Recurrent outbursts of public anger against “big government” are a fixture of American politics. Partly, such sentiments are baked into the cake of America’s classically liberal founding ideas. But as Philip Howard points out, the relentless addition (hardly ever subtraction) of new laws, programs and regulations both bloats government and renders it less and less capable of solving new problems. If the machinery of government is all gummed up, it doesn’t much matter which party is at the controls. No wonder voters get mad, and discouraged.
So Philip is onto something here. Mancur Olson, in The Rise and Decline of Nations, and Jonathan Rauch, in Demosclerosis, explored this phenomenon in depth. So why am I not quite ready to sign onto his manifesto?
One reason is that it has a libertarian ring, in my ears anyway. I can imagine it going down much easier among Tea Partiers than, say, netroots lefties, or even pragmatic, center-left types like me. Yet progressives have, if anything, more reason to worry about the incapacitation of government than conservatives. We actually want to use the damn thing, not just disable it.
A National Infrastructure Bank is an idea whose time has come. The politics are tricky, but there is clear recognition from leading public and private sector thinkers that we need to make big investments in infrastructure, and that we need to make those investments in a rational way.
The panelists were: U.S. Representative Rosa L. DeLauro(D-CT), Sponsor of National Infrastructure Development Bank Act of 2009 (H.R. 2521); Chris Bertram, Assistant Secretary for Budget and Programs and C.F.O., U.S. Department of Transportation; Leo Hindery, Jr., Investor, Managing Partner of InterMedia Partners VII; former President and CEO of AT&T Broadband; former President, Tele-Communications, Inc. (TCI); and Everett Ehrlich, Economist, President of ESC Company; former Under Secretary of Commerce for Economic Affairs. PPI President Will Marshall moderated.
Rep. DeLauro set the tone for the panel by underlining the urgency for doing something big. “We need to be serious about a growth strategy,” DeLauro told a packed audience. “This is not stimulus, this is not recovery, this is whether we can grow and create jobs to compete with the economic power centers of the world. China invests nine percent of its GDP in infrastructure. India invests five percent. We invest less than two percent.”
And yet, Rep. DeLauro’s bill to create a National Infrastructure Bank and turn a chaotic ad-hoc infrastructure appropriations process into a rational national strategy has attracted only 60 co-sponsors – and not a single Republican.
“Resistance is internal to Congress,” said Hindery. “They would give up so much grant and earmark authority. Members are hesitant to see that move into an independent entity.”
Hindery argued that the key was leadership, and that the President wasn’t doing enough of it. “It has to be a stated priority,” he said. “It can’t be a proffered idea with tepid support.”
Ehrlich, who wrote a PPI Policy Memo on how an infrastructure bank should operate, was optimistic that this is an idea whose time has come. “This is a remarkable moment in infrastructure,” he said. “We are finally at a place where all the communities know the current programs are brain-dead…Local planners are wondering where the funds are going to come from, private investors are circling around the periphery of the area, looking for a way in.”
Hindery also noted that both the Chamber of Commerce and the Business Roundtable – both of whom have been largely resistant to any form of domestic spending – have come out in favor of an infrastructure bank. However, DeLauro said her Republican colleagues in Congress were not hearing this.
DeLauro highlighted that there is strong public support for making big investments in infrastructure: about 80 percent of Americans say they’d be willing to pay extra for more infrastructure.
Hindery also argued that in order for the proposal to pass, it would need to have a buy-American component, so that they unions would be on board. He also thought that making it explicitly a “jobs bill” would be effective. There was general agreement on this point.
Bertram, speaking for the administration, said that the President was serious about pushing an infrastructure bank. “I think the President is very interested in changing how we talk about these issues.”
DeLauro, who has been introducing legislation to create an infrastructure bank since 1994, was optimistic that the moment for it to pass was rapidly coming.
“We’re facing an economic crisis now, and we’re looking for ways to grow our economy,” said DeLauro. “Infrastructure is one of the pieces that makes sense for national growth. I believe it can be done. It’s not easy, but nothing is easy. And I’ll continue with this for as long as it takes.”
America is adrift and needs leadership to modernize and build a foundation for 21st century competitiveness. And while it’s a long hard to travel, there are at least a few signs of optimism.
The panelists were : Tom Friedman,New York Times Columnist, Pulitzer-Prize Winning Author; Jason Furman, Deputy Director, National Economic Council, White House; Roderick Bennett, Advisor to the General President of the Laborers’ International Union of North America; and John Woolard, CEO, Brightsource Energy. David Wessel,economics editor of the Wall Street Journal moderated.
In general, the panelists agreed that we’re in a difficult spot. We’re falling behind China on infrastructure, on energy, on basic research and development – just about every measure of investing in a 21st century economy. As Friedman put it, “We can only go so long with a philosophy of dumb as we want to be.”
Part of that dumb-as-we-want-to-be philosophy is an unwillingness on the part of many to admit that government has a key role to play in creating an environment where innovation can thrive, both by making big investments and putting the right incentives in place. The solution to this, of course, is leadership.
“We have an epic lack of faith in government with a capital G, but we have an unchanging love for government at the local level when it means bridge projects and energy projects and broadband projects,” said Furman. “And that’s something you see at the bipartisan level. Some of this means we have a messaging problem, and some of that is bottom-up, pointing out what it all tangibly means.”
