research and cases spanning the last 30 years. Pertinent detail on each case or finding is provided, and each item is sourced. The cases span the country and include fraudulent voter registration efforts, dead and ineligible voters (including pets) on the rolls, multiple registrations across jurisdictions, homeless voters casting multiple votes, fraudulent absentee ballots, vote buying, voter impersonation, and failure to provide absentee ballots to deployed military personnel. ACORN, by the way, is well-represented on the list.

Many of the cases on DTN’s list involve anywhere from a handful of fraudulent votes to several hundred. Of course, it’s likely that only a small percentage of fraudulent votes are ever detected. But there are cases on the list of fraudulent registrations numbering in the thousands, and counts of ineligible voters appearing on voter rolls numbering in the hundreds of thousands and even millions.

One of the studies cited by DTN was commissioned by The Pew Center on the States, published in 2012. It found that there were 24 million invalid or “significantly inaccurate” voter registrations in the U.S. And just before every election, said the report, election officials are inundated with a flood of new and often questionable registrations.

Another study cited by DTN appeared in the journal Electoral Studies in 2014. It said “… based upon extrapolations from the portion of the sample with a verified vote … 6.4 percent of non-citizens voted in 2008 ….” The authors admit that there are reasons to think 6.4% is an under-estimate. That’s especially true given the focus on immigration policy in this year’s presidential campaign. But if that percentage was repeated in this year’s election, and given 24 million non-citizen residents in the U.S. (legal and illegal), then roughly 1.4 million non-citizen votes would be included to the 2016 popular vote total. The researchers acknowledge that this group tends to vote heavily for democrats. The overlap between these votes and those arising from the other kinds of voter fraud by Pew is certainly not complete, so the fraudulent vote total is likely to be well north of 1.4 million.

The electoral college was designed to discourage voter fraud in states dominated by a single party. Vote margins beyond a simple majority provide no incremental reward in the electoral college, the reasoning goes. That doesn’t mean election fraud doesn’t occur in those states or that it isn’t motivated in part by presidential politics. Moreover, state and local races can still be contested in so-called “one-party” states and may be subject to manipulative efforts. In such cases, presidential votes might well ride on the coattails of candidates for state and local offices.

The recent tide of republican success in congressional races and at the state level does not suggest that election fraud is benefitting democrats in more highly contested states. Perhaps it goes the other way or is roughly balanced between the parties in those states. But most people who believe Trump’s tweet would probably say that fraud must be concentrated in heavily “blue” states like California and New York. If so, it would be unbalanced fraud.

The magnitude of voter fraud in the presidential election is plausibly in the range of 1 – 2 million and it could be even higher based on the research and other information cited above. That total, however, is split between the parties. For the sake of argument, if 2 million fraudulent ballots are cast and republicans garner 30%, or 600,000 fraudulent votes, then the contribution to the democrat vote margin is just 800,000 (1,400,000 – 600,000). Hillary Clinton’s popular vote margin was 2.9 million (less than the margin in California alone). Given that total, Trump’s claim is a real stretch, but his “guess” at the number of fraudulent votes is probably well within an order of magnitude. That might be surprising to some detractors.

What should be obvious is that voter fraud is a major problem in the U.S., and it undoubtedly swings some races at state and local levels. I have been lukewarm with respect to voter ID laws, but I am persuaded that they are a necessary step in the quest for electoral integrity. (Whether IDs must be government-issued is a separate matter.) The argument that these laws are discriminatory is true to the extent that we wish to prevent ineligible individuals from voting. That’s a good thing. The argument that it is racist is sheer stupidity: citizenship should bring privileges. That is not a position on immigration policy. Voter ID laws place a simple burden on citizens to prove that they are legitimately entitled to full participation in the democratic process. If you can’t be troubled to identify yourself, you should expect multiple obstacles to sharing in the fruits of modern society.

Postscript: I just ran across this post, which makes some of the same points I’ve discussed above, but it says that there are roughly 20 million adult non-citizens in the U.S. today.

Now, What About Trump?

25 Wednesday Jan 2017

Posted by in Trump Administration

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This guy I voted for… Hoo boy! I’m tellin’ ya’, this guy’s a real beaut! But now, it’s time for me to make an accounting of the good and the bad I see in a Donald Trump presidency. I’ll cover a number of policy areas and how well I think, at this point, the Trump Administration will match my preferences, which are generally libertarian. In posting this list, I’m reminded of a wonderful quote of the late guitarist Jerry Garcia on his ideas for a new project: “I’m shopping around for something to do that no one will like.” I certainly don’t expect many to agree with the entirety of my “scorecard”, but here it is. But before getting to it, a few preliminaries:

First, I’ve had mixed feelings about Trump since he first announced that he’d seek the republican nomination. A basic concern was the difficulty of knowing his real philosophy about the role of government and fundamental constitutional rights. Trump has a history of contradictory positions on big issues like taxes, health care, and gun rights. It was a gamble to count on him to follow any particular idealogical course, and some of it remains unclear even now. My misgivings about Trump’s inclinations as a whirligig were discussed on Sacred Cow Chips in “Trump Flaunts Shape-Shifting Powers” in 2015. Uncertainty still colors my views, though his cabinet picks and other alliances have served to clarify the direction of policy. My discussion below reflects this uncertainty. Also, Trump shows every intention of moving fast on a number of fronts, so I hope the relevance of this post isn’t too perishable.

Second, it’s worth noting that Trump’s policy statements and predilection to “keep-’em-guessing” are probably a by-product of his instincts as a negotiator. His bellicosity may be something of a ploy to negotiate more favorable compromises in international affairs, trade and domestic issues. Still, I can’t know that. Should I evaluate all those statements at face value as policy positions? I have to make some allowance for the reasonability of a bargaining position, but I’ll try to be consistent in my approach.

Third, revelations during the campaign of Trump’s past remarks about women, and some in-campaign remarks like his attack on Megyn Kelly, were highly offensive. I’ve heard plenty of “locker-room talk” over my years, but some of Trump’s statements were made well outside the locker room and well beyond the age at which “youthful indiscretion” could be taken as a mitigating factor. Trump has plenty of female defenders, however, and he has a record of placing women in key roles within the Trump organization and for paying them well. While I do not condone the remarks, and I doubt that complete reform is possible, he cannot change his history and he is now the president. Evaluating his policy positions is now an entirely separate matter. I only hope the exposure has taught him to be more respectful.

