–Failing U.S. transportation system will imperil prosperity, report finds

The debt hawks are to economics as the creationists are to biology.

Failing U.S. transportation system will imperil prosperity, report finds
The Washington Post, 10/4/10

Read this article, then ask the Tea Partyers (You know – those clever people who want less taxes and government) how they plan to handle this.

The United States is saddled with a rapidly decaying and woefully underfunded transportation system that will undermine its status in the global economy unless Congress and the public embrace innovative reforms, a bipartisan panel of experts concludes in a report released Monday.

U.S. investment in preservation and development of transportation infrastructure lags so far behind that of China, Russia and European nations that it will lead to “a steady erosion of the social and economic foundations for American prosperity in the long run.”

That is a central conclusion in a report issued on behalf of about 80 transportation experts who met for three days in September 2009 at the University of Virginia. Few of their conclusions were ground-breaking, but the weight of their credentials lends gravity to their findings.

Co-chaired by two former secretaries of transportation – Norman Y. Mineta and Samuel Skinner – the group estimated that an additional $134 billion to $262 billion must be spent per year through 2035 to rebuild and improve roads, rail systems and air transportation.

“We’re going to have bridges collapse. We’re going to have earthquakes. We need somebody to grab the issue and run with it, whether it be in Congress or the White House,” Mineta said Monday during a news conference at the Rayburn House Office Building.

The key to salvation is developing new long-term funding sources to replace the waning revenue from federal and state gas taxes that largely paid for the construction and expansion of the highway system in the 1950s and 1960s, the report said.
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“Infrastructure is important, but it’s not getting the face time with the American people,” Skinner said. “We’ve got to look at this as an investment, not an expense.”

A major hike in the federal gas tax, which has remained unchanged since it bumped to 18.4 cents per gallon in 1993, might be the most politically palatable way to boost revenue in the short term, the report said, but over the long haul, Americans should expect to pay for each mile that they drive.

“A fee of just one penny per mile would equal the revenue currently collected by the fuel tax; a fee of two cents per mile would generate the revenue necessary to support an appropriate level of investment over the long term,” the report said.

Fuel tax revenues, including state taxes that range from 8 cents in Alaska to 46.6 cents in California, have declined as fuel efficiency has grown. President Obama mandated that new cars get 35.5 miles on average per gallon by 2016, and government officials said last week that they are considering raising the average to 62 miles per gallon by 2025.

Facing mid-term elections this fall, Congress has lacked the will to tackle transportation funding. Efforts to advance a new six-year federal transportation plan stalled on Capitol Hill after the previous one expired last year.

If Congress were to do the report’s bidding, the task would be far broader in scope than simply coming up with trillions of dollars in long-term funding to rebuild a 50-year-old highway system.

The experts also advocated adoption of a distinct capital spending plan for transportation, empowering state and local governments with authority to make choices now dictated from the federal level, continued development of high-speed rail systems better integrated with freight rail transportation, and expansion of intermodal policies rather than reliance on highways alone to move goods and people.

But Mineta noted that 42 days after an eight-lane bridge collapsed into the Mississippi River in Minneapolis a survey found that 53 percent of respondents were against an emergency gas tax increase to pay for infrastructure repairs.

“The shelf life of a tragedy like [I-35W] was 42 days,” he said. Thirteen people died in the collapse and more than a hundred were injured.

The report emphasized that federal policy should be crafted to address congestion by providing incentives that encourage land use that reduces single-occupant commutes and promotes “liveable communities.”

“Creating communities conducive to walking and alternate modes of transportation . . . should be an important goal of transportation policy at all levels of government,” the report said.

It also encouraged expansion of innovative public-private partnerships to further transportation goals, citing the high-occupancy toll lane project in Northern Virginia as an example.
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“The one option that’s not in this report is throwing up our hands,” said Jeff Shane, a former Transportation Department official and a member of the panel. “That seems to be the option that Congress chooses.”

Congress does not want to ask for tax money, so the problems do not get solved. But there is a solution: Federal deficit spending without taxes. Sadly, the debt-hawks’ mistaken belief that deficits are harmful to our children and us, prevents curing our problems. There is a long list of problems our children suffer today, and will suffer in the future, because of the debt hawks. (See: Debt Hawk Problems )

Rodger Malcolm Mitchell
http://www.rodgermitchell.com

No nation can tax itself into prosperity

–Bank closings from 2008 through 2010

The debt hawks are to economics as the creationists are to biology.

I saw these two graphs on a good blog by noted debt-hawk Barry Ritholtz, called The Big Picture. You can see the post at http://www.ritholtz.com/blog/2010/09/fdic-bank-failures-7/comment-page-1/#comment-412084

Bank Failures since June 2008

These graphs brought to mind a few of the questions I’d like to ask those who keep demonstrating for “less government”:

1. How many bank depositors have been saved by FDIC?
2. How much depositor money has been protected by FDIC?
3. Do you feel there is too much regulation of banks?
4. Would you like to deposit your money in a bank that is not insured by FDIC?

Every time you hear someone say there is too much government, ask specific questions about what he/she would like to give up. Less Social Security? Less Medicare? Less military? Fewer roads and bridges, or less maintenance thereof? Eliminate the Supreme Court? Fewer national parks? Less inspection of our food and drugs? Less research? Where exactly should the cuts be made? (And don’t let them get away with “Eliminate waste.” That’s a cop out).

Rodger Malcolm Mitchell
http://www.rodgermitchell.com

No nation can tax itself into prosperity

–Warren Mosler interview: What if China stops buying U.S. debt?

The debt hawks are to economics as the creationists are to biology.

