Dan Mitchell article The Boondoggle of Long-Distance Passenger Rail

The Boondoggle of Long-Distance Passenger Rail

Infrastructure often is a good thing. Government-financed infrastructure is a questionable thing. Infrastructure financed by Uncle Sam is a bad thing. Those three rules guide my thinkingand make for a perfect introduction to this must-watch videofrom Reason on high-speed rail.

The core message from the video is that Californian’s disastrous experience with high-speed rail should be a warning for the entire nation.

Simply stated, the government is incapable of doing infrastructure without jaw-dropping cost overruns.

But even if – by some impossible miracle – the government spent the money wisely and efficiently, long-distance rail doesn’t make sense.

Why? Well, if I do a tweet-of-the-year contest for 2021, this entryfrom Rory Cooper would be an early favorite to win the prize.

Instead of expanding the federal government role, it’s time to end Washington’s involvement.

That means shutting down the entire Department of Transportation.

But let’s focus specifically on Amtrak. Chris Edwards wrote wisely on the topic for the Foundation for Economic Education.

The federal government does a lot of things poorly… After the government helped ruin private passenger rail in the post-WWII years, it took over the remaining passenger rail routes in the 1970s under the Amtrak brand. Amtrak was supposed to become self-supporting, but it has consumed tens of billions of taxpayer dollars over the years. …Amtrak operates 44 routes on 21,000 miles of track in 46 states. Amtrak owns the trains, but freight rail companies own nearly all the track. A Pew analysis found that Amtrak loses money on 41 of its 44 routes… The few routes that earn positive returns are in the Northeast, and the biggest money losers are the long-distance routes. …the best fit for the future would be a privatized Amtrak. Privatization would allow for innovation and cost-cutting to improve service and make rail more financially viable. A private rail company (or companies) could…end harmful union rules. It would be able to close the routes that are losing the most money and shift resources to the core routes to improve service quality.  Congress should get out of the passenger rail business and give rail the private-sector flexibility it needs to better compete against other transportation modes.

Amen. If inter-city rail travel makes sense, it can and will attract funding from the private sector.

Sadly, President Biden wants to move in the opposite direction. His so-called infrastructure plan makes taxpayers foot the bill.

The White House wants $80 billion for rail, though it’s unclear how much money would be allocated specifically to Amtrak compared to other rail projects.

What is clear, by contrast, is that the money will be wasted and America’s economy will be harmed.

P.S. Biden’s “stimulus” boondoggle included a bailout for mass transit, but no funds for intercity rail travel.

P.P.S. If you’re transportation wonk, here’s a very informative 45-minute video on rail and highway transportation.

Biden’s Coronavirus Stimulus Bill: A $1.9 Trillion Disaster

Matthew Dickerson / March 11, 2021

President Joe Biden signs the American Rescue Plan as Vice President Kamala Harris looks on in the Oval Office of the White House on March 11, 2021. Though regularly billed as “the COVID-19 relief bill,” the legislation is not focused on reducing the spread of the disease. (Photo: Doug Mills-Pool/Getty Images)

COMMENTARY BY

Matthew Dickerson

Matthew Dickerson is the director of the Grover M. Hermann Center for the Federal Budget at The Heritage Foundation.

President Joe Biden has signed his $1.9 trillion American Rescue Plan into law.

Though regularly billed as “the COVID-19 relief bill,” Democrats’ legislation is not focused on reducing the spread of the disease. Instead, it is stuffed with a wish list of progressive policies that have nothing to do with the pandemic. 

In fact, less than 10% of the bill’s spending will be dedicated to public health. The vast majority will go to special interest payoffs and other wasteful spending that will do little to reduce the spread of COVID-19 or help the economy recover.

For example, nearly $90 billion is earmarked for a taxpayer-funded bailout of union pension plans that were massively underfunded long before COVID-19. This union bailout gets about twice as much funding as COVID-19 testing and contact tracing.

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The bill would provide $126 billion for K-12 schools around the country. But the nonpartisan Congressional Budget Office says that only $6.2 billion of that—just 5%—would actually be spent by October.

More of this funding will be spent in 2026 than in 2021. How is that supposed to help reopen our schools?

The bill will send another $350 billion to state and local governments, on top of the hundreds of billions already provided. This spending is completely unwarranted, as last year’s coronavirus relief measures have already given states windfall funding well in excess of their projected revenue shortfalls. 