“But how you get the snake through the python is a big challenge,” Furman added. “You have to pass the thing through Congress, and the debate will be framed in big government terms.”
Friedman, who was openly critical of the administration’s salesmanship efforts, argued that what was needed was big-picture leadership.
“We need to make it aspirational,” said Friedman. “That’s what the moon shot was all about. People want nation-building at home. You fly from Shanghai to JFK, and you go from the Jetsons to the Flinstones. People sense that. And the President has never made that the lodestar. He’s never leveraged all that energy.”
Woolard, who heads a large solar energy company, offered a dose of optimism. “We have a lot more projects here in the U.S. than abroad,” he said. “There are good projects, and there’s a lot moving forward.”
“But,” he added, “The thing that scares me most is the longer-term issue. Not enough students are going into engineering. We need to encourage people to go into those disciplines.”
Woolard also described the challenge at hand: In order to stabilize carbon emissions at 450 parts per million by 2050 (a commonly-agreed on target to stem global warming), “we’ve gotta build between 12,000 and 20,000 gigawatts of carbon-free power. That’s a power plant per day. We’ve built gigawatts a week before, but we don’t have the rules yet to get to this objective. We need policy.”
The consensus was that there would need to be a price on carbon. “Capital works itself out with the right rules,” Woolard said. But given the politics of energy, would the political will ever exist?
Here Friedman was an optimist: “We’re absolutely going to have a gas tax and a carbon tax,” he told the audience. “Because we’re going to run out of money, and we will need revenue and when we run into that wall, people will look around and say, what’s the best source? The sad thing is there are 535 members of Congress, and not one will propose this when it is so manifestly in the strategic and economic interest of the country.”
Bennett, whose union represents construction workers, also registered support for a gasoline tax, which he called “the elephant in the room.”
Friedman also offered a “killer app” for economic competitiveness: “An ecosystem of a national renewable standard, a price on carbon, a gasoline tax, higher building efficiency standards,” he said. “Put that ecoystem in place and you get 10,000 green garages trying 10,000 different things. Two of those will be the next green Google and Microsoft. The killer app is the enabling system.”
Just a month out now from Election Day, national political crosswinds are beginning to yield in importance to the sometimes idiosyncratic dynamics of key individual campaigns. In the second of our series of regional takes on statewide and congressional races, we´ll take a quick look today at the South (using the Old Confederacy definition of the region).
This was, by any measurement, Barack Obama´s worst region in 2008, despite important victories in Virginia, North Carolina, and Florida. He trailed John Kerry´s performance in Arkansas and Tennessee, and his percentage of the white vote was abysmal in Alabama, Mississippi, and Louisiana as well. Negative attitudes towards him have clearly deepened throughout the region during 2009 and 2010.
The South also has the nation´s richest lode of Democratic House members in districts carried by John McCain in 2008—23 out of 49. Considering the pro-Republican shape of the midterm electorate, and the erosion of Obama support, all these Democrats, plus many others in districts narrowly carried by Obama, entered 2010 in some serious danger.
There is only one Senate Democrat from the South up for re-election this year, Arkansas´ Blanche Lincoln, whose campaign appears to have fallen hopelessly behind Republican John Boozman even before her close primary runoff victory over Bill Halter.
The two Republican Senate seats thought to be within reach of Democrats are in North Carolina, where Elaine Marshall has run a credible race against Sen. Richard Burr, but is running out of time and money needed to score an upset; and in Florida, where the steady decline of Charlie Crist´s vote seems to be giving Marco Rubio an insurmountable lead.
Gubernatorial races are a relative bright spot for southern Democrats. Tennessee looks very likely to flip from D to R, and Alabama´s a very long shot for Democrat Ronnie Sparks, but in FL, Alex Sink is in a dead heat with Republican Rick Scott; in Georgia, the ethical and financial problems of GOP nominee Nathan Deal are keeping Roy Barnes in close contention; and in Texas, Bill White is running a very competitive race against Rick Perry. In Arkansas, Democratic incumbent Mike Beebe so far looks immune to the tsunami that has engulfed Blance Lincoln.
House races, as always, are harder to assess. Louisiana features a rare Republican-held district that Democrats are favored to flip, though accidental congressman Joseph Cao can´t be counted out. Overall, Democratic retirements have created major problems: the Cook Political Report rates five open southern House seats as “likely Republican,” and another as “lean Republican.” And among incumbents, twelve southern House Democrats are in races rated as tossups by Cook, with another seven in the competitive “lean Democratic” category.
All in all, that means 24 Democratic House seats in the South—2 in AL, 3 in AR, 5 in FL, 2 in GA, 1 in LA, 1 in MS, 2 in NC, 3 in TN, 2 in TX, and 3 in VA—are vulnerable in November 2. One big question involves African-American turnout, which is sometimes relatively robust in midterm election. Another is whether Republicans can count on a late surge in a region where anti-Obama and anti-Democratic leanings have been solidified for quite some time.
President Barack Obama’s new infrastructure initiative has triggered a constructive economic debate — for a change. Instead of a fruitless argument over whether the administration’s stimulus package was too big or too small, now we can talk about what it will really take to reboot the U.S. economy.
Upgrading America’s worn-out, inadequate public infrastructure is the right place to start. The president’s call for a $50 billion “down payment” to jumpstart work on transportation upgrades, and for an Infrastructure Bank to fund projects of regional and national importance is a crucial first step.