Finally, I do not buy the narrative that Trump is a racist. This “Crying Wolf” essay on Scott Alexander’s Slate Star Codex blog demonstrates that Trump’s rhetoric and behavior during his campaign was not racist when viewed in the broader context of his record of denigrating anyone who opposes him. He seems to be an equal opportunity offender! In fact, Trump made strong attempts to appeal to minority voters and succeeded to some extent. His positions on border security and immigration were boisterous, but they were not truly about race or ethnicity. Instead, they were rooted in concerns about illegal immigration and public safety. Efforts by the left to characterize those points as de facto evidence of racism are simply not credible. Nor are claims that he practiced racial discrimination at his apartment buildings early in his career. Today, I would call those cases garden-variety disparate impact actions, as when a business is challenged on the use of screening criteria that might be correlated with race, such as credit rating. A legitimate business purpose is generally a valid defense, though Trump did agree to settle out of court.

So what about Trump from a policy perspective? Here is what I expect of his administration thus far:

I’m Pretty Sure of the Following, Which I Rate As Bad

Trump is a protectionist. He is extremely ignorant of trade principles and favors import duties to punish those who wish to purchase goods from abroad. This would raise both domestic and import prices and directly harm employment in import-dependent industries. It would also discourage innovation by domestic producers, who would face less competition. I cover these protectionist tendencies here as an unqualified negative, but I have a more mixed view on his opposition to certain government-negotiated trade agreements (e.g., the Trans-Pacific Partnership ), which are covered below.

Trump is likely to be a drug warrior. He could do much to restore order in inner cities by ending the drug war, but he will not. He will thereby encourage activity in the black market for drugs, which produces both violence and more dangerous varieties of drugs. He might well interfere with the rights of states to determine their own policies toward relatively benign substances like marijuana, including medical marijuana, by choosing to enforce destructive federal drug laws. The possible appointment of marijuana legalization advocate Jim O’Neil to head the FDA looks decreasingly likely. That might be a game changer, but I doubt it will happen.

Big public infrastructure outlays. This is distinct from private infrastructure, to be discussed below. The latter is motivated by private willingness-to-pay. Rushing into a large public construction program with questionable economic justification will bring waste, and it will probably be sold as an economic stimulus package, which is unnecessary and dangerous at a time when the economy is finally operating near capacity. The decrepitude of American infrastructure is greatly exaggerated by those with a private interest in such projects, and the media eats it up. The breathless promotion of massive but noneconomic projects like high-speed rail is also greeted with enthusiasm by the media. And politicians love to boast to constituents of their efforts to secure federal funds for big local projects. We also know that Trump wants to build a massive border wall, but I’m convinced that border security could be achieved at lower cost by leveraging surveillance technology and other, less costly barriers.

Deficits: Increased defense outlays, a big infrastructure package, a “great” wall, tax credits and lower tax rates will almost certainly add up to ballooning federal deficits in the years ahead. That fiscal combination will be unsustainable if accompanied by higher interest rates and could very well have inflationary consequences.

Trump favors public and private eminent domain and believes it should be treated as a hallowed institution. He truly thinks that a “higher-valued use” is a superior claim to existing ownership of property. This is perverse. I have trouble accepting eminent domain action even for a public purpose, let alone a private purpose; it should only be motivated by the most compelling public interest, as a last resort, and with handsome compensation to the existing property owner. We can only hope that Trump’s public and private infrastructure programs do not lead to many takings of this kind.

Industrial policy. This is the essence of government central planning, picking winners and losers by granting tax and loan subsidies, lenient reviews, and other advantages. The most obvious example of Trump’s amenability to industrial policy is his penchant for trade protectionism, but I fear it will go much deeper. For some reason, Trump believes that manufacturing activity creates private and public benefits far beyond its market value. Moreover, manufacturers require far fewer workers now than they did in his youth, so the sector is not the job engine it once was. His appointee for Commerce Secretary is Wilbur Ross, an investor with a history of trading on prospects for government assistance. This article provides disturbing background on Ross, along with this quote: “We ought, as a country, to decide which industries are we going to really promote — the so-called industries of the future.” Trump’s plan to meet regularly with leaders of giant corporations is a sure sign that corporatism will be alive and well for at least the next four years… as long as they tow The Donald’s line.

Restricting Legal Immigration. I’m all for securing the border, but legal immigration is a major driver of economic growth. Many industries rely on a flow of skilled and unskilled workers from abroad, a need that will be more intense given Trump’s plan to tax outsourcing. Moreover, the country will face a low ratio of workers to retirees over the next few decades; short of massive entitlement reform, immigration is perhaps the only real chance of meeting public obligations to retirees.

Endangered Privacy Rights: As a “law and order” guy, Donald Trump might not be a reliable defender of the privacy protections enshrined in the Fourth Amendment. He has expressed a willingness to repeal the USA Freedom Act, which restricts the bulk collection of metadata and provides other privacy protections. Trump also has expressed an interest in forcing technology companies to enable “back doors” into the devices and programs they sell to the public. I’m concerned that we’ll see the creation of security databases with an excessively broad scope. As a likely drug warrior, Trump will support the sort of privacy violations in law enforcement that have become all too common.

I’m Pretty Sure of the Following, Which I Rate As Good

He’s not Hillary Clinton, and he is not a statist in the mold of Clinton and Barack Obama, though he does embody some statist tendencies as described above.  I thought I would vote for Gary Johnson, but he made crucial mistakes, such as choosing Bill Weld as his running mate and fumbling at attempts to explain libertarian philosophy. At some point, my distaste for Clinton’s criminality and her advocacy of big government in so many aspects of life convinced me she had to be defeated, and that Trump was the only real possibility. But whether he can actually reduce the resources that the federal government absorbs is hard to say, as he has his own spending priorities.

Trump favors deregulation generally, as it places an enormous burden on society’s ability to improve well being. This covers aspects of the Affordable Care Act and reducing the role of the federal government in education. He opposes the costly Paris Climate Accord and other intrusive federal environmental measures, such as wetlands regulation.

Obamacare repeal and replacement with market-oriented delivery of health care, insurance with broad choices, and equalized tax treatment across the employer and individual market segments via refundable tax credits. There is a chance that Trump’s preferred alternative will assign excessive responsibility to the federal government rather than markets, but I’m optimistic on this point.

Entitlement reform is a possibility. Social Security and Medicare are insolvent. Ideas about how future retirees might take advantage of market opportunities should be explored. This includes private retirement accounts with choices of investment direction and greater emphasis on alternatives like Medicare Advantage.

Tax reform of some kind is on Trump’s agenda. This is likely to involve lower corporate and individual tax rates and some tax simplification. It is likely to stimulate economic growth from both the demand and the supply sides. In the short-run, traditional demand-side macroeconomic analysis would suggest that upward price pressures could arise. However, by encouraging saving and investment, the economy’s production capacity would increase, mitigating price pressure in the longer run.

