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East Coast, West Coast – What about Our Coast?

Most Americans take it as an article of faith that there’s a strong connection and relationship between the major cities of the East and West coasts.  Indeed, there may be 3,000 miles separating New York from Los Angeles, or San Francisco from Washington, but psychologically the cities each seem to be more connected to each other than, say, Dallas to New York or Atlanta to San Francisco.  Of course, in the minds of the coastal crowd, the rest of the nation has become “flyover” country.  That wasn’t always the case.  How exactly did that happen?

Lots of factors helped to develop America’s west coast.  Certainly the pioneer spirit that initially brought settlers west led to a strong sense of individualism and entrepreneurism that pushed development forward.  The allure of the weather brought many transplants west.  But I think the West Coast benefitted much more from the kinds of connections identified by Jim Russell at Burgh Diaspora (and now at Pacific Standard) – the West Coast had an effective talent attraction strategy, created strong bonds with the East Coast, and never let them go.  It’s a lesson that the shrinking cities of the Rust Belt should heed and practice.

I’m no historian, nor am I the ultimate authority on the development of cities.  But it’s clear West Coast cities did some things that Rust Belt cities did not.  As we all know, the settlement of California was kicked off with the Gold Rush of 1849.  Prior to that California was a sparsely-settled former Mexican territory with no physical or institutional infrastructure.  The Gold Rush propelled Eastern financiers to provide the money to develop San Francisco as the financial center that would open up the west, and give it the physical and institutional resources to deliver its goods to the rest of the nation.  San Francisco never relinquished those ties.

Further south, Los Angeles used its fabulous and consistent weather as a means to attract parts of a budding film industry previously based on the East Coast.  The growth of the film industry ultimately led to the growth of the media industry in Southern California, and voila – the economic underpinnings of a major metropolis are established.  Like San Francisco, LA never relinquished those ties.  (Side note: I don’t think you can understate the importance of the Rose Bowl in luring Midwesterners in particular to Southern California.  The “Granddaddy of Them All”, started in 1902, annually brought the Big Ten’s best and brightest for a few weeks of sun and fun in winter.  The strategy paid off.)

The lesson here for the Rust Belt is talent attraction, and maintaining the connections over time.  San Francisco was able to parlay its Eastern financial connections into the development of a strong financial center, which later served as the financial apparatus for the tech industry.  Los Angeles was able to do the same with the film industry and media, and it could be argued that the city’s ties to Midwestern interests led to the growth of the defense industry there.

As for the Rust Belt?  It seems that what sets it apart from the West Coast is that it remained content to be the industrial hearth of the nation, instead of seeking other avenues to leverage its advantages for even more growth.  That, and the fact that West Coast cities understood the importance of maintaining strong connections with East Coast partners, and East Coast cities understood the financial upside – for their own cities – of staying close to those on the West Coast.  Can the Rust Belt do the same?

This piece first appeared at Corner Side Yard.

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How Electricity and TV Diffused the "Population Bomb"

In the late sixties, India was the poster child of Third World poverty. In 1965, the monsoon rains failed to arrive, food production crashed, and much of the country was on the brink of starving. Asked for help, President Lyndon Johnson is reported to have told an aide, "I'm not going to piss away foreign aid in nations where they refuse to deal with their own population problems." Johnson came around, but by the end of the decade India was viewed in the West as, at best, a basket case and, at worst, a "population bomb" that threatened the entire planet.

Given this history, it's hard not to see the success India has had feeding its people and slowing population growth as the finale to a Bollywood movie — one most Americans stopped watching in 1970. "In a recent exercise," Stanford's Martin Lewis writes in a new article for The Breakthrough, "most of my students believed that India’s total fertility rate was twice that of the United States. Many of my colleagues believed the same. In actuality, it is only 2.5, barely above the estimated U.S. rate of 2.1 in 2011, and essentially the replacement level."

What did it? Lewis created a series of fascinating maps comparing Indian fertility rates to per capita wealth, female education level, electrification, access to TV, and other metrics to answer this question. His first map is one of the most striking. It shows the entire southern half of the country, plus the northern pan handle, as having fertility rates below replacement levels. 

Wealth, electricity, education, and moving to the city are all loosely correlated with lower fertility, but the strongest correlation is watching television. "The map of television ownership in India," writes Lewis, "does bear a particularly close resemblance to the fertility map." He notes that two Indian states with a low level of female education, which is traditionally inversely correlated with low fertility, still had low fertility rates, a fact that may be explained by its high levels of TV penetration. Lewis bolsters his argument by pointing to a study from India that found declining fertility after cable TV was introduced into poor neighborhoods.

How does TV act as a contraceptive? Lewis notes it may be because "many of its offerings provide a model of middle class families successfully grappling with the transition from tradition to modernity, helped by the fact that they have few children to support." It may not be TV generally, but rather soap operas specifically that paint a vision for poor women of how much better life with fewer kids might be.

Maybe the reason the West has been so slow to appreciate this Indian success story, Lewis speculates, is because it contradicts everything we've come to believe about overpopulation. Back in the late sixties, some prominent Western ecologists called for the sterilization of Indian men and the halting of food aid, so as to not prolong the suffering. A book called The Population Bomb that proposed these things sold four million copies. 

