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2009 July 26 Sunday
California Pretends To Balance Budget

Here in the land of make-believe we pretend to balance the state government.

One “trick” is to bump payroll expenses by one day, from June 30 to July 1, to make them a fiscal year 2011 expense, when revenues might be flowing better. “This is a paper savings of $1.2 billion which in my mind is clearly a gimmick… How are you going to make up for that unless you do it every year?” asks Jessica Levinson, director of political reform for the Center for Governmental Studies.

Another move is to withhold more taxes sooner from state paychecks – even if the money must be paid back, it generates a temporary increase in cash flow.

The legislature couldn't even be bothered to fully pretend to close the gap. Did they lack imagination? Couldn't they come up with some other fantasy phantom revenue sources?

Because the Assembly failed, however, to approve measures to borrow gas-tax revenues from local governments and on oil drilling, the Legislature handed Gov. Arnold Schwarzenegger a budget that falls short by $1.1 billion of being balanced.

Scwharzenegger said he would make line-item cuts in the next few days to make up for the gap, but lauded lawmakers for taking on the painstaking job.

Basically the Governor let the legislature pretend it has raised enough money.

The plan erases about $23 billion of the $26.3 billion gap that Gov. Arnold Schwarzenegger's finance experts projected through June 2010.

They really need Schwarzenegger's proposed $2 billion buffer because the odds of further economic contraction and further decline in state tax revenue seem pretty high to me. But the Democrats are hoping for the best. Hope is not a prudent foundation of good government.

Pedro Nava led the effort to prevent more oil drilling off Santa Barbara that could have brought in more revenue. I personally wouldn't mind the drilling since I rate the accident risks at this point as pretty low.

The plan to allow off-shore drilling at Tranquillon Ridge, expected to bring $100 million to the budget solution, passed in the state Senate 21-18 early Friday morning.

But it was voted down, 43-28, in the Assembly after a series of highly charged speeches by Democratic lawmakers who recalled the environmental devastation of the 1969 Santa Barbara oil slick.

Since these Democratic lawmakers do not want to totally swear off use of oil in their own lives they just expect to make people in other parts of the country and world deal with environmental threats from oil extraction. Make other people pay for it. That's the foundation of the Democratic Party.

By Randall Parker    2009 July 26 01:42 PM Entry Permalink | Comments (1)
2009 July 04 Saturday
Colin Powell Unhappy With Obama Spendfest

Former US Secretary of State Colin Powell thinks Barack Obama is trying to spend more money than we have to spend. Colin Powell helped elect Obama as a prominent black and nominally Republican supporter.

"I'm concerned at the number of programs that are being presented, the bills associated with these programs and the additional government that will be needed to execute them," Mr. Powell said in an excerpt of an interview with CNN's John King, released by the network Friday morning.

Mr. Powell, a retired U.S. army general who rose to political prominence after a long and accomplished military career, said that health care reform and many of Mr. Obama's other initiatives are "important" to Americans.

But, he said, "one of the cautions that has to be given to the president -- and I've talked to some of his people about this -- is that you can't have so many things on the table that you can't absorb it all."

Powell states the obvious here:

"And we can't pay for it all," said Mr. Powell,

Powell is amazed at the size of the deficit.

And I never would have believed that we would have budgets that are running into the multi-trillions of dollars, and we are amassing a huge, huge national debt that, if we don’t pay for in our lifetime, our kids and grandkids and great grandchildren will have to pay for it.

Obama assumes the private sector can produce the wealth he needs to pursue is health, education, and other social programs. But the US economy

Think about the federal debt as an amount per person.

The country first got into debt to help pay for the Revolutionary War. Growing ever since, the debt stands today at a staggering $11.4 trillion - equivalent to about $37,000 for each and every American. And it's expanding by over $1 trillion a year.

That $37k per resident is a much higher number per net taxpayer. Those who pay more in taxes than they take in benefits are a minority of the working population let alone of the total population. Us net taxpayers carry a much heavier and growing burden. Peak Oil is approaching and combined with our demographic problems (an aging population and a dumbing population) the federal government's longer term ability to finance the debt is highly questionable.

By Randall Parker    2009 July 04 08:32 PM Entry Permalink | Comments (1)
2009 May 19 Tuesday
Megan McArdle Sees California Doomed To Bankruptcy

Can California avoid bankruptcy?

So what about California?  A reader asks.  Ummm, that's a tough one.  No, wait, it's not:  California is completely, totally, irreparably hosed.  And not a little garden hose.  More like this.  Their outflow is bigger than their inflow.  You can blame Republicans who won't pass a budget, or Democrats who spend every single cent of tax money that comes in during the booms, borrow some more, and then act all surprised when revenues, in a totally unprecedented, inexplicable, and unforeseaable chain of events, fall during a recession.  You can blame the initiative process, and the uneducated voters who try to vote themselves rich by picking their own pockets.  Whoever is to blame, the state was bound to go broke one day, and hey, today's that day!

There is a surprisingly sizeable blogger contingent arguing that we have to bail them out because however regrettable the events that lead here, we now have no choice.  But actually, we do have a choice:  we could let them go bankrupt.  And we probably should.

Okay, but when California goes into bankruptcy court can it basically lay off and yank the citizenship of its dumbest citizens? Can it order all its illegal aliens to leave? Bankruptcy court is supposed to allow more powerful remedies to be applied to problems. Well, okay, I'm down with that. So how about solutions that address the root causes of the problem?

Defeat of ballot propositions aimed at balancing the budget has put California back into a budget crisis.

Voters decisively rejected five ballot propositions that were sold as reforming a dysfunctional state budgeting process and sealing the February agreement to wipe out a $42 billion deficit.

But the deficit quickly reopened, pushed by the struggling economy and now the defeat of the budget package to $21.3 billion.

California used to be a dream of a place. Now it has become a nightmare. Still has nice weather near the coast though.

Update: Megan also wonders whether the bursting financial bubble will end the resurgence of New York City.

There's a lot of angst out there over whether products like Starbucks that seem somehow emblematic of an era of wasteful spending will outlast the current downturn.  The other day it occurred to me to wonder if the same isn't true of US cities.  The first model for an urban renaissance was, after all, New York.  But while New York's renaissance was certainly a product of a lot of factors, all of the institutional improvements were funded by the post-1982 financial services boom.  New York City is projecting its 2010 revenue will be down 30% from FY2008.  That's three years after the recession started.

I do not expect financial services to come back as strongly because some of the ways financial services companies made money are not coming back. Plus, they are going to try harder to cut costs and the costs of operating in NYC are avoidable by shifting more operations out of the city.

Megan has moved on to worrying about the moral hazard of a state bail out by the US federal government. Think her fears are premature? Municipal born insurance might serve as one way for the Feds to bail out states, cities, and counties.

May 18 (Bloomberg) -- The National League of Cities says it will ask the U.S. Treasury today for a $5 billion interest-free loan to capitalize a new municipal bond insurer it plans to create.

By Randall Parker    2009 May 19 11:43 PM Entry Permalink | Comments (15)
2009 April 06 Monday
Early Primary States Get More US Federal Aid

If you vote early for the winner your state will get more bucks from the government.

The 2008 presidential campaign season had the earliest statewide primaries and caucuses in memory, starting with the Iowa Caucus on Jan. 3. Now research from North Carolina State University shows that states may have good reason to push for an early contest. States that hold early presidential primaries or caucuses get a larger share of per capita federal procurement spending compared to other states, the new study says. But being early is not enough, study author Dr. Andrew Taylor says – states must also pick the winner.

"Obviously this has real-world ramifications," Taylor says. "Here is some evidence that order does matter, and that there is some incentive for states to try to move forward in the presidential nomination process."

Evaluating data from 1984 through 2004, the new report finds that the earlier a state holds its primary or caucus, the more federal procurement funding it receives per capita – as long as it backed the candidate who ultimately won the White House. Taylor explains that states receive minimal benefit if they vote early but back a candidate who ultimately drops out of the race or loses the election. Federal procurement is federal funding for goods and services, such as defense contracts.

States that hold later contests, after the field of candidates has been narrowed, have a better chance at picking the winning candidate. But Taylor says that advantage is effectively negated, because states with later primaries or caucuses won't receive much - if any - added benefit for backing the winner.

For example, Taylor's research shows that "If the first state chooses the ultimately victorious presidential candidate in a competitive nomination ... it receives $35.29 more in procurement per capita than if it had picked a loser." In comparison, the benefit if the eighth state picks the eventual winner would be approximately $22.05 more in procurement per capita. Beyond the ninth contest, Taylor says, the benefits are no longer statistically significant.

Pretty small winnings though.

By Randall Parker    2009 April 06 11:10 PM Entry Permalink | Comments (4)
2008 November 10 Monday
Free Trade With Colombia To Save Auto Industry?

Lower trade barriers with Colombia or crash goes the US auto industry.

WASHINGTON: The struggling auto industry was thrust into the middle of a political standoff between the White House and Democrats on Monday as President-elect Barack Obama urged President George W. Bush to support immediate emergency aid.

Bush indicated at the meeting that he might support some aid and a broader economic stimulus package if Obama and congressional Democrats dropped their opposition to a free-trade agreement with Colombia, a measure for which Bush has long fought, people familiar with the discussion said.

I think Bush should show his support for Colombia by moving there. Adios Jorge Bush.

By Randall Parker    2008 November 10 08:44 PM Entry Permalink | Comments (0)
2008 October 14 Tuesday
Obama Mislabels Tax Credits As Tax Cuts

Barack Obama exaggerates the extent of his tax cutting proposal.

One of Barack Obama's most potent campaign claims is that he'll cut taxes for no less than 95% of "working families." He's even promising to cut taxes enough that the government's tax share of GDP will be no more than 18.2% -- which is lower than it is today.

I'd rather get lower tax rates as my preferred way to pay less taxes. It is simple to understand and you don't have to fit into special categories to pay less. But Barack isn't aiming for my vote. The 44% of tax filers who do not even have to pay income taxes will be eligible for credits that Obama bills as tax cuts. Only the clean car credit below is restricted to people who actually pay income taxes.

- A $500 tax credit ($1,000 a couple) to "make work pay" that phases out at income of $75,000 for individuals and $150,000 per couple.

- A $4,000 tax credit for college tuition.

- A 10% mortgage interest tax credit (on top of the existing mortgage interest deduction and other housing subsidies).

- A "savings" tax credit of 50% up to $1,000.

- An expansion of the earned-income tax credit that would allow single workers to receive as much as $555 a year, up from $175 now, and give these workers up to $1,110 if they are paying child support.

- A child care credit of 50% up to $6,000 of expenses a year.

- A "clean car" tax credit of up to $7,000 on the purchase of certain vehicles.

Here's the political catch. All but the clean car credit would be "refundable," which is Washington-speak for the fact that you can receive these checks even if you have no income-tax liability. In other words, they are an income transfer -- a federal check -- from taxpayers to nontaxpayers. Once upon a time we called this "welfare," or in George McGovern's 1972 campaign a "Demogrant." Mr. Obama's genius is to call it a tax cut.

So Barack is aiming for the votes of people who aren't net taxpayers. These people already get more than they pay for.

A mortgage tax credit? That's the worst one on the list. We are paying enough already for irresponsible home buyers. We need to subsidize their recklessness even more? This is unfair to renters and to savers.

We are talking big money. Taxpayers have to pay so that credits can be handed out to others.

The total annual expenditures on refundable "tax credits" would rise over the next 10 years by $647 billion to $1.054 trillion, according to the Tax Policy Center.