Worse, this round of bailouts will reward those states that enacted especially draconian lockdowns that wrecked their economies, closing businesses and pushing workers onto unemployment.

One of the most expensive provisions in the bill provides a third round of “stimulus” checks to most Americans. Individuals earning up to $75,000 and couples earning $150,000 are eligible for $1,400 checks. 

Sending checks to people who have been able to continue working and are even earning up to two-and-half times the median household income is not targeted aid.

Astonishingly, the package could even open the door to taxpayer-funded abortions.

In one bit of good news, the misguided proposal to increase the minimum wage to $15 per hour, which would have killed 1.4 million jobs, was thankfully dropped from the bill. The fact that this terrible idea was even included in a “COVID-19 stimulus” bill shows just how out of touch the “stimulus” bill is.

According to the Committee for a Responsible Budget’s COVID Money Tracker, of the $4.1 trillion in federal “coronavirus response funding” previously signed into law, about $1 trillion still remains unspent. Adding another $1.9 trillion to the national debt is a bad idea. 

Even Larry Summers, chairman of President Barack Obama’s National Economic Council, has expressed fear that this new package is so costly, it could backfire, hurting the economy.

One year ago, America entered a sharp economic downturn as state governments began closing down normal business operations. This caused the unemployment rate to spike to 14.8% last April. Now, however, the economy is showing welcome improvement.

The most recent jobs report showed more than 400,000 private sector jobs were added last month, with the unemployment rate dropping to 6.2%. For the sake of comparison, the unemployment rate didn’t fall back to this level during the Great Recession until April 2014, more than five years after the crash began.

With the pace of vaccine distribution accelerating, safe reopenings and job gains should hopefully continue over the coming months.

While the health and economic trends have been positive, too many people are still out of work. Instead of wasting trillions of dollars on things that have nothing to do with COVID-19, the correct response to this problem should be targeted and temporary policies that are focused on reducing the spread of the virus.

For just a fraction of the bill’s $1.9 trillion price tag, we could deploy rapid self-administered COVID-19 testing around the country. This would allow those who have not yet been vaccinated to be regularly equipped with knowledge about their infection status and to make informed decisions about safely resuming work and other activities in a more normal way.

Instead of this massive and partisan legislative package, lawmakers should work together on a strategy that we know would bring the spread of the disease under control and allow the economy to continue improving.

This commentary originally was published by National Interest.


Biden’s Misguided Keynesian “Stimulus

We have decades of real-world experience with Keynesian economics. The results are not pretty.

It’s also worth pointing out that Keynesians have been consistently wrong with predicting economic damage during periods of spending restraint.

  • They were wrong about growth after World War II (and would have been wrong, if they were around at the time, about growth when Harding slashed spending in the early 1920s).
  • They were wrong about Thatcher in the 1980s.
  • They were wrong about Reagan in the 1980s.
  • They were wrong about Canada in the 1990s.
  • They were wrong after the sequester in 2013.
  • They were wrong about unemployment benefits in 2020.

This story needs to be told, again and again, especially since we’re now going to have another real-world test case thanks to President Biden’s so-called American Rescue Plan.

I just wrote a column on Biden’s proposal for the Foundation for Economic Education, and it is co-authored by Robert O’Quinn, who most recently served as the Chief Economist at the Department of Labor.

We started by pointing out that Biden is basically copying Trump’s big-spending approach, but with a different justification (Keynesianism instead of coronavirus).

Mr. Biden is bringing a new twist to the profligacy. Instead of trying to justify the new spending by saying it is needed to compensate households and businesses for government-mandated lockdowns, he is making the Keynesian argument that the new spending is a way of stimulating the economy.The same approach was used when he was Vice President, of course, but did not yield positive results. …Mr. Biden and his team apparently think the anemic results were a consequence of not spending enough money. Hence, the huge $1.9 trillion price tag for his plan. Will his approach work? …We can learn about economic recovery today by reviewing what happened during the Great Recession earlier this century and what happened at the end of World War II.

We explain the causes of the previous recession and point out that Obama’s so-called stimulus didn’t work.

…the Great Recession…was the result of an unsustainable housing bubble caused by overly accommodative monetary policy from the Federal Reserve and misguided housing policies. …it took years to clean up the mess from the bursting of the housing bubble. Households slowly rebuilt their savings and cleaned up their balance sheets. …Banks had to work out problem loans and rebuild their capital… Obama’s stimulus did not drive that healing process and spending more money would have done little to accelerate it.