Trump favors border security. No mystery here. My enthusiasm for this is not based on a physical wall at the border. That might come and it might be very costly. I favor a liberalized but controlled flow of immigration and vetting of all immigrants. The recent order of a temporary hold on refugees from a short list of countries will be of concern if it is not short-lived, and it remains to be seen what “extreme vetting” will entail. Nevertheless, I support enhanced integrity of our borders and our right as a nation to be cautious about who enters.

Education reform and school choice. Increased spending on public education, especially at the federal level, has made no contribution to educational productivity, and the country is burdened with too many failing schools.

Encouraging private infrastructure. This relies on private incentives to build and finance  infrastructure based on users’ willingness to pay, thereby avoiding stress on public funding capacity.

Deregulating energy: This includes encouraging zero-carbon nuclear power, deregulation of fossil fuels, and lower energy costs.

Deregulating financial institutions. Repeal of the burdensome Dodd-Frank Act, which has imposed costs on both banks and consumers with little promise of a benefit in terms of financial stability.

Unabashed support for Israel. I strongly favor repairing our damaged ties with Israel and the proposed move of our embassy to West Jerusalem, which has been a part of Israel proper since its founding. Israel is the only real democracy in the middle east and a strong ally in an extremely dangerous part of the globe.

Trump supports Second Amendment rights. This is fundamental. Private gun ownership is the single-best line of self-defense, especially for those with the misfortune to live in areas rife with black market drug activity.

States’ rights and federalism. On a range of issues, Trump seems amenable to transferring more responsibility to states, rather than asserting federal supremacy on issues that are unsettled from region-to-region.

Ending federal funding for abortion. Tax dollars should not be used for a purpose that is morally abhorrent to a large segment of the population. This is not the same as the “right” to abort a child, as settled by Roe vs. Wade.

Putting the screws to the UN. This organization is not aligned with U.S. interests, yet the U.S. foots a large part of the bill for its activities. Sharp reductions in funding would be a powerful message.

Reduced federal funding for the arts. I’ve never been comfortable with allowing the federal government to disburse funds in support of the arts. Lower levels of government are less objectionable, where there is greater accountability to local voters. Dependence on federal purse strings creates a powerful line of influence that usurps authority and may conflict with the desires of local taxpayers. Individuals pay for art voluntarily if they find it of value, and people give privately to support the arts for the same reason. Federal taxpayers certainly have other valued uses for the funds. Art is not a “public good” in a strict sense, and its external benefits, to the extent they exist, do not justify a federal role.

Reversing the FCC’s net neutrality rules. Trump has appointed Ajit Pai as the new chairman of the FCC. Pai is no fan of net neutrality, a policy that rewards heavy users of network capacity and is likely to discourage the growth of network infrastructure.

I’m Not Sure How To Rate the Following

Foreign policy reset. I welcome several likely foreign policy initiatives from the Trump Administration, such as deemphasizing our role in the UN, restoring our relationship with Israel, and taking a harder line on nuclear development by Iran. I also favor greater scrutiny of outlays for foreign aid, much of which is subject to graft by recipient governments. However, I would not welcome a continuation of foreign policy designed around U.S. strategic interests that are, in fact, private investments.

Defense build-up. Our armed forces have suffered a decline in their ability to defend the country during the Obama years. I favor some restoration of the defense budget, but I am concerned that Trump will go on a defense binge. I’m also concerned about how aggressively he’ll wish to project American power overseas. Let’s not go to war!

Upending Trade Partnerships. I am a free-trader, and I abhor Trump’s belligerent talk about erecting trade barriers. So how could I be “unsure” about anything that promotes trade? Formal trade partnerships between nations are an aggravation to me because governments don’t trade… people do! And they do because they reap unambiguous benefits from trade. I’d much rather the U.S. simply eliminated all trade barriers unilaterally than get entangled in complicated trade agreements. These agreements are rats nests. They stipulate all sorts of conditions that are not trade related, such as environmental rules and labor policy. I therefore view them as a compromise to sovereignty and a potential impediment to economic growth. To the extent that trade agreements can be renegotiated in our favor, I should not complain. And to the extent that we’ll never see a government allow completely free and open trade, I should probably hope for agreements that at least reduce trade barriers.

The Keystone pipeline. I am happy with Trump’s decision to approve completion of the pipeline on its merits for energy delivery, and also because it is environmentally less risky than rail, barge and container ships. And yes, it is private infrastructure. But I am unhappy about the heavy application of eminent domain against landowners in the path of the pipeline. The Standing Rock Sioux tribe’s opposition is suspect because the path does not cross its tribal land, and the tribe originally gave its consent to the project. The tribe’s recent position could be an effort to extract rents from the process.

Executive authority. I am somewhat wary of Trump’s aggressiveness thus far. He seems eager to take actions that are questionable under existing law, such as seizing wire-transfer remittances by undocumented immigrants. Granted, he is busy “undoing” some of Obama’s actions, but let’s hope he doesn’t get carried away.

Summary

What we have here is a very mixed bag of policies. On the whole, I’m still pleased that Trump was elected. I believe he favors a smaller role for government in most affairs. But while the balance of considerations listed above seems to be in Trump’s favor, the negatives have the potential to be disastrous. He certainly wants to spend. My biggest fears, however, are that Trump will not respect the Constitution, that he will govern as a cronyist, and that he will succumb to the notion that he can actively manage the economy like a casino build.

Toodle-oo, President Cool Fool

20 Friday Jan 2017

Posted by in Government

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The durability of Barack Obama’s achievements as President of the United States will go down in history as … an oxymoron. He will likely be remembered more for his failures in social, economic, foreign policy and political leadership. Obama has himself to blame for the lack of a durable legacy. From the beginning of his administration, Obama’s mentality with respect to policymaking was always “my way or the highway” (“The election’s over, and I won”), and his consequent failure to achieve legislative victories during his last six years in office was always Congress’ fault. He would share no blame. But it was cool, ’cause Obama had “a pen and a phone” and was willing to act by executive fiat to affect changes he desired. His hope, I suppose, was that his regulatory diktats would become so ingrained in our way of life that rescinding them would be political suicide, much like some of the programs of the New Deal and the Great Society. Well, that backfired! Most of Obama’s executive actions can be undone by executive or legislative action, and while it won’t be costless, it will happen.

The fact of the matter is that Obama’s policies were not productive and not popular. Not only did they contribute to the election of Donald Trump, but they helped fuel the massive losses suffered by Democrats in state houses and governorships over the past eight years. But Obama was always right as rain.