I am expecting that Barack will shaft me so he can play leftist social engineer.

By Randall Parker    2008 October 14 12:10 AM Entry Permalink | Comments (6)
2008 August 29 Friday
Barack Obama As Tony Rezko Enabler

Steve Sailer points out how saint Barack Obama enabled Tony Rezko to corrupt the Illinois Health Facilities Planning Board. Surely the saint did not understand the consequences of his actions.

For example, Rezko is going to prison in large part for packing the Illinois Health Facilities Planning Board with five of his lackeys so they would approve hospital construction in which he had an interest. That Board used to have 15 members, making it hard for Rezko to corrupt it, but in 2003, a bill passed the Illinois legislature reducing the number of members from 15 to 9. And who was the chairman of the Illinois Senate Health and Human Services committee that recommended that bill? Why, Rezko's $250,000 friend, the Presidential nominee ...

By the way, something that's long bothered me is this. Obama wrote that the hero of his youth was Malcolm X. Now, Malcolm was assassinated in 1966 by Black Muslim hitmen working for Elijah Muhammad. The chief long term beneficiary of the murder was Louis Farrakhan, who earlier had written that Malcolm deserved death. Whether Farrakhan was directly involved in the killing is unknown -- a number of years ago, one of Malcolm's many daughters hired a hitman to rub out Farrakhan in revenge. Even if he wasn't involved in the conspiracy, Farrakhan's sentiments are clear: he gave Malcolm's old job to one of the murderers when he was finally released from prison.

Yet, where's the outrage against the Black Muslims on Obama's part? If somebody important was tied into the murder of a hero of my youth, like Jerry West or Fernando Valenzuela, I sure wouldn't treat him as evenhandedly, with a mixture of sympathy for his goals and sarcasm at the impracticality of his economics, as Obama treats Farrakhan in Dreams from My Father. Nor would I have chosen a minister who went with Farrakhan to visit Gadafi in Libya in 1984 and gave Farrakhan his Lifetime Achievement Award in 2007. Nor would I be happy about having a fairy godfather like Rezko who is up to his eyeballs in dealings with Elijah Muhammad's heirs.

Meanwhile, that nutcase McCain really wants to choose Joseph Lieberman as his vice presidential running mate. I hope he does it because then it will be clear that we have two Democratic Parties in this election.

By Randall Parker    2008 August 29 07:31 AM Entry Permalink | Comments (6)
2008 June 30 Monday
Romney VP Appeal: $60 Million Cash Quick To Get

Money raising ability makes Mitt Romney a front-runner to become John McCain's vice presidential running mate.

McCain sources tell Politico that they believe Romney could raise $50 million in 60 days. One close Romney adviser said it could even be $60 million.

But even with Romney and a large pile of cash McCain will still lose.

He's got some other big pluses. But McCain's campaign fears Romney will turn off southern Christian voters in states that Obama might run strong in.

Romney’s other advantages, according to people involved in McCain’s screening process:

— He is squeaky-clean and fully vetted by the national media.

— He has presidential looks and bearing and immediately would be a strong campaigner who could be trusted to stay on message.

— His family’s Michigan roots would help in a swing state that went Democratic in 2004.

Romney probably also poses another problem for McCain: A sufficiently accomplished history that Romney can probably think for himself and possibly try to disagree with McCain when McCain tries to do nutty things.

Obama can count on very high black turn-out and a much higher percentage of the black vote than previous white Democratic Presidential candidates could get. That puts him in a strong position in southern states with large black populations.

Suppose McCain goes with Romney for the cash. That won't put McCain in the lead for cash. Obama the fund-raising all-star has such an amazing track record on getting cash that he's is turning down federal matching funds so he can tap even larger sums from the private sector.

Obama has trounced McCain in fund raising, raking in $287.4 million to McCain's $119.6 million.

Obama is so flush he turned down about $85 million in federal matching funds, and he's so golden that his flip-flop from previously saying he would take matching funds was a non-issue.

People who fear Obama will be a socialist take note: He might be willing to be rented by the wealthy. This will place limits on his redistribution of wealth to the poor. Though this sort of influence-buying tends to corrupt markets and corrupt markets cause enormous damage.

Update: Obama might end up raising over a half billion dollars total by the time he's elected President.

Mr. Obama’s advisers said Thursday that they believed he could raise $200 million to $300 million for the general election, not counting money raised for the Democratic National Committee, if he were freed from the shackles of accepting public money.

By Randall Parker    2008 June 30 10:43 PM Entry Permalink | Comments (10)
2006 July 02 Sunday
Farm Subsidies Go To Non-Farmers

The Washington Post has done an excellent investigation into how the federal farm subsidies work in the United States. The US government pays non-farmers subsidies for land that has not been farmed for many years.

Nationwide, the federal government has paid at least $1.3 billion in subsidies for rice and other crops since 2000 to individuals who do no farming at all, according to an analysis of government records by The Washington Post.

Some of them collect hundreds of thousands of dollars without planting a seed. Mary Anna Hudson, 87, from the River Oaks neighborhood in Houston, has received $191,000 over the past decade. For Houston surgeon Jimmy Frank Howell, the total was $490,709.

"I don't agree with the government's policy," said Matthews, who wanted to give the money back but was told it would just go to other landowners. "They give all of this money to landowners who don't even farm, while real farmers can't afford to get started. It's wrong."

The checks to Matthews and other landowners were intended 10 years ago as a first step toward eventually eliminating costly, decades-old farm subsidies. Instead, the payments have grown into an even larger subsidy that benefits millionaire landowners, foreign speculators and absentee landlords, as well as farmers.

Farms have been split up into 10 acre plots for upscale housing. For each 10 acres 9 can be classified as still available for farming and so owners who just use their land for luxury housing get checks each year for 9 acres of their 10 acre plots.

Farmers and non-farm landowners get more subsidies than welfare recipients but they get far less criticism than do welfare recipients.

What began in the 1930s as a limited safety net for working farmers has swollen into a far-flung infrastructure of entitlements that has cost $172 billion over the past decade. In 2005 alone, when pretax farm profits were at a near-record $72 billion, the federal government handed out more than $25 billion in aid, almost 50 percent more than the amount it pays to families receiving welfare.

It is time to end farm subsidies entirely. Americans should stop seeing farmers as virtuous just because they work the land.

The subsidies serve as an incentive to convert rice fields into cattle grazing land.

In 1998, Zapalac was leasing 2,500 acres, most of it for rice farming. One landlord canceled a lease for 1,400 acres in 1998, he said, and a second cancellation followed for the rest in 2004.

"As soon as they figured they could take the payments, they said, 'I don't need you anymore,' " he said. "They were renting me land for $40 an acre, but they could get $125 an acre from the government."

Some of the rice land he lost has been turned into pasture for cattle, while the landlord continues to receive the rice money.

"You can sell the calves and still stick the rice payment in your pocket," Zapalac said. "It's a hell of a deal."

In the 2010s and 2020s when the huge rise in the retired population causes an explosion in federal spending farm subsidies are one place where spending could get cut without any harm to the economy. But why not cut the subsidies sooner?

Update: Farmers get price subsidies not based on what they sell for but rather for what low prices happen during the year.

The farmers do not have to sell at distressed prices to collect the money. They can bank the government payments and sell when prices are higher.

Since September, the program has cost taxpayers $4.8 billion. Most of that money -- $3.8 billion -- went to farmers such as Richardson who sold at higher prices, according to a Washington Post analysis of USDA payment data.

The subsidy is called the loan deficiency payment. Although it has cost taxpayers $29 billion since 1998, it is virtually unknown outside farm country. But in rural America, the LDP is a topic at backyard barbecues and local diners along with the high school football team and the weather. Despite its name, it is neither a loan nor, in many cases, payment for a deficiency. It is just cash paid to farmers when market prices dip below the government-set minimum, or floor, if only for a single day.

The LDP has become so ingrained in farmland finances that farmers sometimes wish for market prices to drop so they can capture a larger subsidy.

...

For last year's crop, farmers sold their corn for an average of $1.90 per bushel, only 5 cents below the national floor price. But they received an LDP averaging 44 cents, government payment records show. The difference amounted to $3.8 billion.

These subsidies will have to go on the chopping block when the baby boomers retire. The federal government's financial crisis will bring massive pressure to cut all pork barrel spending including farm subsidies.

By Randall Parker    2006 July 02 05:14 PM Entry Permalink | Comments (4)
2006 April 18 Tuesday
Congress Sets New Spending Earmark Record

The Congressional spending bender continues.

WASHINGTON – Remember Alaska's "bridge to nowhere"? It's about to be topped by what critics call Mississippi's "railroad to nowhere," which is quickly becoming the poster child for excessive spending by the Republican-controlled Congress.

The project, which was added to a $106.5 billion emergency defense spending bill in the Senate, would relocate a Gulf Coast rail line inland, to higher ground. Never mind that the hurricane-battered line was just repaired at a cost of at least $250 million. Or that at $700 million, the project championed by Mississippi's two US senators is being called the largest "earmark" ever.

The Congressional whores of Babylon set a new record.

"There's never been a single earmark anywhere near $700 million," says Ronald Utt, a senior fellow at the Heritage Foundation, a conservative think tank in Washington. Tuesday he released a report, "Deadly Sin: Larding up Emergency Appropriations," which details the CSX freight line relocation plan. "That's more than twice the size of the [$223 million] bridge to nowhere."

Fiscal prudence, what sort of heretical notion is that?

President George W. Bush requested an emergency appropriation of $92 billion for operations in Iraq and Afghanistan and another round of hurricane recovery. The House approved the request, but the Senate Appropriations Committee has loaded the measure with $14 billion in new spending, most unrelated to national security or hurricane recovery. Still not satisfied, Senators are now readying floor amendments to add as much as $10 billion more in spending, which would push the price tag to $24 billion above the President’s request.[1]

This new spending is tremendously irresponsible considering the state of the budget. Congress has already boosted spending by 45 percent since 2001 to a post-war record of $23,760 per household.[2] On top of that, the Senate started this year by adding $16 billion to the President’s discretionary budget request.[3] This is at a time where the new Medicare prescription drug benefit is projected to cost over $1 trillion through 2016. Entitlement programs’ liabilities, public debt, and other liabilities such as veterans’ and federal employee retirement costs already total $375,000 for every full time worker in America. [4] The Senate’s actions show a clear disregard for this huge fiscal burden Americans already face.

But Americans elected these turkeys. What does that say about Americans? Nothing good.

The farmer piggies weren't getting enough already. Oink! Oink!

$4 billion for farm bailouts, which comes on top of the $25 billion that will be spent this year on farm subsidies, even as farm income reaches near-record highs;

The role played by Mississippi in this latest spending splurge is made possible by Mississippi Senator Thad Cochran's replacement of Ted Stevens of Alaska as chairman of the Senate Appropriations Committee

By Randall Parker    2006 April 18 09:50 PM Entry Permalink | Comments (1)
2006 April 09 Sunday
Alaska Pork Spending Dips As Stevens Power Decreases

Senator Ted Stevens (R Alaska) has brought home a lot of bacon for Alaska.

Taxpayers for Common Sense calculates that Alaska's earmarks in the 2006 federal spending bills totaled $1.05 billion, a drop of $335 million from last year.

Citizens Against Government Waste, using different criteria, figures that Alaska's per-capita pork fell by half.

Thomas Schatz of Citizens Against Government Waste says Alaska still gets 16 times the earmark dollars per person than the US national average.