And we also point out that the economy recovered very quickly after World War II, even though the Keynesians predicted disaster in the absence of a giant new package such as Truman’s 21-Point Program (his version of FDR’s horrible visionof an entitlement society).

Keynesians feared that demobilization would throw the US economy into a deep depression as federal spending was reduced. Paul Samuelson even wrote in 1943 that a failure to come up with alternative forms of government spending would lead to “the greatest period of unemployment and industrial dislocation which any economy has ever faced.” …President Harry Truman proposed “a 21-Point Program for the Reconversion Period” shortly after the war ended. But his plan, which was basically a reprise of Franklin Roosevelt’s New Deal, was largely ignored by Congress. Did the economy collapse, as the Keynesians feared? Hardly. …Spared a repeat of FDR’s interventionism, the economy enjoyed strong growth. One of the big tailwinds for growth is that the forced savings accumulated during the war years allowed consumers to go on a peacetime buying binge.

That last sentence in the above excerpt is key because 2021 is a lot like 1945. Back then, households had lots of money in the bank (wartime rationing and controls meant there wasn’t much to buy), which helped trigger the post-war boom.

Something similar is about to happen, as we explain in the column.

The current economic conditions are somewhat reminiscent of the ones that existed after World War II. The limited ability to spend money during the pandemic has helped boost the personal saving rate…  In aggregate terms, personal saving soared from $1.2 trillion in 2019 to $2.9 trillion in 2020. …pent-up demand funded with more than $1 trillion in excess savings will resuscitate…GDP.

So what does all this mean? Well, the good news is that 2021 is going to be a very good year for the economy. That’s already baked into the cake.

The bad news is that Biden is taking advantage of the current political situation to increase the burden of government spending.

…the economy prospered after World War II despite (or perhaps because of) the failure of Mr. Truman’s 21-point proposal. President Biden’s team is either unaware of this history, or they simply do not care. Perhaps they simply want to take advantage of the current environment to reward key constituencies. Or they may be trying to resuscitate the tattered reputation of Keynesian economics by spending a bunch of money so they can take credit for an economic recovery that is already destined to happen.

Since I gave the good news and bad news, I’ll close with the worse news.

There’s every reason to expect very strong growth in 2021, but Biden’s spending binge means that future growth won’t be as robust

  • Especially since the economy also is saddled with lots of wasteful spending by BushObama, and Trump.
  • And especially if Biden is able to push through his agendaof higher taxes on work, saving, and investment.

The bottom line is that the United States is becoming more like Europe and the economic data tells us that means less prosperity and lower living standards.

Milton Friedman – Stimulus and Inflation

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Daniel J. Mitchell on Obama’s Economic Stimulus Plan

Dan Mitchell discusses Ineffectiveness of Stimulus Spending

January 21, 2021

Office of Barack and Michelle Obama
P.O. Box 91000
Washington, DC 20066

Dear President Obama,

I wrote you over 700 letters while you were President and I mailed them to the White House and also published them on my blog http://www.thedailyhatch.org .I received several letters back from your staff and I wanted to thank you for those letters. 

I have been reading your autobiography A PROMISED LAND and I have been enjoying it. 

Let me make a few comments on it, and here is the first quote of yours I want to comment on:

Page 244

We proposed that nearly $800 billion be divided into three buckets of roughly equal size. In bucket one, emergency payments like supplementary unemployment insurance and direct aid to states to slow further mass layoffs of teachers, police officers, and other public workers. In bucket two, tax cuts targeted at the middle class, as well as various business tax breaks that gave companies a big incentive to invest in new plants or equipment now instead of later. Both the emergency payments and the tax cuts had the advantage of being easy to administer; we could quickly get money out the door and into the pockets of consumers and businesses. Tax cuts also had the added benefit of potentially attracting Republican support.
     The third bucket, on the other hand, contained initiatives that were harder to design and would take longer to implement but might have a bigger long-term impact: not just traditional infrastructure spending like road construction and sewer repair but also high-speed rail, solar and wind power installation, broadband lines for underserved rural areas, and incentives for states to reform their education systems—all intended not only to put people to work but to make America more competitive.
     Considering how many unmet needs there were in communities all across the country, I was surprised by how much work it took for our team to find worthy projects of sufficient scale for the Recovery Act to fund. Some promising ideas we rejected because they would take too long to stand up or required a huge new bureaucracy to manage. Others missed the cut because they wouldn’t boost demand sufficiently. Mindful of accusations that I planned to use the economic crisis as an excuse for an orgy of wasteful liberal boondoggles (and because I in fact wanted to prevent Congress from engaging in wasteful boondoggles, liberal or otherwise), we put in place a series of good-government safeguards: a competitive application process for state and local governments seeking funding; strict audit and reporting requirements; and, in a move we knew would draw howls from Capitol Hill, a firm policy of no “earmarks”—to use the innocuous name for a time-honored practice in which members of Congress insert various pet projects (many dubious) into must-pass legislatio
n.