But Washington needs an even more ambitious blueprint for reviving U.S. economic dynamism.
When President Obama proposed a national infrastructure bank on Labor Day, he was short on details. How would such a bank work to give coherence to meeting our infrastructure building needs?
In his memo, entitled “A National Infrastructure Bank: A Road Guide to the Destination,” Ehrlich sees five key aspects of a Bank:
First, a Bank will evaluate infrastructure needs from an economic, as opposed to an engineering perspective. That is, infrastructure projects must actually be economically sound investments, not bridges to nowhere.
Second, a Bank will be able to provide consistent, apples-to-apples comparisons of different infrastructure projects so that policymakers can make more rational decisions about where to allocate infrastructure funds.
Third, a Bank will be able to select projects where it can leverage private capital effectively.
Fourth, a Bank will provide an alternative to what Ehrlich calls the “Appropriations Merry-Go-Round” – that is, the process by which states and localities put off much-needed repairs in hopes that congressional appropriators will lavish funds on them if only they wait long enough.
Fifth, a Bank will encourage localities to think creatively about ways to improve on existing infrastructure use, such as designing traffic optimization algorithms. The bank will be able to support non-structural solutions that can often do just as much for our infrastructure needs as building.
Here’s Ehrlich’s overview for how the bank would work:
Any entity – whether state, local, or federal – would have standing to come to the Bank with a proposal requiring federal assistance. The Bank would be able to negotiate the level and form of such assistance based on the particulars of each project proposal. It could offer cash participation or loan guarantees, underwriting or credit subsidies, or financing for a subordinated fund to assure creditors. Any project requiring federal resources above some dollar threshold (on a credit scoring basis) would have to be approved by the Bank.
President Obama has proposed a National Infrastructure Bank, a simple declarative sentence that left most listeners wondering what he meant. The confusion arises partly because the administration did not follow up the president’s remarks with a specific proposal, but also because the operations of such a bank have never been fully fleshed out. Felix Rohatyn and I have elsewhere laid out the broad outline of how such a bank would function,1 and that description serves as a good starting point for our expectations regarding the president’s proposal and what Bank-type proposals generally ought to do.
As many writers have noted, American infrastructure is depreciating rapidly – we are likely well below the replacement rate of investment in roads, mass transit, airports, ports, rail, and water assets. The logical implication is that we need to invest more. But more investment in and of itself will not move us towards having the right mix of infrastructure assets in place.
The current mix results from one of two selection processes. The first is devolution to the states (for example the cost-sharing grants delivered by the Highway Trust Fund), and the second is selection by Federal agencies (e.g., the Corps of Engineers). At worst, these processes lead to politically motivated outcomes, either because state governments favor some projects for wholly non-economic reasons, or because the Congress can muscle the selection process from the federal agencies. The most recent transportation authorization bill, passed in 2005, made the word “earmark” famous by incorporating a stunning $24 billion of them – the price of having a law passed. Insofar as we have given the task of project selection to the political process, it would be surprising if this kind of event didn’t happen, not that it sometimes does.
Politicized project selection is one of several problems associated with the current process. But it is one of the reasons why a National Infrastructure Bank is so important and so urgently needed: not just because a bank might be able to lever federal dollars, but because it can use the existing dollars more wisely and obtain a higher public return.
What follows, then, is a description of the role a National Infrastructure Bank could play, taken from the perspective of the specific problems in the current process it might solve. This perspective also allows us to evaluate the administration’s proposal.
In a nutshell, Rohatyn and I propose that we collapse all of the federal “modal” transportation programs into the Bank. Any entity – whether state, local, or federal – would have standing to come to the Bank with a proposal requiring federal assistance. The Bank would be able to negotiate the level and form of such assistance based on the particulars of each project proposal. It could offer cash participation or loan guarantees, underwriting or credit subsidies, or financing for a subordinated fund to assure creditors. Any project requiring federal resources above some dollar threshold (on a credit scoring basis) would have to be approved by the Bank. Additionally, we imagine that some part of the funding for existing modal programs would be converted into block grants sent directly to the states and large cities to be spent on projects too small for the Bank’s oversight. Such grants could also be used for those programs desired by the states that do not pass muster on terms proposed by the Bank.
This is more a vision of infrastructure policy than a blueprint for the immediate future. Admittedly, it will take years and a meticulous reorganization to produce this configuration. But the best way to measure our progress in infrastructure policy (and the merits of the administration’s proposal) is not to see how quickly we adopt the Bank’s specific features, but to see how the Bank addresses the underlying infrastructure policy flaws it is designed to fix.
In late July, I was sitting in a Seattle restaurant with my uncle and his wife. Our conversation ebbed and flowed among the many problems our country faces –recidivism, poverty, Afghanistan, economic uncertainty – you name it, and I assure you it came up. Since I do the whole “progressive national security thing” for a living, we invariably circled back to those themes.
Though an oversimplification by any stretch, it’s probably safe to say my uncle and his wife classify themselves as “west coast liberals,” or a bit further left on than yours truly at least on military issues. They had, however, spent time in Italy in 2008 teaching English to military officers, and enjoyed the experience.
“You know,” Uncle Bill said, “The only other experience I’ve had with the military was when I was 17. I marched in to see your grandfather and told him that he had to sign these papers so I could join up and go to Vietnam. Of course, he didn’t even bother to drop his paper and said ‘no’. But it’s probably one of the most patriotic things I’ve done in my life.”