Alaska's diminished success in winning federal earmarks reflects Sen. Ted Stevens' reduced dominion over federal spending bills.

Stevens, R-Alaska, had tremendous control of the government purse during the six years he served as chairman of the Senate Appropriations Committee. Term limits on chairmen forced him to give up the gavel at the end of 2004, although he remains a member of the committee and retained his chairmanship of the subcommittee over defense spending.

Senator Thad Cochran of Mississippi replaced him as chairman and so now earmarks for Mississippi are on the rise.

Oh so poor Alaska? Senator Stevens admits the state for which he's pulled in the federal dollars is flush with funds from oil revenue.

JUNEAU -- Alaska's battered image means state lawmakers must loosen their purse strings if they want congressional aid to move the state's big projects forward, U.S. Sen. Ted Stevens told the Alaska Legislature on Wednesday.

The Alaska Republican says the nation is facing an $8 trillion deficit and paying for troops in Iraq while Alaska is enjoying a $1.4 billion surplus and has $34 billion in the bank with the Alaska Permanent Fund.

Never mind that gigantic federal debt and deficit. If Stevens was still committee chairman the total dollars going to Alaska earmarks would be higher.

The people who run the United States seem determined to follow policies that will slowly pull us down. Whether it be immigration to ramp up the size of the population that gets more than it pays in taxes, old age programs such as the Medicare drug benefit enacted a few years ago, or the Iraq debacle the elites seem determined to wreck America.

By Randall Parker    2006 April 09 09:46 AM Entry Permalink | Comments (1)
2005 November 20 Sunday
Tim Kusky Says Move Or Abandon New Orleans

He's taking his argument on US national TV.

Kusky speaks to 60 Minutes correspondent Scott Pelley this Sunday, Nov. 20, 2005, at 7 p.m. ET/PT.

“New Orleans is going to be 15 to 18 feet below sea level, sitting off the coast of North America surrounded by a 50 to 100-foot-tall levee system to protect the city,” says Kusky, a professor in the Earth Sciences Department at St. Louis University. He estimates this will happen in 90 years. “That’s the projection, because we are losing land on the Mississippi Delta at a rate of 25 to 30 square miles per year. That’s two acres per hour that are sinking below sea level,” he tells Pelley.

As the city assesses damage and plans to rebuild, Kusky believes there’s a better plan.

“We should be thinking about a gradual pullout of New Orleans and starting to rebuild people’s homes, businesses and industry in places that can last more than 80 years,” says Kusky. Instead, the law will allow residents to rebuild if their homes lie at the 100-year flood level, much of which was inundated by Katrina’s waters and would be put underwater again should levees fail.

While 60 Minutes will give Kusky's idea a lot of publicity this is not a new position for him. On September 25, 2005 in a Boston Globe op/ed Kusky called for moving or abandoning New Orleans due to inevitable submergence.

The city has other problems of location. To protect communities along the Mississippi River, the Army Corps of Engineers built a 2,000 mile long system of levees that help prevent river flood waters surging from the channel and inundating low lying areas. However, the levees also channel sediments that normally get deposited on the flood plain and delta far out into the Gulf of Mexico, causing the land surface of the delta south of New Orleans to sink below sea level at an alarming rate. A total land area the size of Manhattan is disappearing every year, meaning that New Orleans will be right on the Gulf Coast by the end of the century.

The projected setting of the city in 2100 is in a hole up to 18 feet below sea level directly on the hurricane-prone coast. The city will look like a fish tank battered by coastal waves, surrounded by 50- to 100-foot-high seawalls that are barely able to protect it from hurricanes that are only as strong as Katrina. Such a city is untenable, and we as a nation need to face this reality.

As my regular readers know, I take the same position. I think that fixing the channel sediment problem should take precedence over building flood walls and the lower lying areas should not be rebuilt. We should try to stop the erosion of the delta which human engineering projects caused (or at least greatly accelerated) in the first place. But humans should not live in flood deltas unless they want to sign pieces of paper saying they do not expect any government disaster help when hurricanes hit.

Also see my post "Should New Orleans Get Rebuilt And Who Should Pay For It?" Also, read an excellent Scientific American article about the Mississippi river delta (same article here and here). What is happening has been obvious for a long time. Why not have public policy align with the scientific reality?

By Randall Parker    2005 November 20 03:39 PM Entry Permalink | Comments (8)
2005 October 15 Saturday
Southern Louisiana Set Itself Up For Hurricane Katrina Disaster

The Washington Post has a lengthy article on the Louisiana political decisions by Louisiana pork barrelling politicians that made the Hurricane Katrina disaster possible.

Two months before Hurricane Katrina, Sen. David Vitter (R-La.) gave a chilling preview of its rampage. "This isn't a simulation of World War III, or 'The Day After Tomorrow,' or Atlantis -- but one day, it may be Atlantis," Vitter warned at a hearing. Then he displayed a computer model of a Category 4 hurricane smashing New Orleans and flooding the city under 18 feet of water.

"It's not a question of if," Vitter said. "It's a question of when."

But do not trust the words of Louisiana politicians who are pointing the finger of blame:

"Instead of spending millions now, we are going to spend billions later," he said.

But as Vitter was forecasting destruction, he was also holding up legislation that would have approved levee upgrades and launched the coastal restoration plan. And the holdup involved an industry-backed provision that Vitter had inserted to help Louisiana's loggers deforest cypress swamps, which would reduce the natural hurricane defenses the restoration was supposed to rebuild.

In order to reduce hurricane damage to human dwellings part of what southern Louisiana needs is to allow areas to revert to nature. Allow flooding of fields and swamps and silt deposits. Allow much more trees and brush to grow without harvesting and clearing for short term commercial gain.

Louisiana's Hurricane Katrina disaster was set up by the choices and decisions of the populations in that area. They built where they shouldn't have built. They demanded levees to allow them to live in places where they shouldn't have lived in the first place. Commercial interests and Congressional representatives (that would be you Senator Mary Landrieu) connived to shift the large Army Corps of Engineers budget away from flood prevention and toward pork projects.

Louisiana's $1.9 billion per year Army Corps of Engineers budget is the largest in the nation. They had the amount of money they needed just from fleecing taxpayers in the rest of the country. They could have paid for their own flood protection using local and state taxes.

The scope of the losses from Hurricane Katrina was made possible by the response to Hurricane Betsy in 1965. The levee system built in response to the 1965 flooding allowed construction of large subdivisions of homes below sea level in areas that previously had been swamps.

The Corps aimed to protect New Orleans from the Gulf with levees much shorter than the river levees, plus two huge floodgates designed to keep storm surges out of the lake. But the economic rationale for the plan would be derived by reclaiming pristine wetlands at the city's outskirts, extending the levees beyond New Orleans to "hasten urbanization and industrialization of valuable marsh and swampland." A subsequent report would find that only 21 percent of the land protected by the Corps project was already developed; the rest was soggy, vacant and well below sea level, just waiting for subdivisions. Katrina would put those lands back underwater.

At one hearing in the late '70s, a freshman Louisiana congressman named Robert Livingston Jr. blistered a Corps colonel for protecting swamps instead of people. "Perhaps I am being a bit too complex," he said. "It would seem to me that if hurricane protection to the people and properties is the paramount importance, the portion you would want to complete first would be those levees surrounding inhabited areas rather than those around uninhabited areas.

"Would that not be a priority, sir?"

So government spending created the levees that led to the housing construction that led to the huge economic losses from Hurricane Katrina. How about letting those areas return to swampland and let them flood whenever the river rises or a hurricane hits?

Many projects didn't get built because they required the locals to pay 30% of the costs and the locals did not want to pay to protect themselves in the low level swamps they had turned into subdivisions. Well, why should the rest of the country pay for their choices?

Read the whole disgusting saga. It'll inoculate you against the rhetoric coming from Louisiana politicians. They made the mess.

By Randall Parker    2005 October 15 02:59 PM Entry Permalink | Comments (0)
2005 September 28 Wednesday
Financial Soundness And Disaster Preparedness

One of the underlooked aspects of the damage and loss of life from Hurricane Katrina is just how avoidable most of it was. Shortcomings in federal, state, and local agencies charged with disaster response have attracted the most attention from a press fixated upon the visual images of people on rooftops and bodies floating in waters. But in highly industrialized countries most extreme natural phenomena become disasters for human populations only because of decisions made well ahead of time by private individuals and businesses, and also by government agencies that are not in the disaster relief business.

Government policies have done much to reduce the incentives for prudent decision-making by individuals and businesses. Also, governments have made very imprudent decisions in siting and designing structures near flood zones and other areas at risk of damage from natural disasters. We need to look at how governments at all levels can change policies to reduce the amount of damage, disruption and loss of life from hurricanes and other extreme natural phenomena.

Federal Government Should Lead By Example

The federal government should start by looking at its own siting and building practices. Hurricane wind and flood damage are notable for their avoidability. Want to avoid serious damage and loss of life from hurricanes? Do not build structures near sea level in regions at risk from hurricane. When building near sea level use structure designs and fabrication techniques which can withstand high winds and even floods. Elevate structures and design the buildings for ease of covering up windows and entrances before storms. The federal government has post offices, FBI field offices, and many other structures all over the country. The federal government should design and site all new buildings to make them able to withstand natural disasters.

Only federal government functions essential to an area should get sited in higher risk zones. For example, the federal National Finance Center until recently employed over 1400 in New Orleans and processed paychecks for a half million federal workers all over the country. That center should get permanently relocated to an area which is at very low risk for national disasters. Post Offices, FBI field offices, and some other functions must go where the people live. But even many functions which must go near large populations could get sited at least a few miles inland and on lots raised by dirt fill.

Also, when responding to disasters the federal government rushes in and builds some replacement housing. Well, that housing should not go right on existing unmodified plots where houses were wiped out by storm flood surges. In some cases houses should be rebuilt on trucked in mounds of dirt (quite common in Florida) or on stilts. Better yet, where the storm surges were high and all housing was wiped out for miles inland the new housing should go further inland than the storm surge reached. If people want to rebuild near the ocean then the federal government should not pay for it.

Federal Government Aid Should Incentivize Prudent Behavior

Federal reconstruction aid to hard hit local governments should come in the form of loans rather than outright grants. Local taxpayers should shoulder the costs that come from living along ocean fronts where hurricane strike and in other riskier regions. People who live in dangerous areas should pay for that danger in the form of higher property tax levels, insurance prices, and other market signals.

FEMA should not make big promises of forms of aid to expect in emergencies. State and local governments took a much more lackadaisical approach to emergency preparedness in part because FEMA overpromised how much help it could deliver and how rapidly it could deliver that help.

State Governments Should Impose Tough Standards

Building codes for private homes and commercial buildings should get toughened to reduce building losses from disasters such as hurricanes, earthquakes, and tornadoes. The state of Mississippi should take note that it will lose casino tax revenue for a much longer period of time because casinos were not better built. Had the casinos been built to stay in place and suffer little damage the financial losses to the government coffers would have been far less.

Hurricane Katrina provides a general financial lesson to state and local governments: destruction of structures cuts off tax revenue flows. While governments should impose tough standards just for reasons of public safety governments should also reflect on their own insatiable desire for tax money. The threat of tax revenue interruptions when businesses get washed away should give them an even stronger motivation to require construction of more robust strucures.