PAGE 257

I stepped up to speak. It was my first time at a House Republicans gathering, and it was hard not to be struck by the room’s uniformity: row after row of mostly middle-aged white men, with a dozen or so women and maybe two or three Hispanics and Asians. Most sat stone-faced as I briefly made the case for stimulus—citing the latest data on the economy’s meltdown, the need for quick action, the fact that our package contained tax cuts Republicans had long promoted, and our commitment to long-term deficit reduction once the crisis had passed. The audience did perk up when I opened the floor for a series of questions (or, more accurately, talking points pretending to be questions), all of which I cheerfully responded to as if my answers mattered.

Ted Dehaven rightly notes below:

Or was it because the recession created a “window of opportunity” for politicians to quickly spend a bunch of additional money on pet causes, which had the effect of benefitting certain areas of the country? 

Obama’s Stimulus: A Bit of Pork, a Lot of Opportunism 

By Tad DeHavenTwitterLinkedInRedditFacebook

study [$] published in the winter edition of Political Science Quarterly considers two possible reasons for why the 2009 American Recovery and Reinvestment Act (ARRA) failed to sprinkle Uncle Sam’s magic dust onto those areas of the country that were being hardest hit by the recession. 


Was it because well‐​positioned politicians were successful in delivering the pork? 


Or was it because the recession created a “window of opportunity” for politicians to quickly spend a bunch of additional money on pet causes, which had the effect of benefitting certain areas of the country? 


I’m going to skip right to the answer: the uneven geographic distribution of stimulus funds had only a little to do with traditional pork barreling and much to do with Obama’s then chief of staff Rahm Emmanuel’s famous quip that “You never want a serious crisis to go to waste.” 


On the possibility of traditional pork‐​barreling, the authors found no statistically significant relationship between the distribution of funds and whether a county was represented by a politician serving on a congressional committee relevant to stimulus funding. Nor was a relationship found between funding and counties that were represented by a Democrat in the House or Senate. However, a relationship was found between funding and those counties that overwhelmingly voted for the president: 

There does, however, appear to be a distinct tilt toward counties that were stronger for the Democratic Party in 2008. All else equal, counties at the 90th percentile of Democratic share presidential vote ’08 received between $35 and $36 more per capita in both total funding and infrastructure projects than did counties at the 10th percentile (p ≤ .001)…The effect of presidential politics may be especially relevant for the distribution of ARRA funds because most of the grants, loans, and contracts funded by the stimulus were in discretionary programs overseen by administrative agencies, over which presidents and their political appointees exercise influence. 

On the other hand, the authors found that a county possessing attributes that synched with the policies funded in ARRA were more likely to receive money. For example, a county with a lot of interstate highway mileage made out better than a county that did not. Another example is counties that had a larger share of state and local government workers received a larger share of funds. 


While it’s not surprising that legislation that funds highway infrastructure projects would benefit areas with more highway mileage, let’s remember that the stimulus was sold by many politicians as being necessary to help those with the greatest need. Indeed, as the authors point out, the text of the legislation stated that a main goal was “to assist those most impacted by the recession.” 


The bottom line is that the Obama administration used the economic downturn to spend a bunch of money it otherwise would not have been able to on a stack of its pet policies. In the process, the counties that did the most to put Obama in the White House received a taxpayer‐​funded thank you in return. TopicsTax and Budget Policy

Sincerely,

Everette Hatcher III, 13900 Cottontail Lane, Alexander, AR 72002, ph 501-920-5733 everettehatcher@gmail.com

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