The American public’s lack of familiarity with the military, something we subsequently brought up, continues to be a huge problem. Because military recruiting is confined to a few areas of the country – notably poorer areas of the South and Midwest – most of the country has little “skin in the game” when it comes to major foreign policy decisions involving military deployments.
Secretary of Defense Robert Gates feels just about the same. He spoke about the issue yesterday at Duke University:
“With each passing decade, fewer and fewer Americans know someone with military experience in their family or social circle…. There is a risk over time of developing a cadre of military leaders that politically, culturally and geographically have less and less in common with the people they have sworn to defend.”
For rational economic reasons, our forces are concentrated in several areas throughout the country – southern Virginia, San Diego, North Carolina, and Texas are amongst the largest – and DoD remains the bedrock of many of those communities.
While that may not change, the next Secretary of Defense should make it a priority to expand the recruiting base. This is a big argument that needs much more fleshing out, but it’s worth beginning to discuss now: Our military should draw from a more even cross-section of American society to inject a more diverse set of ideas into military culture and policy, which will further benefit the country by engaging those diverse recruits’ families and friends in pressing foreign and military policy debates. How many officers have Ivy League educations these days, anyway?
How should we build high-speed rail in the United States? And how should be pay for it? Do we need dedicated lines and dedicated funding? Or can we build a system incrementally? How should we build high-speed rail in the United States? And how should be pay for it? Do we need dedicated lines and dedicated funding? Or can we build a system incrementally?
Do we need a dedicated right of way for high-speed rail or can it be developed incrementally? (Panelists agreed that a dedicated right of way would be ideal, but generally felt that the politics would be difficult);
How can we fund high-speed rail? (Panelists agreed that we need a dedicated source of funding, though again, the politics of establishing such a fund are tricky); and
Should private capital be enlisted? (Panelists agreed that definitely, private funding should play an active role, and offered some ideas how).
The event’s panelists were: Pierce Homer, Transportation Director, Moffatt & Nichol; Ken Orski, Editor and Publisher, Innovation Newsbriefs; Mark Reutter, Fellow, Progressive Policy Institute; and Petra Todorovich, Director, America 2050. Michael Riley, managing editor of Bloomberg Government, moderated.
Do We Need a Dedicated Right of Way?
Mark Reutter made the strongest case for a dedicated right of way, arguing that a self-contained track free of interfering traffic was necessary for true high-speed rail.
“New rights of way is the only technologically sound approach to genuine high speed rail,” Reutter said. “Dedicated rights of way provide the necessary platform for greater safety and sustained speed, and eliminate choke points and interfering track. It’s the only way high-speed rail can compete with air traffic.”
Reutter also pointed out that on most corridors, trip times on Amtrak are no faster than they were in 1971 (when Amtrak was created) and in many places slower than they were under private rail in the 1950s.
Other panelists thought that incremental development also had to be part of a strategy.
“I think the answer is both,” Todorovich said. “Some corridors are suitable for dedicated rail systems. Other places need time to build markets, and in those places it makes sense to invest in incremental improvements. Operationally, there’s no question a closed, dedicated system is better. But you have to maintain support.”
Orksi was the most skeptical. “If money were no object, I’d say we can do both,” he said. “But since we live in a world of limited resources, I’d say invest whatever limited resources there are on improving existing freight lines.”
How Do We Fund High-Speed Rail?
This week, PPI released a memo written by Reutter arguing that a cleaned-up and repurposed Highway Trust Fund could become a dedicated source of funding for high-speed rail, a proposal that formed the backdrop of the conversation. Panelists agreed that dedicated funding was a good idea, but political feasibility remained an issue.
“I’m attracted to the notion of a trust fund,” said Orski. “But there are great obstacles. First, will there be enough political support in Congress? Or will concerns about deficits oblige them to focus on other more urgent infrastructure projects? Any proposal will raise howls of indignation from highway interests.”
Reutter responded by arguing that, “there have always been special interests, that’s how government works. Groups always want to cling to the allocations they get. All that means is we need leadership. You have to have an overall vision of economic development.”
Homer, meanwhile, argued that they key to funding high-speed rail was to identify economic interests who might benefit from it. “There have to be individuals, organizations, and regions who would see benefit in this and would be willing to pay for it,” he said.
Homer also noted that any funding plan had to think about not just the capital expenditures to cover the building, but also the long term operational and maintenance costs, which are likely to exceed the capital costs. “The larger and more difficult question is how to pay for operations,” he said.
Is Private Funding Necessary?
On the question of private funding, there was widespread agreement that it was necessary. The more difficult question is how to attract that investment.
Homer argued that government needed to do more to reduce the risk inherent in such investments. “In the U.S., the biggest obstacle is regulatory risk,” he said.
He added that if there is a market where ridership exists, “private capital is going to find where there is the greatest economic benefit.”
Todorovich agreed. “Private interests are interested because they want revenue streams, and that could come from passenger fares.”
But Reutter added that regardless of private money, government needed to provide a reliable source of government money that “private investors can count on. There needs to be a level of government guarantee, that’s why a surface transit fund is so essential for this.”
Homer also argued that rather than focusing on speed, what might drive the most investment was focusing on reliability. “If I knew it was a two-hour trip from Richmond to Washington, I’d take that any day over I-95,” he said. “As this evolves, I think we should be talking about high-reliability rail.”