The Planner’s Conceit: A big believer in the power and goodness of government, Obama attempted to usher in a great wave of new regulation and social planning. Here is David Harsanyi in Reason:

“The president’s central case for government’s existence rests on the notion of the state being society’s moral center, engine of prosperity and arbiter of fairness. Obama speaks of government as a theocrat might speak of church, and his fans return the favor by treating him like a pope.“

Obama is a man who lacks any understanding of the causes of prosperity: personal and economic freedoms, individual initiative, and healthy private markets. Jeffrey Tucker makes this point eloquently in “Why Obama Failed“:

“Despite his vast knowledge on seemingly everything, and endless amounts of charm to sell himself to the public, he missed the one crucial thing. He never understood wealth is not a given; it must be created through enterprise and innovation, trade and experimentation, by real people who need the freedom to try, unencumbered by a regulatory and confiscatory state. This doesn’t happen just because there is a nice and popular guy in the White House. It happens because the institutions are right.“

Obama’s results underscore his ignorance regarding the fundamental drivers of material well-being: economic growth during the post-recession years has been very sluggish, and while the unemployment rate has declined, it is not as impressive as it might appear: many workers have been forced into part-time jobs, and the decline in the jobless rate was exaggerated with declines in labor force participation to levels not seen since the late 1970s. Perhaps not coincidentally, the number of workers claiming Social Security disability benefits happened to soar as employment prospects remained grim. Slow growth in the economy and budget sequestration (an action Obama blames on republicans despite having proposed it himself as a cudgel) have reduced the annual budget deficit, but the nation’s outstanding debt under Obama has increased by $10 trillion, doubling the total outstanding over his eight years. Future annual deficits are projected to soar under his policies, according to the Congressional Budget Office.

Two factors that would contribute to ballooning deficits, if allowed to stand, are the Paris Climate Accord, signed by Obama without the Senate’s consent, and Obamacare. The climate treaty would do little to change global temperatures, but would impose heavy costs on the U.S. in terms of subsidies for foreign energy projects, regulatory burdens, and energy bills.

Failing Health Care: The future budget impact of the Paris Accord could be minor compared to Obama’s greatest source of pride: the Affordable Care Act (ACA), a.k.a. Obamacare. Recent scare stories have softened public opinion regarding the ACA, but so unpopular was this “landmark” legislation that Donald Trump was elected in part because he promised, along with congressional republicans (who played no part in its passage) to “repeal and replace” the law. The failures of the ACA were covered in my last post, “Death By Obamacare“.

Foreign FUBARs: The foreign policy foibles of the Obama Administration are legend. From Benghazi to the Syrian “red line”, from the botched deal on nuclear weapons development by Iran to the weak stand on Russian expansionism, American foreign policy has never been such an embarrassment. Obama, the recipient of a dubious Nobel Peace Prize, has been an avid drone warrior, collateral damage be damned. Our continued involvement in Afghanistan and the reentry of U.S. forces into Iraq must be sorely disappointing to the anti-war constituency Obama once courted. He has alienated our longstanding allies and cooed in the ears of avowed enemies. His grants of clemency in recent days to the likes of the treasonous Chelsea Manning and terrorists like Oscar Lopez Rivera are symbolic of the contempt in which he holds the lives lost at their hands. Our weakness abroad has led to a loss of respect for the U.S., signaled vividly by our exclusion from peace talks in Syria. Recent events have increased public awareness of our vulnerability to cyber-attack from foreign enemies, but Obama has failed to provide leadership on the issue.

Scandalous: Obama’s tenure as president has been marked by a number of scandals, contrary to what his admirers would have us believe. The Fast and Furious operation by ATF agents put guns in the hands of criminals and drug cartels, resulting in the death of a border control agent, but the Obama Justice Department sought to obstruct an investigation. The massacre at the U.S. consulate in Benghazi, Libya led to the death of four Americans, including Ambassador Chris Stephens. The White House and State Department sought to create a misleading story line, claiming an anti-Muslim video was responsible for a protest gone-wrong, when in fact they were well aware that it was a planned terrorist action. A deeper question is whether Stephens was in Benghazi attempting to arrange arms sales to “Syrian rebels”. Then there are the attempts by the IRS to target opposition to Obama, and conservative groups generally, and an apparent effort to conceal that activity, as well as cases in which it appeared that the administration was targeting members of the press whom they considered unfriendly. There were a number of other scandals and events such as the Solyndra subsidies, which suggested high corruption and cronyism. Here is an excellent discussion of a variety of dubious antics by the Obama Administration, and the shady efforts to keep them quiet.

Racial Muckraking: Ironically, Obama’s greatest failing might well have been the racial discord that boiled up during his two terms. As the first African-American president of the U.S., there was a considerable expectation that his legacy would be one of racial healing. Instead, it was as if he deliberately sought to encourage discord. Here is Joel Kotkin’s description of the president’s missteps on race relations:

“Whenever race-related issues came up — notably in the area of law enforcement — Obama and his Justice Department have tended to embrace the narrative that America remains hopelessly racist. As a result, he seemed to embrace groups like Black Lives Matter and, wherever possible, blame law enforcement, even as crime was soaring in many cities, particularly those with beleaguered African American communities.

Eight years after his election, more Americans now consider race relations to be getting worse, and we are more ethnically divided than in any time in recent history. As has been the case for several decades, African Americans’ economic equality has continued to slip, and is lower now than it was when Obama came into office in 2009, according to a 2016 Urban League study.“

The Liar: Obama is an unrepentant liar. Even the Washington Post felt it necessary to catalog some of the Obama lies that made it into their headlines (through many did not). There was the infamous Benghazi deception; the “Like Your Plan, Keep Your Plan” fib; he quoted enrollment numbers on the Obamacare exchanges that were greatly exaggerated; he publicly denied that domestic surveillance was a reality; he claimed that he was not responsible for our withdrawal from Iraq… what? There were efforts to cover and dissemble regarding details of all the scandals referenced above. By now, Obama’s insistence that his would be the “most transparent administration in history” is rather humorous. Most of Obama’s lies were motivated by ideology, and that might make it worse in my book. What’s particularly galling is the lie that Obama has any respect for the Constitution. He has attempted to subvert it with regularity.

I, Barack Obama: Another common trait among politicians is narcissism, but few are as obvious about it as Barack Obama. He has a habit of self-referencing that may be unequaled in political oratory. In fact, last July at the Democratic National Convention, he mentioned himself 119 times in a speech about Hillary Clinton. He is always eager to invoke his personal story as a possible source of inspiration for others. He is seemingly preoccupied with his legacy, going out his way to issue additional executive orders in the waning days of his term, and giving a “final” address in which he glorified his accomplishments. And then there was a final-final press conference at which he did the same. He has always encouraged the perception that Barack Obama is the “smartest guy in the room”. Of course, he is never wrong, and everything is cool. Obama seems to believe that he can make reality conform to his every assertion –oh yeah, I already talked about lies!