State governments should enact legislation and regulations that impose even tougher building codes on all levels of government in each state. For example, the state of Mississippi should require that all state, county, and city government buildings sited along the Gulf coast be located and constructed to withstand the wind and flood waters of a category 5 hurricane. This will both reduce financial losses from disasters and also allow local government buildings to operate as shelters. Also the survival of government buildings will help speed relief and security operations after a hurricane or other disaster.

That means city halls, schools, fire department buildings, police stations, prisons, and other government buildings should be build on raised dirt mounds or sufficiently far inland that to avoid destruction from a flood surge. Also, building materials and construction methods should be chosen to enable the buildings to withstand high winds. For buidings absolutely needed in flood zones the building materials should be able to withstand flooding. So, for example, cinderblock should be used in place of wood.

Financial Soundness Requirements For Local Governments

Each state should require counties and cities in high risk areas to financially prepare for disasters as well. Local units of government should either buy high levels of disaster insurance coverage or build up large reserves of cash deposits. Requirements should be set based on potential losses of tax revenue when buildings get destroyed by hurricanes. The level of reserves required should depend on independent or perhaps state-level assessments of the vulnerability of structures in each jurisdiction to destruction.

Think of these fiscal soundness requirements on local governments against disasters as analogous to requirements on pension funds, insurance companies, and banks. Pension funds, for example, have fiduciary responsibilities to be able to handle expected liabilities and potential investment losses. States should require localities to audit and publish their financial risks from natural disasters and how they have arranged to meet financial demands resulting from disasters.

By Randall Parker    2005 September 28 02:59 PM Entry Permalink | Comments (1)
2005 September 16 Friday
Bush Continues Drunken Spender Bender With Gulf Coast Great Society

George W. Bush has a song he's singing to the Democrats: "Anything you can spend I can spend bigger, I can spend anything bigger than you".

Although Bush cited no price tag, he committed the nation to a plan that officials and lawmakers believe could top $200 billion, roughly the cost of the Iraq war and reconstruction, and which promises to reorient government for the balance of the Bush presidency. It will create much larger deficits in the short term, siphon off money that would have been spent on other programs and dramatically shift the focus of the White House, Congress and many state governments for the indefinite future.

Even as he embraced a spending program the scale of which few Democratic presidents ever advanced, Bush signaled that he would shape its contours with policy ideas long sought by conservative thinkers. He proposed creation of a "Gulf Opportunity Zone" that would grant new and existing businesses tax breaks, loans and loan guarantees through 2007. And in documents released before the speech, Bush called for displaced families that send children to private schools, including religious ones, to be eligible for federal money.

Why give people tax breaks to resettle an area that Mother Nature rather forcefully just demonstrated isn't appropriate for large scale human habitation? People should be discouraged from returning and rebuilding in areas wiped out by storm surges. Governments should impose tough building codes and governments should construct their own buildings on high ground and out of extremely tough materials.

Most of those evacuated from New Orleans have more sense than the President and do not want to return.

HOUSTON, Sept. 15 -- Fewer than half of all New Orleans evacuees living in emergency shelters here said they will move back home, while two-thirds of those who want to relocate planned to settle permanently in the Houston area, according to a survey by The Washington Post, the Henry J. Kaiser Family Foundation and the Harvard School of Public Health.

...

Forty-three percent of these evacuees planned to return to New Orleans, the survey found. But just as many -- 44 percent -- said they will settle somewhere else, while the remainder were unsure. Many of those who were planning to return said they will be looking to buy or rent somewhere other than where they lived. Overall, only one in four said they plan to move back into their old homes, the poll found.

Also, isn't it not just unwise but also cruel to help people of such meager means and meager abilities to return to a place which is in harm's way?

According to the poll, six in 10 evacuees had family incomes of less than $20,000 last year. Half have children younger than 18. One in eight was unemployed when the storm hit. Seven in 10 said they have no insurance to cover their losses. Fully half have no health insurance. Four in 10 suffer from heart disease, diabetes, high blood pressure or are physically disabled.

When illness or injury strike, they were twice as likely to say they had sought care from hospitals such as the New Orleans Charity Hospital than from either a family doctor or health clinic -- needs for costly services that now will be transferred to hospitals in the Houston area or wherever these evacuees eventually settle.

Some fiscal conservatives still exist in Congress.

One fiscal conservative, Senator Tom Coburn, Republican of Oklahoma, said Thursday, "I don't believe that everything that should happen in Louisiana should be paid for by the rest of the country. I believe there are certain responsibilities that are due the people of Louisiana."

Senator Jim DeMint, Republican of South Carolina, called for restoring "sanity" to federal participation in the recovery, which is at $62 billion and rising fast. The House and Senate approved tax relief Thursday at an estimated cost of more than $5 billion on top of $3.5 billion in housing vouchers approved by the Senate on Wednesday.

"We know we need to help, but throwing more and more money without accountability at this is not going to solve the problem," Mr. DeMint said.

Their comments were in marked contrast to the administration approach thus far and a call by Senate Republican leaders for a rebuilding effort similar to the Marshall Plan after World War II. Congressional Democrats advocated their own comprehensive recovery program Thursday, promoting a combination of rebuilding programs coupled with housing, health care, agriculture and education initiatives.

Their comments are in marked contrast to the administration because Bush is a faux conservative.

What we need is an "Endangered Fiscal Conservative Species Act".

The federal government plans to build temporary communities of prefabricated housing.

The settlements would range from 2,000 to 25,000 units _ mostly prefabricated houses and mobile homes _ arranged in loose street grids. They will ideally be placed within a short drive of pre- existing shopping centers, grocery stores and gas stations to make life easier for evacuees.

Note that the middle and upper classes will mostly make their own housing arrangements and will avoid these temporary cities like the plague. Each community that gets one of these temporary cities will need a lot more police to handle a high crime population. But with effective policing and aggressive prosecution the crime rate of New Orleans refugees could be lowered well below the rate at which they committed crimes in poorly policed New Orleans.

By Randall Parker    2005 September 16 12:21 PM Entry Permalink | Comments (14)
2005 September 13 Tuesday
Economists Argue Against Rebuilding New Orleans

The Wall Street Journal relays arguments by economists against rebuilding New Orleans.

"We have an obligation to people, not to places," says Edward Glaeser, a Harvard professor who specializes in urban economics. "Given just how much, on a per capita basis, it would take to rebuild New Orleans to its former glory, lots of residents would be much [better off] with $10,000 and a bus ticket to Houston."

New Orleans was already a dying city before the hurricane.

According to Census Bureau estimates, New Orleans's population declined by 4%, or 21,000, between 2000 and 2004, to 462,000. Among the cities with the largest populations in the nation, the only one with a larger decline during that stretch was Detroit. Some 24% of New Orleans families lived below the poverty line, according to the Census Bureau, compared to 9% nationally.

New Orleans might have a brighter future if none of the low lying housing of the poor people was rebuilt. Give some cash to the poor people to settle somewhere else and then let the middle and upper classes come back to the places which are at higher elevations. The resulting city would have far less crime, a less corrupt government, a more effective police force, and better financials.

Many fled to the suburbs in search of better public schools. Some of those big investors have been fleeing as well. ExxonMobil, Shell and ChevronTexaco, for instance, have eliminated or moved hundreds of jobs to Houston in the past few years, continuing a two-decade exodus from the city. The result: Even though the energy sector is booming, New Orleans hasn't felt much of it. In 2004, private sector employment levels in the city were still below their levels of 1997.

As for the supposed essential New Orleans ports: I was watching a discussion on a cable news channel where Douglas Brinkley and another New Orleans native commented on how New Orleans is losing lots of port business to Galveston Texas and Mobile Alabama. But the ports do not need the city in order to function anyway. Ports are highly automated and a pretty small commuter population could run them.

Building towns and cities in a delta and surrounding them with levees causes the ground to dry out and subside more rapidly than it does naturally. It also cuts off the supply of silt needed to build up the sinking ground. Trying to turn the Mississippi delta into another Holland was a foolish undertaking. There's no economic justification for this. The US government should stop subsidizing the creation of non-sustainable communities in the Mississippi delta.

Also see my previous posts Should New Orleans Get Rebuilt And Who Should Pay For It? and Hurricane Katrina Costs To Run Into Hundreds Of Billions Of Dollars and Algiers Exempted From New Orleans Evacuation Order and Federal Disaster Relief Money Encourages Irresponsible Behavior.

By Randall Parker    2005 September 13 10:17 AM Entry Permalink | Comments (67)
2005 September 10 Saturday
Federal Disaster Relief Money Encourages Irresponsible Behavior

Climate researcher Roy Spencer says a repeat of the Miami hurricane of 1926 would cost $110 billion.

Adjusted to 2004 dollars, Hurricane Andrew of 1992 was the costliest hurricane on record, at about $44 billion. It remains to be seen whether the Katrina event will exceed this record. If it does, it will be more attributable to the desire of so many people to live and build in coastal areas than to the inherent strength of the hurricane itself. Indeed, if we ask the question, "which land falling hurricane in U.S. history would be the most expensive if it happened today?" the clear front-runner would be the Great Miami Hurricane of 1926. It is estimated that, if that hurricane occurred today, the costs would reach about $110 billion.

The US government and state governments in the American southeast should adopt policies aimed at shifting more of the costs of hurricane strikes onto the people who choose to live in areas where hurricane damage can rack up huge costs.

For example, how about regional taxes in ocean front counties that would pay for disaster relief and repair of public infrastructure? Also, tougher building codes could reduce damages. Florida has probably gone furthest on this score with a succession of increasingly tougher building codes that require elevation of houses to reduce the risk of flooding damage and that also require better anchoring of roofs against high winds.

Who pays when hundreds of thousands of people become refugees from predictable disasters? We do. But these people shouldn't be living in flood zones in the first place.

Update: Henry Petroski says raise New Orleans above sea level.

Durham, N.C. -- When civil engineers start planning for rebuilding New Orleans, there are few historical examples to guide them. Duke University engineering professor Henry Petroski says the closest example he can think of is the 1900 Galveston, Texas, hurricane which, like Katrina, left a city partially underwater.

To protect Galveston from a recurrence, engineers found a bold and challenging solution that Petroski said may be necessary to save New Orleans: they raised the entire city.

“There have been massive floods before, but few have covered such an extensive urban area as 21st- century New Orleans,” said Petroski, an author of several books on engineering and society. “Galveston was devastated. What the engineers basically did was to raise it. Every low point of the city was higher than before, and some places were quite a bit higher, so if there was another flood the houses would be above it. In addition, they built a sea wall, but then they had backed this up so that the houses were higher if water did get through.”

Petroski, a member of the National Academy of Engineering and chair of the American Society of Civil Engineers’ History and Heritage Committee, said he doesn’t know if engineers would consider something similar for New Orleans. “The challenges would be enormous. The city is so much larger than Galveston was in 1900. But, on the other hand, they have many more resources and tools that the Galveston engineers didn’t have.”

Petroski provides no cost estimate for this undertaking. Abandonment of the lower lying areas would probably be cheaper. My basic questions:

  • What was the market value per acre of land in the flooded areas?
  • What is the cost per acre to raise each acre above sea level? Keep in mind that dirt costs are just part of the costs. New roads would need to get paved at the higher level. Houses would need to get rebuilt or lifted to higher levels.

If the cost of raising the land up exceeds the market value of the land the exercise would be wealth destroying and dumb. How much does an acre-foot of dirt go for? Anyone know what the cost is in your area delivered by truck?