The forum continues tomorrow. For a full schedule of PPI-sponsored events, click here.
PPI just released a new policy memo by Jeff Siegel: “Let the Wine Flow: Why Congress Shouldn’t Restrict Free Markets in Beer, Wine, and Spirits.” It’s about an issue that will be the subject of a House Judiciary Committee hearing today—and one that is also very close to my own heart: booze. After reading Jeff’s piece and seeing the witness lineup for this hearing, I had to take a break from our big week of infrastructure events to say a few words about this piece on H.R. 5034 and today’s hearing.
This booze war is good stuff. Any issue that mixes alcohol with economics, congressional politics, and constitutional law is right up my alley. Even putting aside my personal bias as an enthusiastic consumer, the political history of the alcohol industry in America is incredibly fascinating, and the newest chapter being written this week is no exception.
Regulation of alcohol in this country has provided some of the most interesting stories in our history about the role of government in regulating economic activities by private industry and individual consumers. After all, what other consumer product has ever been important enough to us as a nation that we amended our Constitution to ban it from the market, and then amended it a second time to legalize its sale again? Although most of us probably think of prohibition as a one-time quirk of American culture that is well behind us, the regulatory legacy of prohibition is strong and still shapes the industry today.
Because of our national fascination with controlling alcohol in commerce, the three-tier structure of our alcohol industry today is more an accident of history than a system shaped by economic forces. With the repeal of prohibition, the 21st Amendment implicitly endorsed the three-tier approach imposed by the states by explicitly giving states the power to regulate the alcohol industry. At the time, giving distributors a legally-protected role in the market was seen as a safeguard against past corruption and abuses by large alcohol producers that had in large part inspired prohibition in the first place. Since that time, a lot has changed in the industry, but the distributors have continued to enjoy protected status as state-sanctioned middlemen. It’s pretty nice work if you can get it.
Apparently, those same distributors now feel that their place in the market is being threatened to the point that they have asked Congress to step in and help them by making it nearly impossible for anyone to challenge state alcohol laws on constitutional grounds. The distributors claim that the three-tier system enforced by the states is under attack by the growth of direct shipping from small wineries and microbreweries, along with the direct buying power of large wholesale outlets like Costco and Walmart. Producers, consumer groups, free-market think tanks, and an outraged community of wine bloggers have tried to debunk that argument, countering that this is a pure political power play by the distributors to further entrench their position as rent collectors in state alcohol markets.
This bill is an odd thing if you actually read the text of it (which I’m not sure many staffers did), because it’s not at all clear what it’s trying to accomplish unless you’re familiar with the background of the Supreme Court’s 2005 Granholm decision that limited the states’ ability to regulate alcohol under the 21st Amendment when the state regulation unfairly restricts interstate commerce. As a recovering lawyer, I admit that I find the Granholm decision really interesting: a 5-4 decision with an unusual mix of justices in the majority, and hardcore textualist Scalia agreeing that the phantom idea of the dormant commerce clause trumps the clear language of the 21st Amendment. But for sane people who would rather stab themselves in the eye than read the entire decision, the takeaway was that states can no longer pass laws to protect their local alcohol industry by discriminating against alcohol producers from outside the state. That’s good for out-of-state wineries and breweries who want to bypass distributors and sell directly to consumers and retailers, and bad for distributors who lose part of their markup business when that happens.
What the bill actually does, more or less, is to give states free rein to ignore the Granholm decision by making it really, really hard for anyone to challenge state alcohol laws in court for running afoul of Granholm.
That’s a bold step for Congress to take, and for pretty questionable reasons. Which means that even for a recovering lawyer, the jurisprudence is less important than the political story that’s at work here. Because as a recovering Hill staffer, this bill turns my stomach. The language (if you can follow it) is so shamelessly overreaching that when I learned that it has 146 cosponsors in the House, I knew immediately I could name at least 146 legislative staffers who are not very good at their jobs. It baffles me to think how anyone could advise a member of Congress to add his or her name to legislation that is such an obvious political liability waiting to happen. And then I remember what good receptions the beer wholesalers used to throw, and how much young legislative aides appreciate free beer.
But now that the Judiciary Committee is taking this bill seriously and giving it a full-blown hearing, it’s worth thinking critically about the serious questions underlying the distributors’ position. First, is the three-tier system mandated by the states in danger of collapsing? That is, do the distributors have a valid claim that Congress needs to take action to protect the current system against erosion by market forces in interstate commerce? And second, is the system of state-by-state government structuring of the industry, which has produced the three-tier system, worth protecting in the first place?
But as Jeff Siegel points out in his memo, the debate surrounding this bill hasn’t been about these questions, and as often happens in Congress, the real-world outcomes are obscured by rhetoric and misdirection:
Ultimately, this is an issue of choice and competitiveness. It’s one thing to have an honest debate about the pros and cons of the three-tier system and whether it still makes sense, almost 80 years since the 21st Amendment put it in place. But that’s not the debate we’re having. Instead, the debate is whether Congress should tie its hands for no good reason, and make it harder for small businesses to compete in the alcohol distribution market. It seems like a debate that’s hard to justify having.