Did Obama’s narcissism contribute to his failed presidency? It’s plausible because he invested too much in his own ability to teach, influence others,  and control events. Collaboration with important stakeholders was unnecessary, and indeed, it was often better to demonize anyone who stood in the way of the world according to Barack. That world was a sad self-delusion.

Death By Obamacare

18 Wednesday Jan 2017

Posted by in Health Care

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People will die if we don’t repeal and replace Obamacare! That right, and I’ll tell you why: First, the “Affordable” Care Act (ACA) creates terrible incentives for physicians. Among other provisions, it has chopped reimbursement rates on Medicare and Medicaid. As a result, physicians are declining patients under those plans, exposing the “access” myth under Obamacare as one of several cruel deceptions. Second, “physician feedback” reports and hospital “performance scores” reward providers who avoid the sickest and neediest patients. Third, provisions of the ACA encourage the monopolization of health care delivery and consequently inflate costs. That makes it less likely that needy individuals will insure or seek care, especially given the high deductibles they face. And greater market concentration in health care delivery often means patients have nowhere to go when they are denied care. Fourth, Obamacare has increased the regulatory burden on providers, which invariably reduces the quality of care. Other ACA regulatory burdens placed on employers have forced them to reduce employees’ hours and new hiring in order to control costs. This has limited the number insured under employer plans, leaving them to grapple with the exchanges, or on government plans from which physicians feel stiffed, or to be uninsured. All of these developments lead to undesirable health care outcomes. And there is more.

The ACA Disaster

Obamacare was a complete sham and destined to fail from the start, but the law’s now certain demise is greeted with indignance by the economic illiterati of the left. There are many counts upon which the law has failed: almost 29 million remain uninsured; millions of others in the individual market lost the coverage and doctors they preferred; only a single insurance option is available on many exchanges; the individual mandate is widely-ignored; the exchanges are serving a sickly risk pool; insurance premia are skyrocketing; health care delivery has trended toward monopoly; low Medicaid reimbursement rates have reduced actual access to providers; negative employment effects have arisen as firms adjusted to the employer mandates; and the law has imposed stiff regulatory compliance costs on providers of health care. Obamacare is also a significant budget item, despite early claims to the contrary (also see here): according to the Congressional Budget Office (CBO), the law’s contribution to the federal budget deficit is expected to be almost $2 trillion over the next ten years. What a law! It’s many invasive tendrils are destroying the vitality of the health care and insurance sectors, and it must be eliminated.

There are better ways to achieve the goals originally put forward under the aegis of the ACA. Those who fear repeal either believe that the law will not be replaced, which is unlikely, or that the replacement plan will lead to the loss of health care coverage for a large number of individuals. My contention is that the ACA can be replaced with a plan that would correct its massive deficiencies without creating other death traps.

The single truthful claim that supporters of Obamacare can make is a reduction in the number of uninsured since its implementation, but the numbers reported are exaggerated. A typical quote is that 20 million have gained coverage, an estimate, but we’ll go with that. The link gives a rough but meaningful accounting. Most of the increase in the number of insured, about 13 million, came from expanded Medicaid enrollment. That could have been accomplished without the ACA, and most of those enrollees were already eligible for Medicaid before the ACA’s expansion in eligibility. Perhaps the law had some beneficial effects on the awareness of individuals who were previously eligible but unenrolled.

The quoted gains in the insured population also include several million who were forced off their previous coverage in the individual market by the ACA. These do not represent net increases in the insured population. There have also been gains among young adults who remained on their parents policies. And yes, there have been gains in coverage among those with pre-existing conditions, but this totals less than half a million even counting those already covered under state “high-risk pools”. Needless to say, outright repeal of the ACA without replacement would not lead to a 20 million increase in the uninsured population, as many have argued. With replacement, it is conceivable that losses in coverage could be zero or negative.

Replacement Bills

What are the likely features of an ACA replacement bill? There are as many as nine different proposals or bills introduced by republicans, including one from Rep. Tom Price, who has been nominated to serve as President-Elect Trump’s Secretary of Health and Human Services (HHS). Rep. Pete Sessions and Sen. Bill Cassidy have introduced a bill endorsed by economist John C. Goodman. Rep. Phil Roe introduced a bill just last week. Sen. Orin Hatch and Sen. Richard Burr have proposed health care legislation. House Speaker Paul Ryan has also proposed a plan that received muted praise from noted health-care expert Avik Roy. These plans have some commonalities. In broad strokes, the proposed legislative actions call for less regulation, greater choice in the design of health insurance policies, more patient-centered care, a shift to market orientation, efforts to equalize the tax treatment of insurance premia for employer and individually-sponsored plans, retention of the ACA’s continuance of family coverage for young adults, and tax credits to support universal availability of insurance coverage.

There are several ways in which an ACA replacement plan can reduce the cost of health care delivery and the cost of health care insurance. The low-hanging fruit, as it were, involves steps to reduce the regulatory burden on health care providers, eliminating the ACA’s Minimum Essential Coverage and Essential Heath Benefits requirements (and allowing wider choice of coverage types and levels), and allowing competition among insurers across state lines.

The reduction in costs and subsidies that can achieved by allowing simple catastrophic-only policies in both the individual and employer markets is obvious. These policies would have low premia and correspondingly high deductibles. Regular checkups and routine health maintenance would not be covered under such basic policies. Those benefits would be optional, along with others like mental health coverage, maternity and reproductive health. The basic policies would represent real insurance, not paid-in-advance services. It’s more difficult, however, to anticipate the magnitude of cost savings and efficiency gains from eliminating regulatory requirements, encouraging competition among providers, and legalizing interstate insurance competition. That means the total gain from “low-hanging fruit” is hard to quantify, but it is real. Here are comments by David Brooks in The New York Times on the promise of market-oriented reforms.

Several of the GOP plans seek to provide universal availability of health insurance coverage by allowing refundable tax credits on insurance costs combined with expanded availability of Health Savings Accounts (HSAs). These steps would help to equalize the tax benefits of health insurance across the employer and individual markets. This is a crucial step due to the historically damaging effects of employer-provided coverage, as noted by A. Barton Hinkle here. Several of the GOP plans would allow non-employers like church groups, fraternal and professional associations to offer coverage.

Here is Avik Roy on the handling of high-risk individuals under the Ryan plan:

“Obamacare-style guaranteed issue and community rating would be gone and replaced by high risk pools, guaranteed issue for continuously held coverage, and a default requirement that insurers had to price their plans for older enrollees no higher than 5 times how they price them for younger enrollees (a significant improvement from Obamacare’s stricter 3:1 ratio).“

Other proposals in some of the GOP plans involve reform of the FDA, more support for private Medicare plans, and a change in the federal portion of Medicaid funding to block grants to states (who actually manage the program). The latter will be the subject of a future post.