Also, Petroski does not address the problem of continued subsidence. A place that does flood subsidies faster than a place that does flood. Many areas of NO that are below water level did not used to be. To make this worthwhile the level would need to be raised high enough to account for 50 or 100 or some other number of years of future subsidence.

Also, there's still the additional cost of preventing the delta from eroding all the way up to NO.

If New Orleans is worth saving by lifting it up with dirt then property taxes on the property of New Orleans should pay for the lifting. If the property there is not worth enough to pay for the lifting then raising up New Orleans is not cost justifiable.

Update II: Writing for the Wall Street Journal Sharon Begley reports that disaster experts see Hurricane Katrina as an unnatural disaster created by human folly.

As Theodore Steinberg argues, God is getting a bum rap. "This is an unnatural disaster if ever there was one, not an act of God," says Prof. Steinberg, an environmental historian at Case Western Reserve University, Cleveland. "If the potential for mass death and destruction from extreme weather existed anywhere in the U.S., it existed in New Orleans."

Yes, building a city in a delta and putting levees around it while it gradually sinks from natural subsidence is a pretty stupid thing to do. But in America the big move to build on hurricane coasts is far from the only foolishness humans are doing on mass scale. The construction of mobile home parks in tornado alley is taking its toll as well.

It isn't only hurricanes whose destructiveness has been increased by human actions. Tornadoes turn mobile homes into matchsticks (one of Prof. Steinberg's first jobs was at a New York brokerage firm, where he followed the trailer-home industry). From 1981 to 1997, he found, more than one-third of all deaths from tornadoes occurred among people living in mobile homes; federal regulations didn't require them to withstand high winds, and a 1974 statute actually pre-empted stricter state standards with more lax federal ones.

The New York Times reports that the overreaction of federal disaster relief spending has created conditions for big wasteful federal contracts.

Some experts warn that the crisis atmosphere and the open federal purse are a bonanza for lobbyists and private companies and are likely to lead to the contract abuses, cronyism and waste that numerous investigations have uncovered in post-war Iraq.

"They are throwing money out, they are shoveling it out the door," said James Albertine, a Washington lobbyist and past president of the American League of Lobbyists. "I'm sure every lobbyist's phone in Washington is ringing off the hook from his clients. Sixty-two billion dollars is a lot of money - and it's only a down payment."

John Tierney of the New York Times points out that the Army Corps of Engineers was not lacking for funds but Congress critters had earmarked the money for their pet projects rather than for the biggest threats.

Or suppose the investigators try to find out why the Army Corps of Engineers didn't protect New Orleans from the flood. Democrats have blamed the Iraq war for diverting money and attention from domestic needs. But that hasn't meant less money for the Corps during the past five years. Overall spending hasn't declined since the Clinton years, and there has been a fairly sharp increase in money for flood-control construction projects in New Orleans.

The problem is that the bulk of the Corps's budget goes for projects far less important than preventing floods in New Orleans. And if the investigators want to find who's responsible, they don't have to leave Capitol Hill.

Most of the Corps's budget consists of what are lovingly known on appropriations committees as earmarks: money allocated specifically for members' pet projects. Many of these projects flunk the Corps's own cost-benefit analysis or haven't been analyzed at all. Many are jobs that Corps officials don't even consider part of their mission, like building sewage plants, purifying drinking water or maintaining lakeside picnic tables.

But local governments ought to protect their own jurisdictions against flooding anyway.

By Randall Parker    2005 September 10 01:12 PM Entry Permalink | Comments (7)
2005 September 09 Friday
Algiers Exempted From New Orleans Evacuation Order

The more affluent of Algiers do not have to leave as yet.

Mayor Ray Nagin instructed all public safety officers "to compel the evacuation of all persons ... regardless of whether such persons are on private property or do not desire to leave," according to a written statement from his office.

The order did not apply to people in Algiers on the West Bank side of Orleans Parish.

The Algiers Point area sits on higher ground and probably could get restored to livable conditions a lot faster than most of New Orleans.

A realist might think that the much more law abiding middle and upper class in Algiers are being allowed to stay to defend their property against looters. Could the decision be made on such practical grounds? Or does Nagin's decision reflect the power of the upper class?

The people deliberating about evacuations ought to pause and think hard before ordering the evacuations of the middle and upper classes. If poor folks get sent to another state then that removes liabilities from the state's balance sheet. But if middle and upper classes are told to uproot they might leave the state and take their future tax paying revenue streams with them.

Kennedy said state tax revenues likely would take a hit from the storm. About $40 billion of the state’s $125 billion in total personal income tax revenue comes from the metropolitan New Orleans area, and the state will also lose tax revenue on lost income and spending.

A small slice (about $2.5 billion) of that $40 billion a year of income tax revenue from the New Orleans area could easily have built levees that would have prevented the flood of New Orleans.

Think of the middle and upper class refugees headed out of state as lost revenue sources. Think of lower classes headed out of state as lost liabilities and avoided future crimes. If the more affluent living on higher grounds are allowed to stay then the city and state will benefit in the long run. Perhaps a lower population New Orleans will have a higher average per capita income and lower crime rate a year from now as a result of Hurricane Katrina.

By Randall Parker    2005 September 09 03:50 PM Entry Permalink | Comments (4)
2005 September 08 Thursday
Police Were Underfunded Along With Levees In New Orleans

Mac Johnson says New Orleans was barely under control in the best of times and the city did not spend enough money on police.

Many people believe that Washington, D.C., is the “murder capital of America.” And indeed it often is, but that is only because such rankings are limited to “major cities” –those with a population of 500,000 or more, and New Orleans has (or had) a population of 485,000. Were it not for this actuarial accident, Washington, D.C.. wouldn’t even have a shot at the murder title. The per capita murder rate in New Orleans is 16% higher than in “Murder Capital” Washington, D.C.; and nearly 10 times the national average. To have a murder rate equal to that of New York City, New Orleans would need to reduce its murders by 86%. No, that’s not a typo.

At a time when crime is plummeting in most of America, it has been steadily increasing in New Orleans. And one cause is simple: The New Orleans City Government has run its law enforcement apparatus into the ground. On a per capita basis, New Orleans has less than half as many cops as Washington, D.C.: just 3.1 police officers per 1,000 citizens. Turnover has become a huge issue, as young cops leave at the first opportunity. A report conducted for the city two years ago said that New Orleans was “bleeding police officers.”

The taxpayers of New Orleans did not want to vote for property taxes high enough to pay for either a levee strong enough to protect the city from a natural disaster or for a police force strong enough to protect it from a human disaster. They made very short-sighted choices at great costs.

Why should the taxpayers of the whole United States pay to rebuild the parts of New Orleans that are below water level? If the city is not a financially viable concern it should shrink just as other declining cities have shrunk. The federal government should not reward imprudence, irresponsibility, and corruption with continued subsidy. To do so just encourages more of the same.

I have an even more fundamental objection to using federal tax money to rebuild New Orleans: The city seems destined to sink under water. By keeping its soil dry and preventing floods that build up the surface level the levees that keep out the water seem to doom New Orleans to continued subsidence. If anyone can point to expert commentary on why that is not the case please post in the comments or email to me. What I've come across so far (and thanks to Robert Schwartz for this link) argues that New Orleans is going to keep sinking.

First, all river deltas tend to subside as fresh sediment (supplied during floods) compacts and is transformed into rock. The Mississippi River delta is no exception. In the early to mid-20th century, the Army Corps of Engineers was charged with protecting New Orleans from recurring natural floods. At the same time, the Corps kept the river (and some related canals) along defined pathways. These well-intended defensive measures prevented the natural transport of fresh sediments into the geologically subsiding areas. The protected land and the growing city sank, some of it to the point that it is now 10 feet below sea level.

An argument can be made for projects to restore controlled flooding into some parts of the delta in order to prevent further delta erosion. But such projects should be approached in the spirit of efforts underway in the Everglades to restore some of the natural waterflow there. Maintenance of a navigable river channel and port facilities do not also require maintenance of large urban and suburban living areas. Highly automated ports do not require a large nearby urban population as a source of workers. Therefore the expense of large levees around New Orleans can not find justification in economic arguments about trade.

If New Orleans is to be restored then it should not get a large population in its lower lying areas until stronger levees are built. Otherwise we could spend a lot of money and then witness a repeat hurricane strike causing large scale death and destruction. But if levees get built that will take years and by then most of the former residents of New Orleans will have developed their lives and found work in other communities. So what is the point of restoring the lower lying areas of New Orleans to be able to hold hundreds of thousands of people?

Also see my previous post "Should New Orleans Get Rebuilt And Who Should Pay For It?"

By Randall Parker    2005 September 08 01:17 AM Entry Permalink | Comments (16)
2005 September 07 Wednesday
Hurricane Katrina Costs To Run Into Hundreds Of Billions Of Dollars

The New York Times reports federal government costs for Hurricane Katrina might rise to $100 billion.

WASHINGTON, Sept. 6 - The federal government's costs related to Hurricane Katrina could easily approach $100 billion, many times as much as for any other natural disaster or the $21 billion allocated for New York City after the terrorist attacks of Sept. 11, 2001.

"There is no question but that the costs of this are going to exceed the costs of New York City after 9/11 by a significant multiple," predicted Senator Judd Gregg, Republican of New Hampshire and chairman of the Senate Budget Committee.

Administration officials said today that rescue and relief operations in Louisiana and Alabama are costing well over $500 million a day and are continuing to rise.

Less than four days after Congress approved $10.5 billion in emergency assistance, White House officials said they would be asking for an even bigger amount in the next day or two.

I haven't seen cost estimates for the local and state governments.

The next appropriation might add $40 billion to the $10 billion already appropriated.

President Bush intends to seek as much as $40 billion to cover the next phase of relief and recovery from Hurricane Katrina, congressional officials said Tuesday as leading lawmakers and the White House pledged to investigate an initial federal response widely condemned as woefully inadequate.

One week after the hurricane inflicted devastation of biblical proportions on the Gulf Coast, Senate Democratic leader Harry Reid, D-Nev., said the total tab for the federal government may top $150 billion. At the same time, senators in both parties said they suspect price gouging by oil companies in the storm's aftermath.

Federal government costs could go as high as $200 billion.

The federal government could spend as much as $150 billion to $200 billion caring for the victims of Hurricane Katrina and rebuilding from its devastation, according to early congressional estimates -- a total bill that would far surpass the initial costs of recovering from the 9/11 terror attacks and could put Katrina on track to become the most expensive natural disaster in American history, the (paid-restricted) Wall Street Journal reports in Wednesday editions.

Note that a lot of those costs come from what are basically welfare payments. How long will all the people who lost housing in New Orleans get to live in the federal dole? That will determine how high the pay-outs will rise. Unfortunately the drunken sailor spenders in Washington DC and the pundit elite fools around them want to resurrect the big urban welfare spending programs of the past in response to black lawlessness. Hey, welfare didn't work last time. The welfare state contributed to the decline of families and neighborhoods in urban areas. Are we doomed to repeat this mistake?

Bush's agenda looks to be in tatters. The disaster made him even more unpopular and simultaneously added huge costs to the federal budget. Bush and the Republicans in Congress want to repeal the estate tax which would reduce federal revenue by $70 billion per year. That just got politically much harder to do. The need to appoint a second Supreme Court justice and deal with the expensive aftermath of Hurricane Katrina lower the odds of enacting many Bush policy initiatives.

About $100 billion in property sits in the flooded areas.

At least 150,000 properties have been flooded in New Orleans this week, surpassing the previous U.S. record from flooding and levee failures on the Lower Mississippi river in 1927, which inundated 137,000 properties, RMS said.