Given the growth and innovation we have seen in the alcohol industry, and the benefits to consumers of a vibrant national market for new products, it’s hard to see how anyone can make a valid case that the Granholm decision needs to be rolled back, or that distributors can’t continue to flourish in a competitive market, even if they no longer get to put their hands on every product moving into and out of state markets. But apparently someone has made the case successfully to 146 cosponsors in the House, so maybe I need to let them buy me a beer and explain it to me one more time . . .
Parts of Hungary may well still conjure drab images of the Cold War: bleak and desolate wheat fields, maybe a blue-gray sky, skeletons of Soviet-era construction.
Stereotypes, of course, often contain a grain of truth. The New York Times’ recent profile of Oroszlany, some fifty miles east of Budapest, harks back to that bygone era. Some 3,000 of the town’s 20,000 residents work in industries related to coal; with that many directly tied to the industry, it’s not hard to imagine how deep into the economy coal’s tentacles stretch.
But that’s changing — authorities announced that Oroszlany’s coal mine would close within three years. The mine’s closure is well-intended, as the European Union — of which Hungary became a member in 2004 — seeks to end government subsidies for carbon-producing sources of energy. Dirty coal is, of course, a chief protagonist.
This noble clean-energy goal has created a painful short-term “bridging” problem: The coal-fired power is disappearing too fast, and Hungary is left with an energy shortfall. It simply doesn’t produce enough domestic power right now to keep up with demand. Figuring out any role that the U.S. or EU might play as Eastern Europe makes this transition is becoming ever more important.
This energy transition is an issue Gabor Rajnai, Oroszlany’s mayor, understands all too well. He wonders how his town is going to keep warm in the winter. He frets Russian natural gas will fill the gap. Rajnai probably remembers New Year’s Day 2006, when Vladimir Putin, then Russia’s president, sent a shockwave across Europe when he directed Gazprom, the state energy company, to shut off the flow of gas to the Continent. Thanks to a price dispute with Ukraine, Europe froze, as it did again when Russia slowed down gas supply again in March 2008. To make up for this year’s drop in coal-fueled power, Hungary will again import Russia gas.
This is the latest in a deepening dependency. In March 2008, Putin and Ferenc Gyurcsany, his then- Hungarian counterpart, signed a contract that deepened cooperation on natural gas projects, including Hungarian financing of a Russian pipeline through the country. In other words, as NATO-member Hungary transitions to a cleaner fuel sources, it is lashing itself ever tighter to the world’s coldest petro-dictator.
Let’s hope this deal doesn’t end up putting Hungary on par with its Eastern European neighbor, the Czech Republic. As detailed in a stunning mid-September article in The New Republic, Russia and Gazprom camouflaged a network of Czech shell companies to obfuscate the money trail that leads directly from Prague’s hand to Moscow’s mouth.
The Czech Republic faces the same bridging problem as Hungary, too: As coal plants are phased out, how will the country power itself before domestic, self-sustaining energy sources are brought online? Nuclear power, asregularlychampionedbyPPI, is an option, but as TNR chronicles, even the Russians are likely to win that bid too.
However, that doesn’t mean Hungary and the Czech Republic are doomed to fall in some sort of Cold War-style Soviet sphere of influence. According to one industry expert, the region’s long-term prospects of creating secure domestic energy sources are more solid: Alex Cranberg of Aspect Energy thinks Hungary has solid reserves of its own gas yet to come online.
He told me he was first drawn to Hungary because its geological fingerprint reminded him of the southern US, and thinks the country’s natural gas industry — where Aspect has invested — is well-run and could produce a stable supply of clean natural gas over the long-haul. The trick, he says, is getting to the tough-to-reach underground gas fields, which make up some 90 percent of the domestic supply. That appears to be happening: in the last four years, Cranberg claims that his joint venture has gone from producing none of Hungary’s natural gas to 20 percent, and that slice of the pie should only grow.
But growing takes time, and ensuring that Hungary — and Eastern Europe — has access to a diverse supply of energy in the interim is an important policy initiative that Brussels, not to mention Washington, seems to have glossed over. Vice President Biden was in Prague to lobby for Westinghouse’s nuclear bid, but local experts believe it might be too little too late. Helping develop domestic clean power sectors could be a productive initiative for both capitals, from economic, energy, and security perspectives.
With five weeks to go until Election Day, the national political environment seems to have stabilized enough to conduct some regional analysis of what’s likely to happen on November 2. Let’s start today with the West, where highly competitive gubernatorial and Senate contests are occurring in at least seven states.
Much of the Pacific Coast seems relatively impervious to the Tea Party movement. In California, hard-core conservative activist Chuck DeVore finished a relatively poor third in the Republican Senate primary, and gubernatorial candidate Steve Poizner, who tried to run to the right of Meg Whitman, was beaten badly. Conservatives could not even mount a strong challenge to the much-derided RINO, Lt. Gov. Abel Maldonado. In Washington state, another TP favorite, former pro football player Clint Didier, barely broke double figure percentages in a Senate Republican primary challenge to Dino Rossi. And in the same state, one of the more moderate new House candidates in the country, Jaime Herrera, won her primary easily. Alaska, of course, is the exception on the coast, since its long-powerful conservative movement knocked off Sen. Lisa Murkowski, who is now running as a write-in candidate in the general election.
In any event, Republicans have at best mixed prospects for major gains on the Pacific coast. In CA, recent polls have given Barbara Boxer a significant lead over Carly Fiorina for the Senate seat, and despite Meg Whitman’s unprecedented spending, Jerry Brown is at worst tied with her as he begins his own media campaign in the governor’s race. Republicans have a realistic shot at just one Democratic House seat in California, and Democrats are sure to hang onto control of both chambers in the state legislature.