Opportunities and Minefields

The kinds of steps described above can lead to greater reductions in the number of uninsured, and at a lower cost, than Obamacare. However, many partisans are agitating to convince republicans that this is impossible. Here is Roy’s opinion (he refers to his 2014 book, Transcending Obamacare):

“… many would-be reformers have convinced themselves that no Republican replacement for Obamacare can cover as many Americans as Obamacare will. Put simply, this is flat-out wrong. As Transcending Obamacare showed, you absolutely can achieve universal coverage with less spending and less government intervention, because we spend way too much subsidizing health coverage for the wealthy, and because our government-driven employer-based health care system inflates wasteful spending across the board.“

John C. Goodman discusses four “minefields” that republicans should avoid, the first of which seems obvious:

  1. Don’t repeal and delay: All indications are that congressional republicans have avoided this minefield, and Trump has stated that he won’t accept anything short of “simultaneous” repeal and replace.
  2. ACA revenue should not be “given away”: Goodman lists negotiated fee reductions from the AMA under the ACA, AARP’s agreement to Medicare cuts, and taxes on pharmaceutical companies, insurers, big labor and big business. Eliminating these sources of savings and tax revenue can be afforded only by reducing other costs. I’m dubious that the fee reductions and taxes haven’t had counterproductive effects, but point taken.
  3. Don’t impose a Cadillac tax: The Cadillac tax applies to expensive plans offered by employers. This point is an exception to #2 above, but Goodman says several GOP plans impose forms of Cadillac taxes despite widespread opposition.
  4. Don’t ignore employers: Here is Goodman on employers:

“Virtually all of the new government spending for private health insurance under Obamacare is going to what has become the most dysfunctional part of the healthcare system – the individual market. This is where premiums are spiraling and there is a race to the bottom on quality and access to care. Almost every Republican plan to replace Obamacare makes the same mistake. But why throw good money after bad?

Almost 30 million Americans are still uninsured (largely because the products in the Obamacare exchanges are so expensive and unattractive) and 85% of these live in a household with someone in the labor market. A tax credit that could be used by employers to help employees enroll in a group plan would give them access to lower premiums and better coverage.“

Goodman strongly endorses the replacement plan put forward by Rep. Pete Sessions and Sen. Bill Cassidy. It is the only GOP plan advanced thus far that avoids the four pitfalls identified by Goodman.

Markets Can Save Lives

My statement at the top of this piece might strike some as outrageous, but it is less outrageous than statements by Sen. Harry Reid and others that “people will die” if Obamacare is repealed. Of course, my assertion would be hard to defend unless conditioned on a replacement plan to improve access to quality care. But it is wrong to say that repeal will lead to incremental deaths without reference to a replacement plan. The claim that there is unlikely to be a replacement is disingenuous.

The usual defense of the ACA is grounded in the increased number of insureds it has achieved, combined with appeals to the expense of catastrophic health events. A weaker defense is the presumption that Obamacare codifies a “right” to health care. Even if we stipulate that such a right exists, there are better ways to accomplish the ends desired by the ACA’s proponents. The alternatives now under consideration are encouraging, as they are largely geared toward leveraging the efficiency of the market with less reliance on information-deficient government planners and rule-makers.

 

Read This Post a Little Later

11 Wednesday Jan 2017

Posted by in Blogging

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I love blogging, but invariably I find a few typos and readability issues when I publish a new post. It drives me crazy! I try to fix them as soon as possible, but it’s often difficult to get to it immediately. That was a problem last night. It was late when I posted and I had to hit the sack. This morning, to my horror, I found several such issues, and a number of readers had already clicked through from a link in social media.

Worse yet, when I pulled-up the edit screen, I was prompted to choose a “saved version of the file,” a pop-up prompt that I see occasionally. I was a little foggy then, and I’m a little foggy now as to the sequence of events, but somehow the media file I added last night at the top of the post  — the cartoon — was not in the “saved version”. I did not notice. That was unfortunate because I referenced the cartoon explicitly in the text. I made several edits and other additions, then unsuspectingly clicked “Update.” A friend emailed this afternoon to inform me that there was NO CARTOON in the post!

The missing cartoon was probably a consequence of editing drafts on both a laptop and a phone, depending on my location. I’ve long been aware of the potential this creates for version control problems, but I’m unlikely to end the practice. I just have to be more careful. Sure!

I always reread my posts multiple times before clicking “publish”, but it helps to get away from the draft for a while. One quirk I have is that it seems much easier to spot problems when a post is in the final format, as opposed to viewing it the editing screen in WordPress. There is a “Preview” option, which shows the post in the final format. For some reason, however, I seldom avail myself of that capability. I think it’s because I’m always too eager to get my posts out there, to be timely, yet so often I lament typos, mangled sentences, discontinuities, and omissions of pertinent thoughts that I’d intended to cover.

Occasionally, following one or two of these episodes, I have gone so far as to offer a veiled repentance on the link to a post in social media. Something like: “Fixed typos and improved readability”. I assume the readers will know I messed up, and I want them to know that I know it. I also have imagined giving my contacts a disclaimer at the time of initial posting: “You might want to wait a few hours before you read this, or check back in the morning…  I need a chance to review.” But of course I won’t ever do that. Except right now!

I must start using the preview option. I’ll start with this very post, tonight, but I will still review it in the morning and I’ll probably change something. Then I’ll hope there no typos within my new fixes! It happens. I’m not sure I can check my eagerness to post, so this post is a meta-repentance for my past and future blogging blemishes. So sorry! I’ll let this post serve as my umbrella disclaimer. I might not find every glitch, but I’ll try. If it’s within a day of the original posting, check back later for an improved experience.

Private Incentives and Infrastructure

10 Tuesday Jan 2017

Posted by in infrastructure, Markets

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Material infrastructure is fixed plant and equipment providing services considered basic to the functioning of society. That definition leaves plenty of room for interpretation, however. For example, it does not limit the meaning of “infrastructure” to facilities necessary for the provision of “public goods”, for which benefits are non-exclusive. And it encompasses facilities used by firms in certain competitive markets, such as some forms of telecommunication. The character of infrastructure tends to change over time, as new technologies lead to changes in our way of life (e.g., the cellular network). That’s even more evident when infrastructure is defined more broadly, as Walter Buhr does in “What Is Infrastructure?” His definition of material infrastructure encompasses all facilities enabling “the activation or mobilization of the economic agents’ potentialities.”