The value of physical property in the flooded areas is approximately $100 billion, RMS estimated.

A property tax on that $100 billion in flooded properties could have been used to pay for a much better levee system. But is that valuation on just New Orleans area property or does that include flooded Mississippi property as well?

Will the economy have a smaller loss than the government?

Paul Getman, chief executive officer of Economy.com, estimates the economic loss from the hurricane that devastated New Orleans and a swath of communities along the Gulf Coast will total around $175 billion.

Most of that _ $100 billion _ is damage to homes, businesses, roads, bridges, levees, telecommunications, water and sewer systems and other public infrastructure, he said. Another $25 billion is the cost of disrupted economic activity. Larger energy bills faced by consumers and businesses make up the other $50 billion.

Insured losses might add up to only $25 billion.

"This is far and away off the charts in terms of other natural disasters," Global Insight spokesperson Jim Dorsey said.

Global Insight projects insured losses from Katrina will top $25bn.

"But a lot of folks down there are uninsured so it's conceivable that the real loss figure could double or triple to upwards of $75bn," Dorsey said.

New Orleans was a dumb place to locate a federal government center that generates paychecks for half a million federal employees.

The Agriculture Department, which had 1,427 employees at its National Finance Center in New Orleans, also has not heard from all staffers, said Ed Loyd , the department's press secretary. "We are anxious to know they are safe," he said.

The National Finance Center handles a large part of the federal payroll, sending out checks and making electronic bank deposits for about 500,000 government employees. The center, aware that Katrina could swamp New Orleans, worked through a weekend to get checks out to employees before the hurricane hit Aug. 29.

The United States government should systematically move work centers out of coastal cities that are at risk of getting hit by hurricanes. No purpose (aside, perhaps, from handing out pork to Congressional districts) is served by locating most US agencies in high risk areas. Some functions such as FBI offices and US attorney offices have to get located around the country in highly populated areas because those populations need those federal workers. But for many other functions locations which have high natural disaster risks should be avoided.

We are entering a long term cyclical upswing in hurricane activity that will span the next few decades. At the same time a large migration to coastal regions is building up more structures to get wrecked when hurricanes hit coasts. So we face more such expensive hurricane disasters in the coming years.

By Randall Parker    2005 September 07 02:19 AM Entry Permalink | Comments (12)
2005 September 02 Friday
Should New Orleans Get Rebuilt And Who Should Pay For It?

The rebuilding of New Orleans will cost many billions and perhaps even tens of billions of dollars. On top of that the levee system and other water control improvements will be needed to prevent a repeat of the Hurricane Katrina disaster. Faced with these huge costs a question arises: Is New Orleans an economically viable city? Should it be rebuilt? It is time to look at the tax base and economics of New Orleans.

The New Orleans property tax system shows signs of corruption that prevent the city from realizing all the revenues it could potentially collect. Also, New Orleans does not increase assessed values all that much as market values increase. So the city could have greatly higher tax revenues than it has been collecting. Such revenues could have gone to fund higher levee construction. Worse, still, the New Orlean Times-Picayune newspaper found that people who donate to reelection campaigns of tax assessors enjoy much lower property taxes than those who do not donate.

As a rule, New Orleans assessors put residential properties on the tax rolls at their sales price and then do not increase the valuations to reflect market appreciation. So New Orleanians who own their homes for a long time, whether or not they are donors, generally benefit from low assessments.

To determine whether donors get any additional benefit, The Times-Picayune looked at whether their homes went on the rolls for less than the sales price. Such breaks are fairly unusual, in part because assessors who stray too far from sales prices run the risk of having their tax roll rejected by the state.

Not only are properties owned by campaign donors prone to being undervalued, but they're likely to be undervalued by a larger amount than other properties. For example, properties owned by donors were more than three times as likely as other properties to be valued at 80 percent or less of their most recent sales price.

The breaks become larger when the date of the most recent sale is considered. The average donor-owned home in the newspaper's survey was purchased in 1988. The average sales price of a home in Orleans Parish has increased by 129 percent since then. But the properties in the survey are still valued at an average of 7 percent less than their most recent sales price.

Those numbers suggest that donor-owned homes are worth 136 percent more on average than the assessors' valuations. By comparison, the newspaper's survey found that the average New Orleans home not owned by a donor was worth about 70 percent more than its assessment indicated.

The New Orleans assessors have to keep their cheating from getting really blatant in order to avoid objections from a state-level commission.

Local taxing authorities collect about $2 billion a year in property taxes in Louisiana. Parish millages vary from a low of just over 43 mils to a high of nearly 176 mils in Union Parish and St. Tammany Parishes, respectively (2002). Municipalities also collect property taxes. Millage taxes are based on budget requirements set by local governments and are voted on by the taxpayers in the local communities. Parish assessors, elected to four year terms, have the responsibility of overseeing the proper assessment of properties within their jurisdiction. Under Louisiana state law, all properties within a parish are supposed to be re-assessed every four years in order to ensure accurate, up-to-date valuations. The Louisiana State Tax Commission is responsible for certifying that parish tax rolls are accurate.

Underassessments probably cost New Orleans $100 million per year in foregone tax revenue.

Last year, Mayor Ray Nagin took New Orleans' seven assessors to task for undervaluations of property that he said were costing the city more than $15 million a year. Although the assessors countered that the mayor was ill-informed and acting outside of his authority, the statistics suggest Nagin was low-balling the loss.

Had the properties in the survey been valued at the prices for which they sold and property tax rates remained constant, city agencies would have taken in an additional $2.3 million annually. Assuming the sample is representative, city agencies could have taken in, conservatively, at least $52 million more in tax revenue last year -- just from homeowners -- if assessments were accurate citywide. That's about the total raised from homeowners now.

Moreover, owner-occupied houses amount to about 40 percent of the city's base of taxable real estate. If similar assessment inequities exist in apartment complexes and commercial property, which were not examined in the newspaper's survey, the likely shortfall in city revenue could be more than $100 million a year.

Throw in a tax increase on property and it seems clear in retrospect that the money to pay for defending New Orleans from the sea was potentially available from local taxes. But if New Orleans could not afford to defend itself against hurricanes then the population of New Orleans should have gradually shrunk into a smaller area which can be defended. The people there have no right to demand of the rest of the United States to have their below-sea level lifestyles subsidized by everyone who chooses to live in less risky locales.

The flooding in New Orleans could have been avoided for $2.5 billion which could have been funded with a bond payable with higher property taxes.

"It would take $2.5 billion to build a Category 5 protection system, and we're talking about tens of billions in losses, all that lost productivity, and so many lost lives and injuries and personal trauma you'll never get over," Mr. Naomi said. "People will be scarred for life by this event."

If New Orleans property was all assessed at market value then a levee system strong enough to prevent the latest disaster could have been paid for by the citizens of New Orleans rather than by the taxpayers in the rest of the United States who do not choose to live below sea level.

One reads again and again in the press of complaints by local people about how a lack of federal money was to blame for what happens. But surely the locals could have come up with the money to buy better pumps and backup power generators.

Dr. Penland, the director of the Pontchartrain Institute for Environmental Studies at the University of New Orleans, said it was impossible to say how long it would take to repair the levees and pump the city dry.

New Orleans has 22 pumping stations that need to work nearly continuously to discharge normal storm runoff and seepage. But they are notoriously fickle. Efforts to add backup power generators to keep them all running during blackouts have been delayed by a lack of federal money.

"Pumping the water out - that's a lot of water," Dr. Penland said. "When the pumping systems are in good shape, it can rain an inch an hour for about four to six hours and the pumps can keep pace. More than that, the city floods."

If New Orleans is not economically viable the absent a large federal subsidy for storm defenses then the city does not have some sort of God given right to call upon the rest of the nation to support it.

Even if the nation decides to fully rebuild New Orleans the city might get trashed a couple more times while waiting for a cat 5 hurricane capable levee system to get built. Al Naomi says a levee fix to prevent cat 5 hurricane disasters would take decades to construct.

Until the day before Katrina's arrival, New Orleans's 350 miles (560 kilometers) of levees were undergoing a feasibility study to examine the possibility of upgrading them to withstand a Category Four or Five storm.

Corps officials say the study, which began in 2000, will take several years to complete.

Upgrading the system would take as long as 20 to 25 years, according to Al Naomi, the Corps' senior project manager for the New Orleans District.

Wikipedia's entry on New Orleans provides economic insights into whether New Orleans could afford sufficient flood control measures to protect against a category 5 hurricane.

As of the census2 of 2000, there are 484,674 people, 188,251 households, and 112,950 families residing in the city.

The median income for a household in the city is $27,133, and the median income for a family is $32,338. Males have a median income of $30,862 versus $23,768 for females. The per capita income for the city is $17,258.

From those numbers above New Orleans has a total GDP of about $8.4 billion. Could a city with that level of GDP afford to spend a few billion dollars on anti-flood measures?

In the coming debate on what to do about New Orleans keep in mind that another category 5 hurricane could hit the city next year or 5 or 10 years from now. Should billions of dollars in federal aid go into rebuilding the city? Or should the rebuilding aid be held back with money first spent on building levees and other anti-flood measures? Or should the homes in the flooded parts not get rebuilt and should the city just shrink in size into defensible borders?

At this point the assessed value of New Orleans just took a big nose dive. The local tax base just contracted into a small fraction of its previous size. Advocates for rebuilding should explain why the federal government should fund both a large chunk of the rebuilding cost and the development of a levee system and pumping system capable of handling the worst case events.

The US government already spends hundreds of millions per year subsidizing the physical upkeep of New Orleans. Michelle Malkin points to an article from the New Orleans City Business which showed that Army Corps of Engineering spending for New Orleans doubled from 1991 to 2003.

The Corps' New Orleans district in 2003 spent about $409 million on construction contracts, dredging and maintenance for the state's waterways, real estate purchases, private sector design contracts and in-house expenditures, according to the Corps. That more than doubles the $200 million the district spent in 1991.

Also, I do not buy the argument for the economic importance of New Orleans as a port city. I think the argument is based on a fallacy: Most of New Orleans does not need to be protected by levee in order for the port to work. Also, if the port has such high economic value then port usage charges should be raised high enough to pay for the levee system. If some economic activity has such high value then it should pay for itself. If port charges can get hiked high enough to pay for these costs then the market has spoken and ports can get expanded elsewhere to pick up the load.

One other point can be made for federal subsidies for the defense of New Orleans: Projects further up on the Mississippi river have cut the amount of sediment reaching New Orleans to replenish the silt that gets corroded away. Fair enough. But most of the problem with sediment appears to come from human interventions done for the area around and to the south of New Orleans. (and this is a really good article from Scientific American)

Louisiana's barrier islands are eroding faster than any around the country. Millions of tons of sediment used to exit the Mississippi River's mouth every year and be dragged by longshore currents to the islands, building up what tides had worn away. But in part because levees and dredging prevent the river's last miles from meandering naturally, the mouth has telescoped out to the continental shelf. The sediment just drops over the edge of the underwater cliff into the deep ocean.

Back in New Orleans the next day it becomes apparent that other human activities have made matters worse. Cliff Mugnier, an L.S.U. geodesist who also works part-time for the Corps of Engineers, explains why from the third floor of the rectangular, cement Corps headquarters, which squats atop the Mississippi River levee the Corps has built and rebuilt for 122 years.