In Washington state, Patty Murray appears to be opening up a modest but consistent lead over Rossi, who led her in some early polls. While Herrera has a good shot at picking up an open Democratic House seat, only one incumbent Democrat, Rick Hansen, seems to be in jeopardy. In Oregon, former Gov. John Kitzhaber is in a close race with Republican Chris Dudley for the governorship.
In Hawaii, Democrats have a better than even chance of flipping control of the governorship, with former congressman Neil Abercrombie a solid favorite over Lt. Gov. Duke Aoina, and of retaking Abercrombie’s House seat, which was lost in a special election earlier this year thanks to multiple Democratic candidates.
In Alaska, Democratic Senate candidate Scott McAdams remains underfunded and little-known; his fate almost certainly depends on the viability of Murkowski’s write-in campaign down the stretch.
Moving eastward from the Pacific, Colorado is another hotly disputed state. Tea Party favorite Ken Buck has been leading Sen. Michael Bennet in early general election polls, but this race is likely to tighten up. John Hickenlooper is almost certain to hold the governorship for Democrats thanks to the conservative split between Republican nominee Don Maes and former congressman Tom Tancredo, who is running on the Constitution Party ballot. Republicans think they have a shot at taking two Democratic House seats, though their best chance is against freshman congresswoman Betsy Markey. Turning south to New Mexico, Republican gubernatorial candidate Susana Martinez has recently taken a steady lead in the polls against Lt. Gov. Diane Denish, who once looked invincible, and two Democratic House members, Harry Teague and Martin Heinrich, in some peril. In Arizona, Sen. John McCain and Gov. Jan Brewer look safe to hold onto their seats for the GOP, and though Republicans have visions of picking up as many as three House seats, all three Democrats—Gabby Giffords, Anne Kirkpatrick and Harry Mitchell, are in reasonably strong condition.
Finally, in Nevada, one of the top national races looks almost certain to go right down to the wire, with Sen. Harry Reid and Tea Party champion Sharron Angle running neck and neck in virtually every post-primary poll. Reid would probably be doomed against any other Republican opponent, but Angle’s long history of eccentric issue positions has given him a new lease on life.
All in all, the West could prove to be a national bellwether. A true Republican tsunami in the region could produce a net gain of four Senate seats (Washington, California, Colorado and Nevada), two governorships (Oregon and New Mexico), and nine House seats. On the other hand, a stronger-than-expected Democratic performance could keep Republicans from gaining any net Senate seats, and could actually give Democrats a net gain of one gubernatorial seat (Wyoming looks to be a certain Republican gubernatorial pickup, but that could be offset by a Jerry Brown win in California and an Abercrombie win in Hawaii). None of the Western House races in which Republicans now look strong is a slam-dunk.
One regional factor that use to bedevil strategists is now of declining importance: the hope or fear that early returns from the eastern and central times zones could influence final turnout in very close races. That’s because voting by mail is increasingly important in the West, with all ballots in OR and WA; most in Colorado; and over half in California, now being cast by mail. The dominance of voting by mail will also significantly limit the impact of very late campaign activity in many states. If Meg Whitman’s going to hit her target of spending $150 million in personal funds in the CA gubernatorial race, she’ll probably hit it well before November 2.
The roundtable will feature panelists New York Times Columnist Tom Friedman, LIUNA General President Terence M. O’Sullivan and BrightSource Energy CEO John Woolard. It will be moderated by Wall Street Journal Economics Editor David Wessel.
“Furman’s participation underlines the forum as the premier showcase of strategic infrastructure investments needed to speed economic recovery and raise America’s game in global competition,” said Will Marshall, president of PPI. “We hope to challenge the nation’s political leaders to embrace a bolder strategy for retooling the American economy through crucial infrastructure projects like high-speed rail, clean cars and next-generation nuclear energy.”
Throughout the three-day conference, the Progressive Policy Institute and CG/LA Infrastructure will bring together leading thinkers from the public and private sectors in order to move North America’s most important projects forward, creating as many as six million new direct jobs.
Other featured speakers include: U.S. Senator Mark Warner, (D-Va.); U.S. Representative Rosa DeLauro, (D-Conn.); Leo Hindery Jr., Managing Partner, InterMedia Partners VII; Joe Boardman, President and CEO, Amtrak; U.S. Representative Dan Lipinski, (D-Ill.); Mark Reagan, Chairman, Global Construction Practice, Marsh Inc.; Chris Bertram, Assistant Secretary for Budget and Programs and Chief Financial Officer, Department of Transportation;Ev Ehrlich, President, ESC Company; and more.
WHERE: Washington Hilton, Columbia Hall 5 & 7, 1919 Connecticut Ave. NW, Washington, DC
President Obama has been quite supportive of building high-speed rail. In January he announced an $8 billion down payment. But that was just a start. Building high-speed rail is a major investment, and the big question is: how will we pay for it, especially in a time of increasing federal deficits?
PPI Fellow Mark Reutter has some ideas, and he writes about them in a new policy memo that PPI is releasing today. The memo is called: “A smart way to finance high-speed rail: Restructuring the Highway Trust Fund into a results-driven transportation fund.”