Infrastructure ≠ Government

There is a popular fallacy that infrastructure is the exclusive province of government. Infrastructure often does provide some public, non-exclusive benefits, but the willingness of users to pay is the key test of private benefits. As it happens, most infrastructure needs can be met privately and partly, if not fully, supported by user fees. That follows from the high degree of exclusivity of benefits yielded by the infrastructure. Today, privately-owned infrastructure includes communication networks, power generation and distribution, some water and sewer systems, toll roads, ports, and landfills. The presumed monopolistic nature of some infrastructural services probably encourages the notion that infrastructure must be public, but that view is largely unjustified: the services may be “monopolized” only to the extent that the relevant market is defined narrowly, such as road travel, rather than transportation. Indeed, certain kinds of infrastructure functions in markets that are fairly competitive (e.g., wireless networks).

The great thing about most private infrastructure is that owner-operators have an incentive to put it up and keep it up. So it kind of takes care of itself. I say “kind of” because there is always a degree of public involvement, from land use and environmental approval to construction permits, to licensing, to spectrum auctions, to rate regulation, and many other varieties of oversight. Aside from those considerations, if there is a need for infrastructure that is commercially-viable, the project is likely to be proposed by private interests. The funds necessary to pay for construction can be raised from private investors, rather than taxpayers. It’s not at all strange to say that private infrastructure is highly advantageous from a public finance perspective.

There are risks to private infrastructure developers, but those risks are too often borne publicly. A new facility, be it a water treatment plant or a road, might not prove to be profitable once a new revenue stream or reduction in operating costs is realized. Given those circumstances, private interests might seek additional incentives from public authorities to ensure profitbility. To the extent that the shortfall is due to an error in pricing administered by a public regulatory authority, it might be reasonable to make adjustments in the owner-operator’s favor. However, to the extent that demand falls short of the owner-operator’s expectations, it might be better to let the firm fail. That would allow the assets to be sold at a discount to a new operator who can make the cheaper investment profitable. No bailouts!

Trumpian Infrastructure Incentives

The coming Trump Administration is known to have certain steps in mind for encouraging infrastructure development. While the tax plan that has been discussed has a few questionable features, any policy that reduces corporate tax rates would increase the return to existing and prospective private infrastructure, and the profitability of private operation of public infrastructure. In addition, a proposal mentioned explicitly by Trump is a corporate tax credit for infrastructure development.

Here is where a more precise definition of infrastructure would be helpful. Would traditional categories of infrastructure investment by power, telecommunication, and water treatment companies qualify automatically? Moreover, the long timelines required in the planning and installation of most infrastructure might make it difficult to distinguish between new plans and those already in the works. Will the administration establish a bright line between infrastructure investment and run-of-the-mill corporate spending on new plant and equipment? Perhaps any form of corporate investment will qualify. These are questions that remain unanswered as we await Trump’s inauguration.

There is another public-finance dimension of the Trump infrastructure credit. Public infrastructure projects, such as roads, are frequently difficult for governments to fund because they face limits on the debt they can issue. This is emphasized by Randall O’Toole in a recent piece on the Trump credit. Instead of issuing its own debt, a government can take advantage of a large private road builder’s ability to raise funds in the capital market, agreeing to compensate the contractor over time. Thus, taxpayers will be obligated to pay-off the contractor’s debt. The term “Public-Private Partnership” has been invoked in this connection.

Private Incentives Or Central Planning?

I am never averse to reduced tax rates to the extent that taxation always distorts economic incentives. However, selective targeting of tax benefits at certain industries, specific forms of business organization (like corporations), or specific activities like capital investment is overt central planning. Overriding market incentives in this way is not desirable. (Neither are proposals to subsidize exporters and penalize importers. Tyler Cowen at the Marginal Revolution provides some salient quotes from Lawrence Summers on this point.) At this stage, Trump’s tax plan looks like central planning gone berserk.

Ideally, private investment and private infrastructure should be judged on its real merits, not on the prejudices of a central authority. To that end, I believe the Trump Administration’s intent to roll back regulatory distortions is commendable. A case in point is nuclear power generation. Despite the constant outcry against the burning of fossil fuels, there has been little emphasis on encouraging investment in new nuclear capacity. The lengthy approval process and costly regulatory requirements discourage this zero-carbon form of energy production relative to other forms of energy investment.

Users Are the Cost-Causers

I should note that O’Toole speaks favorably of “targeting” certain kinds of public infrastructure, but I think his point is that private operation of infrastructure, if not ownership, will allow markets to do the targeting more efficiently than government ever could. In particular, he notes that politicians tend to prefer new projects to the maintenance and repair of existing infrastructure, independent of the actual merit. Would relying on private operation and user fees encourage better maintenance?

“Unlike infrastructure paid for out of tax dollars, user-fee-funded projects tend to be well maintained because the agencies that manage them know they have to keep them in good shape to continue earning revenues.“

The cartoon above satirizes the consequences of providing free access to a costly facility. User fees encourage more rational patterns of use. For example, it is folly to think that projects like light rail can be financially viable when free alternatives exist. Specific highway routes under high demand must be priced in order for commuters to make rational decisions about the alternatives available to them, and for providers of transportation facilities, whether public or private, to rationally balance the resources dedicated to supporting various modes of travel.

Lower tax and regulatory burdens under the Trump infrastructure plan offer some encouragement for private development and operation of infrastructure projects. As a by-product, the plan might encourage greater reliance on user fees as a method of defraying the costs of infrastructure and promoting a more efficient allocation of resources toward infrastructure needs. However, there are unanswered questions about the details of the plan, and some of its heavy-handy features should be dispensed with.

Politicians and Infra-Hucksters

05 Thursday Jan 2017

Posted by in Government, infrastructure, Technology

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We’ll soon have a new president and already we’ve heard new promises of infrastructure investment. Once again, a chorus of politicians and pundits decries the woeful state of America’s road, bridges, sewers and airport terminals. Then, there are hosannas in adoration of the economic stimulus and job creation promised by large public works projects. And of course there are proposals to integrate politically-favored technologies with new infrastructure. All three rationales for a publicly-financed infrastructure program are flawed. Our infrastructure is not as inadequate as many believe; it is bad public policy to justify infrastructure decisions on the basis of the construction jobs required; and new infrastructure should not be treated as a vehicle for large-scale deployment of unproven technologies.

Ownership

Much of our nation’s infrastructure is privately owned. This includes, but is not limited to, power generation and the power grid, communication networks, many water systems and sewer systems, most rail lines, some toll roads and bridges, and some river, sea and space ports. Maintenance and upgrades to private facilities, and to some public facilities, depend on the adequacy of the rates or fees charged to users. On the other hand, the quantity and quality of publicly-owned and operated infrastructure is often left up to taxpayers rather than users. Proposals for federal infrastructure investment are largely about these public facilities, but they might also involve subsidies for the development of private infrastructure.