Warren Mosler is that rare individual who is both a successful businessman and an economist. He now is running for the Senate from Connecticut.

Warren has the ability to explain abstruse economic subjects in simple, illuminating ways. Here’s one excerpt from a recent interview. You can read the entire interview at Interview.

(Background: The Chinese buy U.S. T-securities by transferring U.S. dollars (not yuan) from their checking account at the Federal Reserve Bank to China’s T-security account, also at the Federal Reserve Bank. Later, when the Chinese redeem those T-securities, the money is transferred back to China’s checking account at the Fed. During the entire purchase and redemption process, the dollars never leave the Fed.)

Interviewer: “Money the Chinese earn by sending merchandise to the United States are credits in the U.S., and these credit units are nonredeemable, so Chinese owners can do nothing with these things unless they use them to buy American products, and if they do, those units become profits for American firms.

But there is also another possibility, which sometimes raises concerns in the larger public, and this is what happens if China should choose to get rid of these dollars by selling the U.S. securities they own.

While the amount of dollars owned by foreigners doesn’t change, the price of the dollar would in fact decline. If China sells off American debt, dollar depreciation may be substantial.”

Mosler: “Operationally, it’s not a problem because if they bought euros from the Deutsche Bank, we would move their dollars from their account at the Fed to the Deutsche Bank account at the Fed.

The problem might be that the value of the dollar would go down. Well, one thing you’ve got to take note of is that the U.S. administration is trying to get China to revaluate currency upward, and this is no different from selling off dollars, right?

So, what you are talking about (selling off dollars) is something the U.S. is trying to force to happen, would you agree with that?”

Interviewer: “Yes.”

Mosler: “Okay, so we’re saying that we’re trying to force this disastrous scenario—that we must avoid at all costs—to happen.

This is a very confused policy. What would actually happen if China were to sell off dollars? Well, first of all, the real wealth of the U.S. would not change: the real wealth of any country is everything you can produce domestically at full employment plus whatever the rest of the world sends you minus what you have to send them, which we call real terms of trade.

This is something that used to be important in economics and has really gone by the wayside.

“And the other thing is what happens to distribution. While it doesn’t directly impact the wealth of the U.S., the falling dollar affects distribution within U.S., distribution between those who profit from exports and those who benefit from imports.

And that can only be adjusted with domestic policy. So, number one, we are trying to make this thing happen that we are afraid of, and number two, if it does happen, it is a demand-distribution problem, and there are domestic policies to just make sure this happens the way we want it to be.”

So there you have it. All the hand wringing about what happens if China were to stop buying T-bills and instead buy some other country’s money is just a bunch of blah, blah, blah.

The relative value of U.S. dollars, compared with other money, would go down, which is exactly what the Federal government has been trying to effect — foolishly, I might add.

When China or any nation buys T-securities (aka “lends us money”), they must use dollars, and the dollars never leave the Fed.

Even if China were to buy another nation’s debt, using dollars it has earned from exports, the dollars still never would leave the Fed.

Think closely about this process and you will see why federal “borrowing” is a meaningless exercise.

Rodger Malcolm Mitchell
http://www.rodgermitchell.com

No nation can tax itself into prosperity

 

–The “Pledge to America” Sham

The debt hawks are to economics as the creationists are to biology.

The House Republicans have published a “Pledge to America.” It is a blatant, political sham. It includes:
–Make the Bush tax cuts permanent
–Give small businesses an additional tax deduction
–Fully fund missile defense
–Strengthen our Mexican border
–Reduce government spending to the 2008 levels
–Reduce the federal deficit

See anything wrong with these nice, safe political “pledges”? If you make the tax cuts permanent, give extra tax deductions to small business, fully fund missile defense and strengthen our border, there is no way to reduce spending to the 2008 levels and reduce the deficit — nor should we. Reduced spending (aka “money creation”) would doom us to an immediate return to recession. All six depressions and nearly every recession immediately have followed reductions in deficit growth. The reason: Federal deficits provide the money for economic growth.

Further, what spending would be cut? See: Federal Debt cuts for a list of right-wing recommended spending cuts and tax increases. Ask yourself which ones you like.

And, of course, nothing is said about Social Security and Medicare, which politicians will tell you (wrongly) require either tax increases or benefit cuts.

The Pledge also includes:
–Repeal the health-care law
–Ensure access for patients with pre-existing conditions

But, of course, ensuring access for patients with pre-existing conditions is one of the benefits of the health care law the House Republicans want to scuttle. The health care plan also contains such benefits as:
*Young people can remain on parents’ insurance until age 26
*No discrimination against children with pre-existing conditions
*No dropping people from coverage when they get sick
*No lifetime limits on coverage
*Free preventive care
*Increased ability to appeal decisions made by your health plan
And other benefits that slowly come on line between now and 2014. How many of these would you like to forgo if the health care plan is repealed?

And the Pledge includes:
–Tough sanctions against Iran (but no mention is made of Iraq, Pakistan and Afghanistan, where our troops actually are fighting and additionally, spending massive amounts of money.)

In short, the House Republican “Pledge” includes a potpourri of popular-sounding, though contradictory ideas. They want to spend more and spend less. They want to increase benefits and reduce them. They want to cut taxes and cut the deficit. Meanwhile, the public has been sold on the idea of “reduced federal deficits,” while not understanding what that really means. It means higher taxes and/or reduced federal benefits.

And it means recessions and depressions. But the politicians don’t tell you that.

Yes, the Pledge is a sham, but it will fool some of the people, and that might be enough.

Rodger Malcolm Mitchell
http://www.rodgermitchell.com

No nation can tax itself into prosperity