Reutter argues that the money should come out of a cleaned-up Highway Trust Fund, which is currently larded with strategically aimless and costly programs:
Congress could easily allot $5 billion a year for HSR construction – without an increase in the gas tax – by cutting out earmarks and formula-based grants that now soak up billions of dollars, according to the General Accountability Office (GAO). Such fund reallocations could not only jumpstart HSR projects but serve as seed money to public-private partnerships to get the work done.
Although the Highway Trust Fund was once an elegant solution to funding the construction of the Interstate Highway System with gasoline taxes, it has over the years become more and more just a source of political pork.
Reutter thinks it’s time we use the almost $300 billion authorization (over six years) for building up genuine high-speed-rail routes. To that end, he makes seven specific policy recommendations for the next Highway Trust Fund re-authorization replacing the current authorization due to expire at the end of 2010.
Change the name of the Highway Trust Fund to the Surface Transportation Trust Fund to better reflect its new mission for the 21st century.
Allocate at least $5 billion in Trust Fund money in 2011 to HSR construction, with special emphasis on getting a demonstration high-speed line between Tampa and Orlando completed by 2015. (The Florida line received $1.25 billion in federal stimulus grants, but is still short of its $2.6 billion budget.)
Increase HSR expenditures in years 2012-15 (if a five-year spending bill is enacted) to reflect the increased demand for grants as more states develop passenger rail plans.
End the bureaucratic separation of highway and rail programs by establishing a team of planners to develop a HSR network in coordination with future highway building and restoration.
Direct the U.S. Department of Transportation and state authorities to examine routes where HSR could use Interstate and other publicly owned highway corridors for rights of way. This approach, already being used in the Tampa-Orlando corridor, would greatly lower land acquisition costs for new rail lines.
Base federal transportation decisions on clear analytic measures of performance rather than earmarks – and competition between states instead of preset formulas – to produce the greatest return on taxpayer dollars.
Ensure that HSR, which uses about 20 percent less energy per passenger mile than automobiles, gets its fair share of any future revenues generated by carbon pricing.
Reutter also explores ways that policymakers can leverage private capital to augment public spending.
One approach is assembling land around potential HSR terminals for sale to private companies either operating or putting up part of the capital costs of HSR building.
Another is to encourage overseas operators with proven track records to invest in U.S. projects, at least initially, to allow U.S. companies to “learn the ropes” of building these highly sophisticated systems.
Ultimately, though, it’s going to take real political leadership. As Reutter concludes:
The Obama administration has repeatedly talked about its commitment to “green” technology and how fast trains could provide job growth and business opportunities to regions hard-hit by the loss of manufacturing. The administration needs to seize the initiative and make the case for HSR funding during the fall election cycle and in the next transportation reauthorization bill.
Reutter will be discussing high-speed rail Wednesday at a panel on “Keeping America on Track: The Future of High-Speed Rail,” which is part of the 2nd Annual North America Strategic Infrastructure Leadership Forum, co-sponsored by PPI.
Since announcing an $8 billion “down payment” for high-speed rail development, the Obama administration has been silent about how to pay for a program as ambitious as the Interstate Highway System.
The interstates cost more than $250 billion in current dollars to build. A fast train network, based on systems being developed worldwide, most noticeably in China, could be equally expensive.
So far, Congress has come up with $2.5 billion in general fund appropriations for high-speed rail (HSR) in 2010, and the administration has asked for $1 billion a year for the 2011-14 budgets. Such allocations are hardly enough to begin detailed engineering for California’s HSR proposal between Los Angeles and San Francisco, let alone the nine other intercity corridors that the White House has envisioned.
On Labor Day, President Obama proposed a $50billion transportation infrastructure program that would include 4,000 miles of rehabbed and new railway track. The proposal calls for integrating HSR projects into the next surface transportation bill, a promising step that would ensure some level of federal commitment to the program over the five- or six-year life of the bill. But again, the president did not specify how he would finance HSR or the larger infrastructure program other than to say that his administration “is committed to working with Congress to fully pay for the plan.”
The president’s reticence raises a legitimate question: Can the nation afford HSR in a time of looming federal deficits?
The answer is yes – financing HSR is entirely feasible, but will only happen if the administration and its congressional allies take bold steps to rebalance our transportation priorities. Fortunately, there is both a funding source and a road map for moving from today’s scattershot federal transportation spending to a results-driven enterprise.
The funding source is the Highway Trust Fund, with approximate funds of $52 billion a year. Allocating a portion of highway funds for rail construction is an equitable way to wean drivers away from auto travel by providing them with a faster, safer, and more environmentally sound alternative.
Congress could easily allot $5 billion a year for HSR construction – without an increase in the gas tax – by cutting out earmarks and formula-based grants that now soak up billions of dollars, according to the General Accountability Office (GAO). Such fund reallocations could not only jumpstart HSR projects but serve as seed money for public-private partnerships to get the work done.
Already, international rail operators have expressed interest in competing for high-speed train contracts in the U.S. But these groups are waiting for the Obama administration to lay out a comprehensive financing plan before structuring bids. The use of a well-established and reliable source of transportation financing could make these deals happen.
Since we at PPI are focused today on infrastructure in advance of our big infrastructure forum Wednesday through Friday, we wanted to share some of our best posts over the last several months on infrastructure.
These posts also make an excellent crash course on what’s been happening lately in the world of infrastructure and high-speed rail in advance of this week’s conference.