Crisis or Crock?

In a Heritage Foundation research report, Michael Sargent notes that the poor state of the country’s public infrastructure is wildly exaggerated:

“The notion that America’s infrastructure is ‘crumbling’ and in uniquely poor condition is not supported by data. The percentage of the nation’s bridges deemed ‘structurally deficient (not necessarily unsafe, but requiring extensive maintenance) has declined annually since 1990 and now sits at under 10 percent, well under half of what it was 25 years ago. Similarly, analyses of highway pavement quality conclude that the nation’s major roads have been steadily improving in quality and are likely in their best shape ever. Our airports and airways safely move more people and goods than those of any other nation. Overall, the U.S. ranks near the top of G-7 nations for infrastructure quality.“

The usual poster child of the infrastructure “crisis” is the nation’s transportation system, but this report from the Reason Foundation shows that those troubles are something of a myth.

Nevertheless, there are always repairs, maintenance and replacement projects to be considered, as well as possible expansion and new facilities. Infrastructural shortfalls and expansion must be prioritized, but as Sargent emphasizes, an even larger number of projects should and probably would be handled privately if not for burdensome federal regulations. In addition, an irrational mistrust of privately-operated facilities among some segments of the public creates pressure to burden taxpayers with costs, rather than users. Complaints about congestion on roads offer a case in point: the best solutions involve efficient (and positive) pricing of existing capacity, rather than continued expansion of a “free” good. The avoidance of rational solutions like efficient pricing underscores the extent to which demands for increased public investment in infrastructure are driven by hyperbole, rather than sound analysis.

It’s About the Infrastructure, Not the Jobs 

Public infrastructure projects are also pitched as effective engines of economic stimulus and job creation. Both of those claims are questionable. Most importantly, the real rationale for infrastructure investment is the value of the infrastructure itself and the needs it serves going forward. The public expense and the jobs required to produce it are cost items! This point was made recently by economist T. Norman Van Cott, who rightfully asserts that a given output is of greater benefit when its costs are low and when it requires less labor input. (Van Cott’s piece uses the Keystone pipeline as an example, a controversial private project that I find objectionable for its dependence on eminent domain actions.) The sharp distinction between creating value and creating jobs is also made here by Jerry L. Jordon and here by Steven Horowitz. Here is Horowitz:

“Creating jobs is easy; it’s creating value that’s hard. We could create millions of jobs quite easily by destroying every piece of machinery on U.S. farms. The question is whether we are actually better off by creating those jobs—and the answer is a definite no.“

Yet this is how so many infrastructure projects are pitched at the national, state and local levels. It’s also puzzling that economic stimulus is used as a rationale even when the economy is operating near its potential output. Even by the standards of traditional Keynesian economic analysis, that is the wrong time for stimulus. Infrastructure projects should be evaluated on their own merits, not on how many construction workers must be hired, or on how much of their paychecks those workers will spend. Many of them must be bid away from competing projects anyway.

The Public Investment Trough

Here’s a brief anecdote from my own experience with an “advanced” public infrastructure project. Some years ago in the region around my city, St. Louis, Missouri, transportation agencies began to install a network of electronic highway message boards to convey real-time information to drivers on road conditions, congestion, and various public service announcements. The 100+ signs in the area today are connected to operators in a central office via fiber optic cable. This type of system is used elsewhere, and it is partly funded by the federal government.

I seriously question the benefits of this system relative to cost. The signs themselves cost well in excess of $100,000 each. The fiber network is undoubtedly costly, and there are other fixed and variable system costs. The signs have an anachronistic look, vaguely the quality of old high school scoreboards. The information they provide generally adds little to what I already know (“12 minutes to I-270”). The signs are in fixed positions, so the occasional report of an accident or congestion usually comes too late to give motorists decent alternatives. The information the signs provide on road conditions is obvious. Missives such as “buckle up” are of questionable value. Before I depart on a commute, or if I have a passenger, we can consult maps and other apps on cell phones to avail ourselves of far better information. Other, more flexible technologies were outpacing the message boards even before they could be fully deployed, and the boards are still being deployed. This is a project that might have sounded brilliant to highway engineers 20 years ago, but it represented something of a luxury relative to other needs, and it still got funded. Today, it looks like waste.

The politics of infrastructure often means that the enabling legislation gets loaded with poorly-planned projects and shiny jewels to dangle before home constituencies. Legislators are so eager to demonstrate their sophistication that they fall over themselves to approve taxpayer funds for unproven but politically-favored technologies. For example, a recent post by Warren Meyer notes the technical folly of solar roads. These are unlikely to attract much private money because they represent such a monumentally stupid idea. Proponents will go after tax money instead. The same is true of ideas like Elon Musk’s tunnel boring project, for which he hopes to collect massive taxpayer subsidies. Musk claims that tunnels will eliminate road congestion, but efficient pricing would do much to eliminate this problem without tunnels, and other technologies like automated vehicles are likely to reduce congestion by the time Musk over-invests tax money in tunnel-boring equipment, roads and hyper-loops inside tunnels.

In general, taxpayers should be wary of “green infrastructure” proposals. A large number of bike lanes, pedestrian bridges and greenways sound wonderful, but they are serious cost inflators. Federal dollars are regularly squandered on charming but wasteful projects such as trolleys. Even worse are ongoing efforts to subsidize the construction of high-speed rail systems. All of these bright ideas should be resisted.

Let’s Be Rational

The country certainly has infrastructural needs, but claims that we face a crisis are greatly exaggerated. With a new administration and what are likely to be supporting majorities in both houses of Congress, the danger of rushing into big funding commitments is heightened. The sponsors of this kind of legislation will herald massive job creation, but that is incidental to the cost side of the ledger. The benefits of individual projects should be evaluated carefully in comparison to costs. Then they can be prioritized if deemed of sufficient value. Finally, large scale deployment of unproven technologies should be avoided on the public dime.

I haven’t even mentioned one very large infrastructure project that has been proposed by President-Elect Donald Trump: the border wall. I suspect that it would be easier and less expensive to solve the problem of border security using more advanced and flexible technologies, but the permanence and symbolism of a wall appeals to many of Mr. Trump’s supporters. The benefits of a wall in terms of border security and control of immigration flows are difficult if not impossible to evaluate, as are the costs to taxpayers, with Trump promising to extract some form of payment from Mexico. The wall, however, is being “sold” to the American public in emotional terms. Come to think of it, that’s how too many other infrastructure proposals are sold by politicians!

There are promising opportunities to improve the nation’s infrastructure through the private sector, where the value of projects is subject to evaluation by parties who must put “skin in the game”. This will be addressed in my next post.