Mugnier says that the earth beneath the delta consists of layers of muck--a wet peat several hundred feet deep--formed by centuries of flooding. As the Corps leveed the river, the city and industry drained large marshes, which in decades past were considered wasteland. Stopping the floods and draining surface water lowered the water table, allowing the top mucks to dry, consolidate and subside, hastening the city's drop below sea level--a process already under way as the underlying mucks consolidated naturally.

So the city is sinking. Mugnier says the parishes digging water drainage ditches are speeding the drying and compacting of the soil. Hence they are speeding the subsistence. He says St. Charles Parish will probably sink 14 feet. Should the US government spent more money on levees to protect these sinking parishes that are sinking themselves? We need to allow some natural processes to resume working. But all the local communities (New Orleans included) do not want to pay the price in flooding necessary to make those processes work. The delta has too many people living in it for natural processes to work.

Read that previous article. The problem with storm threats and sinking and corroding land in the New Orleans area runs a lot deeper than the blame game blog debate about increases or decreases of some tens of millions of dollars in the federal by the Bush Administration.

Corrupt and incompetent governments in Lousiana have done too little for decades to prepare for hurricanes. At the same time these governments have pursued policies and continue to pursue policies are sinking the land in the delta and causing massive losses of land to the sea. Louisiana has screwed up on such a massive scale that it is time to tell them they have to take responsibility for their problems.

Also see my post "Partisan Politics And The New Orleans Hurricane Katrina Disaster ".

Update: Here's my top question about the whole Mississippi delta: Can the sinking of New Orleans even be stopped or can it only be slowed? Note what the Scientific American article says above. As long as a levee exists around New Orleans and the place is not allowed to flood will it just continue to sink? Will the drying of the soil and the lack of new silt deposited on the surface of the city condemn the city to sink ever deeper?

Maybe the real problem here is that humans simply can't live long term (i.e. centuries) on a large delta of a river.

The levee system built to tame the Mississippi river both causes the subsidence and increases the economic value of ports along the river. A more complicated (and expensive) levee system could prevent (or at least slow) delta erosion. But can a complicated levee system prevent the populated areas from sinking?

If the areas that are kept permanently dry are condemned to sinking at some minimal rate even with the most sophisticated levee system then perhaps the delta should have port facilities but little population. Let the bulk of the Mississippi delta exist for wildlife and use levees to maintain a port and navigable river and for maintaining the delta buffer but not to maintain towns and cities in the delta.

By Randall Parker    2005 September 02 04:37 PM Entry Permalink | Comments (36)
2005 September 01 Thursday
Partisan Politics And The New Orleans Hurricane Katrina Disaster

Kevin Drum assumes his duty on the Left in the inter-party blame game for the New Orleans disaster.

  • Summer 2004: FEMA denies Louisiana's pre-disaster mitigation funding requests. Says Jefferson Parish flood zone manager Tom Rodrigue: "You would think we would get maximum consideration....This is what the grant program called for. We were more than qualified for it."
  • June 2004: The Army Corps of Engineers budget for levee construction in New Orleans is slashed. Jefferson Parish emergency management chiefs Walter Maestri comments: "It appears that the money has been moved in the president's budget to handle homeland security and the war in Iraq, and I suppose that's the price we pay."
  • June 2005: Funding for the New Orleans district of the U.S. Army Corps of Engineers is cut by a record $71.2 million. One of the hardest-hit areas is the Southeast Louisiana Urban Flood Control Project, which was created after the May 1995 flood to improve drainage in Jefferson, Orleans and St. Tammany parishes.

Does Lousiana have no money? Does the New Orleans government have no money? Why does the state of Lousiana need federal money (i.e. money taken from the pockets of people in other states) to prepare for natural disasters?

So Drum is all huffy. He gets huffier still:

A crony with no relevant experience was installed as head of FEMA. Mitigation budgets for New Orleans were slashed even though it was known to be one of the top three risks in the country. FEMA was deliberately downsized as part of the Bush administration's conservative agenda to reduce the role of government. After DHS was created, FEMA's preparation and planning functions were taken away.

Actions have consequences. No one could predict that a hurricane the size of Katrina would hit this year, but the slow federal response when it did happen was no accident. It was the result of four years of deliberate Republican policy and budget choices that favor ideology and partisan loyalty at the expense of operational competence. It's the Bush administration in a nutshell.

Drum's post illustrates why I do not often read the heavily partisan blogs on either the Left or Right: Every event is turned into the fault of the opposing side if the opposing side is in control in Washington DC. But this disaster was predicted for decades, and not just by the latest staff of FEMA. Why didn't the Clinton Administration build much bigger levees around New Orleans? Or Bush Sr., Reagan, Carter, Ford, Nixon, Johnson, Kennedy or Ike? You blame many past US Presidents and Congresses for the weak levee system that made this tragedy possible.

Hurricane disaster budget cuts predate Bush's Administration.

Congress in 1999 authorized the corps to conduct a $12 million study to determine how much it would cost to protect New Orleans from a Category 5 hurricane, but the study isn't scheduled to get under way until 2006. It was not clear why the study has taken so long to begin, though Congress has only provided in the range of $100,000 or $200,000 a year so far.

...

Funding for these projects has generally trended downward since at least the last years of the Clinton administration. Congressional records show that the levee work on Lake Pontchartrain received $23 million in 1998 and $16 million in 1999. It was not clear how much the drainage project received in 1998, but records show it received $75 million in 1999.

But this is all chump change. Surely Senator Landrieu and other federal-level Louisiana politicians have gotten hold of much larger chunks of money for a variety of pork projects during the 1960s, 70s, 80s, 90s, and since 2000. They could have gotten a lot more for flood control.

But I'm a federalist. While I have a fairly negative of view George W. Bush why can't the people of New Orleans and Louisiana finance a sufficient levee system that would handle even the worst case storms? Why didn't the local governments increase property taxes to fund the construction of levees to protect their property? Doesn't the blame rest on local elites and local voters?

In a nutshell: Why should the rest of the American public pay for property protection when a tax on local property owners to pay off some bonds could have built up sufficient levees?

The insufficient levees were a disaster waiting to happen for decades. That successive generations of Louisiana politicians failed to address the known threat says more about the voters than it does about the obviously inadequate Democratic Governor Blanco or Republican President Bush or ditzy Democratic Senator Landrieu.

By Randall Parker    2005 September 01 09:03 PM Entry Permalink | Comments (7)
2005 August 24 Wednesday
Steve Sailer On Hollywood Blacklist And Intellectual Property Fights

Writing for The American Conservative Steve Sailer puts a different spin on the motivations behind the Hollywood blacklist against communists.

A 1919 theatre strike won the playwrights of Dramatists Guild the right to retain copyright in their works. To this day, dramatists own their plays and merely license them to producers. Further, they have the right to approve or reject the cast, director, and any proposed changes in the dialogue. Contractually, a playwright is a rugged individualist, an Ayn Rand hero.

If memory serves, Rand had total (and highly unusual) editorial control of the script for the movie version of The Fountainhead. The communist script writers must have been very envious.

But the Hollywood movie script writers did not enjoy this legal right and their battle against the Hollywood studios over the right to control their own intellectual property led to to the blacklist against communists.

Insanely ironic as it seems now, many screenwriters became Communists because they despised the movie business' need for cooperation. How turning command of the entire economy over to a dictatorship would restore the unfettered joys of individual craftsmanship was a little fuzzy, but, hey, if you couldn't trust Stalin, whom could you trust?

The possibility of studios blacklisting writers first surfaced in the 1930s when the moguls' cartel turned aside the leftist screenwriters' push to align themselves with the Dramatists Guild by threatening to fire union supporters. "It wouldn't be a blacklist because it would all be done over the telephone," Jack Warner explained.

Decades later, after the formal Blacklist era, this labor-management conflict was eventually resolved by a tacit compromise. The blacklisted writers were elevated in the collective memory to the role of martyrs. Their leftism (but not their Stalinism, which was conveniently forgotten) was enshrined as the appropriate ideology of all respectable movie folk.

In return, the producers damn well hung on to their property rights in screenplays.

This is not history as popularly portrayed, now is it? Stalinist writers fighting for copyright control (in other words, intellectual property) of their own works? Oh, and they conducted this fight against the command economies which operated inside each movie studio. How convenient that the US Congress pressured Hollywood on communists. Just the excuse needed to break their attempt to get more intellectual property.

A too little recognized aspect of corporate capitalism is that internally corporations are command economies. They are not based on the Marxist "from each according to his ability and to each according to his need". Rather, they operate more like "from each to the extent we can pressure him to work harder and to each according to whether he can get a higher salary inside another corporate command economy". But even that limited right only works when a corporate command economy won't sue a departing worker for taking a job at a competitor with the claim the worker is taking company secrets with him.

Legal reforms that establish more property rights for individual knowledge workers make industry less a bunch of large command economies. Whether that would be more or less fair or more or less economically efficient is hard to say. I suspect such reforms would tend to increase economic inequality and also boost productivity by providing much more incentive to create.

Steve's article makes a wide assortment of other observations about the movie industry, politics, and American culture. Suggest you read it in full.

By Randall Parker    2005 August 24 11:56 AM Entry Permalink | Comments (4)
2005 August 03 Wednesday
California San Joaquin Valley Agricultural Subsidies Tallied

Big pieces of California's agricultural industry runs on government subsidies.

OAKLAND, Calif., Aug. 3 — Some of America's richest agribusinesses are double dipping from U.S. taxpayers' pockets at a rate of hundreds of millions of dollars a year, according to an Environmental Working Group (EWG) computer investigation of federal crop and water subsidies to California's Central Valley Project (CVP).

At a time of record federal budget deficits and scarce, expensive water, thousands of Central Valley farms get cheap, taxpayer-subsidized water to grow surplus crops the government subsidizes a second time with price supports. EWG found that in 2002, the latest year for which figures are available for both types of subsidies, the approximately 6,800 farms in the CVP, the largest federally-operated irrigation system in the nation, took in by conservative estimate $538 million in crop and water subsidies combined.

EWG found:

  • More than one in four CVP farms got double subsidies for at least one year between 1995 and 2004. Crop subsidy checks to these farms in that period totaled more than $891 million. These farms received more than $152 million worth of water subsidies in 2002 alone, so their combined subsidy take over ten years could well top $2 billion.
  • Roughly one-third of the subsidized irrigation water the CVP delivered in 2002 went to grow crops eligible for subsidies from the Department of Agriculture. Cotton and rice growers were the biggest subsidy sweepstakes winners by far. These crops received one-fourth of the irrigation water and 92 percent of the crop subsidies in the system.
  • Some California dairy operations are not double dippers but triple dippers. They receive taxpayer-subsidized water to grow corn, for which they receive crop subsidies. They feed the corn to cattle to produce milk, cheese and other products eligible for federal dairy subsidies. These triple dippers received more than $3 million in combined subsidies in 2002.

Long term subsidized water contracts are locking in the subsidies for decades to come.

In 2002, the ten biggest double dippers in California reaped almost $20 million in water and crop subsidies combined. The five biggest — Dresick Farms of Huron, Burford Ranch of Fresno, Hansen Ranches of Corcoran, Sumner Peck Ranches of Madera, and Starrh & Starrh Cotton Growers of Shafter — each received more than $2 million in combined federal subsidies in 2002.

...

The Bureau of Reclamation is in the process of renewing long-term contracts for CVP irrigation districts that promise 43 percent more subsidized water by 2030, even though hundreds of thousands of acres are going out of crop production. Renewing the water contracts at bargain-basement prices, while ignoring the inherent conflict of growing subsidized crops with subsidized water, will lock in double dipping for another 25 to 50 years.

Meanwhile, the federal crop subsidy program grows more bloated each year, with new EWG figures showing $12.5 billion in price supports paid nationwide in 2004. The U.S. is under pressure to comply with a World Trade Organization ruling that U.S. cotton subsidies are illegal and harmful to Third World economies. Earlier this year, President Bush proposed reducing crop subsidies, then backed down after an outcry from the farm lobby.

One wonders how much money these big farmers give to Congressional campaigns. Do Congress reps sell themselves cheaply? Or are they high-priced courtesans?

Also, how many cheap illegal aliens do these farms employ? What is the subsidy cost for their medical care, education for their children, and other costs picked up by taxpayers?

I remember first learning that rice is grown in Calfornia. When one thinks of rice one thinks of historic Southeast Asian rice paddies where torrential rains provide the water needed. Growing rice in the desert in a state short on water can only be done with government intervention to pay for it.

It is good that environmental groups have joined economists and taxpayers in arguing against agricultural subsidies Now, if only environmental groups would return to their embrace of population control which so many of them embraced in the 1970s they could support efforts that will do far more to protect the environment than would be accomplished by cuts in agricultural subsidies. To make that shift the environmental groups would have to come out against immigration. But the liberal fools think posturing as unracist is more important than protecting the environment and quality of life in America.

By Randall Parker    2005 August 03 10:06 AM Entry Permalink | Comments (4)
2004 April 17 Saturday
Charles Murray: You Are What You Tax

In a New York Times Op-Ed Charles Murray proposes to allow each taxpayer to choose how their tax money is allocated.

Police, fire, water and sewage, courts and prisons and national defense will get far more money than they would ever have the nerve to request. The allocations for national parks, environmental protection, air-traffic control and highways will probably be many times their current budgets. But my first point (match my prediction against your own choices) is that almost all the choices will be for tangible services. Most of them will be for services that fall under the classic understanding of a "public good" - something that individuals cannot easily provide on their own and that is shared by all (police protection, clean air).

Mass direct democracy is an appealing idea. Governments do many things that they would not do if each individual decision was separately voted on by all voters. On a large assortment of subjects the government does things that the majority opposes. For instance, on immigration the elite-populace gap is huge. Public choice theorists offer explanations for why government so often behaves in ways that cause it to go against the will of the majority. But it seems they less often propose what to do about this problem. Murray is offering a rather bold proposal that would, if implemented, cause a huge reordering in government spending priorities.

One can pick some nits on this proposal. One objection is that giving each taxpayer the ability to allocate government spending would make spending too volatile from year to year. Is this a fixable problem? One way to deal with it would be to allow a person to commit to a multi-year allocation of taxes paid. But there would need to be some incentive for a person to specify their allocations over multiple years.

A second objection is that a once-a-year allocation would not offer sufficient flexibility. If, for instance, there was need to increase defense or homeland security spending due to an event in the middle of the tax year there'd be no way to do that if all money was allocated when people filed their tax returns. But we could allow people to allocate some of their tax money to something called "reserves" and then to allocate that reserve money within the year or even to assign that money to a future year.

A third problem with this proposal is that in the simplest implementation each person would not know in advance what decisions others would make. A person who wants to make sure that a particular area gets funded well enough might specify that all their money would go to that area. But if too many do so then all the biggest supporters of an agency or project may get an outcome they do not desire with so much going to that area that much of the money would be wasted. For instance, give NASA $50 billion next year and there'd be no way for NASA to spend that effectively.

To implement Murray's proposal would require some sort of mechanism that would allow taxpayers to specify rules to transfer money to lower priorities once their top priorities have enough money. So a taxpayer could say "Allocate all my money to the Environmental Protection Agency if its budget is less than $1 billion but for every $100 million above $1 billion that the EPA gets take 10% of my money and allocate it to the next item on my priority list". If each item on a person's priority list was specified as a rule in some formulated automatically implementable manner then a person could be assured that what they want to spend money on will get enough but not too much.

But spending rules in that style the example above uses would face another problem: If lots of people put conditional rules on how much they want to spend on, say, the Environmental Protection Agency whose money should be reallocated to their priorities once the EPA has enough money? One could imagine a method where everyone's first rule was evaluated, the EPA might then be found to have a $10 billion dollar budget, and then anyone who wanted a lower max would have portions of their money taken away until the EPA was down to a point was greater than or equal to their spending max for that agency.

Another way to handle the over-allocation problem would to allocate money in a series of steps where each person had to allocate, say, 5% of their tax money at each step. Then each person could see what other decisions others were making in the early steps and stop allocating to some purposes after the first few steps once they see that enough money is going to those purposes. This is not an ideal solution however because this mechanism still might result in some purposes getting far more money than some of their earlier stage allocators would prefer.

It seems reasonable to implement this proposal gradually. Shift 10% of each person's income taxes into the allocatable category each year. One advantage to this approach is that it would allow the populace to gradually learn the consequences of their allocations. But in the first year of such a mechanism for implementing spend Congress might respond by shifting around the remaining money to at least partially cancel out the directly expressed preferences of the taxpaying populace.

Another obvious huge problem with this proposal is in how to define the spending categories. Do we make "Defense" a single item? Or do we let people specify whether they want their money to go the Navy or Air Force or Army or Marines? How about submarines versus surface ships? Or building new equipment versus upgrading versus raises for the troops versus more troops?

Congress could be tasked with defining the spending buckets. But it might be tempted to assign tasks to a department just because that department gets lots of money from the choices of taxpayers. Congress already uses spending laws to foist all manner of rules on federal contractors about racial preferences, environmental regulation, and assorted other topics. Congress would be tempted to do much more of this if the taxpayers were more directly controlling the purse strings. What could be done to limit Congress's use of this sort of strategy and of the bureaucracy's use of this strategy?

A final objection is that the people who make the most and pay the most in taxes would have a far larger say in how money is spent than those who pay little or no taxes. True enough. But is that a problem? If so, why? I think those who are making the most will probably make better decisions. Seems like a feature rather than a flaw.

If anyone reading this knows any game theory and has some better suggestions on implementation of Murray's proposal then please post them in the comments.

Charles Murray is the author of a number of books including most recently Human Accomplishment : The Pursuit of Excellence in the Arts and Sciences, 800 B.C. to 1950 as well as What It Means to Be a Libertarian, his highly influential Losing Ground: American Social Policy, 1950-1980, and co-author with the late Richard Herrnstein of the book that is more influential than most are willing to admit: The Bell Curve: Intelligence and Class Structure in American Life.

Update: One other point about this proposal worth noting is that one flaw with current democracy is that each vote for a representative has to be over too many different issues. When governments did orders of magnitude fewer things the number of reasons to choose between candidates was fairly small. But today we have to select people who have to make so many different decisions on so many different issues that there are too many trade-offs in a voting choice. You might, for instance, prefer one presidential candidate on domestic issue but another on foreign affairs. Or you might prefer one on criminal law enforcement and another on environmental regulation. The outcome has to be less than optimal. Regardless of whether you agree with Murray's proposal consider the possibility that some major change in how decisions are made could produce much better decisions.

Another proposal that I've encountered in the past is to elect two legislatures, one for taxation legislation and the other for spending legislation. People could then separately choose how much they want to get taxed and how they want to see the money spent. Of course there are plenty of ways to use tax legislation to force private individuals and corporations to spend money in ways that are contrary to their interests and their desires. Also, there are plenty of ways to structure spending programs that will have some impact on how much tax revenue will be collected. But the idea of separate voting on taxation and spending has merit.

One big advantage of Murray's proposal is that it would give people a much bigger sense of direct involvement and power in how the government operates. That would probably be an incentive for citizens to learn more about issues since they would have much more control over how their money was spent. It would also likely produce much more satisfied taxpayers.

By Randall Parker    2004 April 17 02:48 PM Entry Permalink | Comments (8)
2002 November 23 Saturday
Bush Signals Russia's Iraq Interest Will Be Protected

Russia's UN position on Iraq was all about money. Now Bush, by making his assurances public, has made it clear to the Russian government that the US will make sure Russia continues to earn money from Iraqi oil fields after Saddam's regime is gone.

Bush took such assurances to a more formal and public level when he told Russia's NTV Television on Thursday that if there is regime change in Baghdad, "we fully realize that Russia has economic interests in Iraq, as do other countries."

"Of course, these interests will be taken into account," he added.

The Bush Administration is even willing to make sure that world oil prices will stay high enough to prevent a Russian economic meltdown.

A high-ranking Russian foreign ministry official involved in negotiations with the United States over the U.N. resolution told an American visitor to Moscow this week that a "gentleman's agreement" had been reached with Washington on Iraq.

He said the deal centered on maintaining a price of oil at around $21 a barrel, the price used by Russian government planners for long-term budget estimates. Oil prices have been hovering around $25 a barrel for much of this year.

As I've stated previously, there is considerable irony in the argument that the US is going to fight Saddam for oil. Many of the opponents of the war against Saddam's regime come to their opposition in large part as a result of their own oil interests and other financial interests in the Iraqi regime and in world oil prices.

By Randall Parker    2002 November 23 08:46 PM Entry Permalink | Comments (0)
2002 November 05 Tuesday
Iraq Is About Oil: But In Whose Minds?

Some opponents of a US attack on Iraq put forward the argument that the US motive revolves around oil. There is considerable irony in this argument because while the argument about whether to attack Iraq is about oil the reason is not because of US motives. The reason that the fight over Iraq is about oil is because the opponents of the attack want to protect their oil interest and other interests in Iraq that flow directly or indirectly from Iraq's ability to produce oil. Take Russia for example:

Iraq still owes Russia from $7 billion to $10 billion for arms purchases during the war with Iran, and Russian oil companies, with their history of cooperation with Iraq, are poised to be major players in any revival of the Iraqi oil industry.

Lukoil, Russia's biggest oil company, signed a 23-year deal with Iraq five years ago to rehabilitate the country's southern oil fields, a deal potentially worth billions.

At the same time, Russia is worried that an eventual increase in Iraqi oil production could drive prices down.

Russia is hardly the only country who sees its oil interests threatened by a US invasion of Iraq. Saudi Arabia doesn't want Iraqi production to lower the world price of oil and it doesn't want US control of Iraqi oil fields to lessen US feelings of dependence on the Saudis. France wants its business relationships with Iraq to be maintained.

By Randall Parker    2002 November 05 07:32 PM Entry Permalink | Comments (0)
2002 September 23 Monday
Russia fears Iraqi regime change will lower oil prices

There is frequently a big gap between the stated and actual reasons governments oppose the actions of other governments. Well, in the case of Russia's objection to regime change in Iraq the actual reason for Russia's position is all about the Benjamins. From the Janes site:

However, what the Kremlin fears most is the ousting of Saddam Hussein and his replacement with a US-backed puppet regime. Should such an administration be installed in Baghdad, there is likely to be a marked fall in oil prices as US oil companies are free once again to invest in Iraq's ageing and under-funded industry. While lower oil prices will be welcomed by the US, Russia will be facing difficult economic prospects. From Moscow's perspective, a protracted diplomatic wrangle – and restricted Iraqi oil output – would be best.

As Tony Blair tries to get a UN Resolution to support action against Iraq in order to appease the left wing of the British Labour Party keep in mind that Russia has veto power in the UN Security Council.

By Randall Parker    2002 September 23 06:10 PM Entry Permalink | Comments (0)
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