Hopefully now, anyone concerned about both human development and the environment will come to see electricity, rising wealth for the poor, and even TV not as anathema to human development but, at least in many parts of the world, essential to it.

Read the article at The Breakthrough: "Population Bomb? So Wrong, How Electricity, Development, and TV Reduce Fertility"

A Toronto Condo Bubble?

Toronto has experienced a virtual explosion in high rise condominium construction in recent years, especially in the downtown area. According to Bloomberg, Toronto has the largest number of high-rise condominium towers under construction in the world.

However concerns are being expressed that the market may be saturated and that a housing bubble is developing. The Toronto Starreports that new condominium sales declined 55 percent in the first quarter of 2013, compared to last year.

At the same time, a huge number of new condominium units is under construction in Toronto. According to The Star, 57,000 units were being built during the first quarter. The first quarter build rate is reported as the largest rate ever. For their part, builders have scaled back plans for new towers

Who is Buying?

In an article entitled, “Toronto Condo Investors Under Water,” the Toronto Condo Bubble|Toronto Housing Bubble website (subtitled Largest Housing Bubble Except for Vancouver of Course) asked:  “… if condo living is the way of the future, then why is it that the majority of people who buy condos never actually live in them?”

The question was in the context of a report by Scotiabank that between 45% and 60% of Toronto condominium purchasers were investors, rather than people who actually intended to live in the housing.

Single Family Housing in Toronto: The Holy Grail

At the same time, The Star points to indicators that the single family housing market retains considerable strength. Part of the reason is that this most desired type of housing is made far more difficult to build as a result of provincial land-use policies (urban containment, including the Toronto "greenbelt").According to The Star, "That’s made detached homes, in particular, the coveted Holy Grail of housing."

Despite the explosion in condominium units, Statistics Canada data indicates that 71 percent of net new occupied housing in the Toronto metropolitan area was detached between 2006 and 2011.

These market dynamics, rising detached house prices relative to incomes and heightened speculation are predictable outcomes of urban containment (land rationing) policies.

9-Year Run: CEOs Rank Texas #1, California #50

Each year, chiefexecutive.net ranks states based upon their business competitiveness. The latest rankings have just been published in 2013: Best and Worst States for Business.

Texas on Top: For the 9th Year in a Row

For the ninth year in a row, chiefexecutive.net ranks Texas as the most business friendly state. Noting the Texas cost of living advantage, chiefexecutive.net points out that “Young programmers and engineers can actually afford to live well in Austin, where the housing cost index is 300 percent lower than in San Francisco.” 

It is not surprising that Austin has emerged as the fastest growing metropolitan area in the United States adding 3.1 percent to its population annually since 2010. This is an astounding rate of growth --- twice that of the San Jose IT behemoth, which at current rate of growth will fall behind Austin in population by 2015. Austin’s growth rate is faster than some of the fastest growing developing world cities, such as Mumbai, Dhaka and Manila.

However there is much more to Texas Austin. Dallas-Fort Worth is the fastest growing metropolitan area with more than 5 million people in the high income world, though at an average annual growth rate since 2010 of 1.9234 percent retains only a narrow lead over similar sized Houston (1.9227 percent). Smaller San Antonio is growing marginally more quickly both Dallas-Fort Worth and Houston (though less than 2 percent).

Texas was joined in the top five by the South’s Florida, North Carolina and Tennessee, as well as Indiana, from the Midwest. Three of the top five (Texas, Florida and Tennessee) do not have a state income tax and chiefexecutive.net notes that other states are looking at tax reform that would improve the business climate.

California: Bringing Up the Rear for the 9th Year in a Row

Just as predictably as Texas ranking first, California has secured the bottom position for the ninth year in a row. A California CEO told chiefexecutive.net“On any particular element, if New Jersey is an ‘8’ on the pain-in-the-ass scale, California is a ‘9 … It’s an ungovernable state, and there’s no movement that will change that, though there are people who want to…” 

Nearly as predictably, California is joined in the bottom five by older northeastern states New York, New Jersey and Massachusetts as well as Illinois, from which, like California, hundreds of thousands, even millions of people have fled since 2000.

The complete state rankings can be viewed at http://chiefexecutive.net/best-worst-states-for-business-2013.

Leaving Portlandia

There have been two universal reactions to my announcement that I was going to move from Portland to the Midwest: surprise and disbelief. But I also found a number of people who, if given a few moments to find clear and honest footing in the conversation, could see through the self-absorbed mental fog that covers the city in equal measure to the grey rain clouds and tells its inhabitants every day that Portland is the most amazing possible place in this country to live. The amount of media devoted to reinforcing this idea is overwhelming in the sense that I believe it has overwhelmed people’s ability to have their own thoughts and identity in Portland.  Instead they have a Portland identity…because they live in Portland and that is what defines them.

On the surface, Portland has many progressive aspects. Sustainability and the “greening of the city” stand front and foremost as two easily recognized. Curbside recycling and composting, increasing investment in bicycle transportation, native gardening, and urban farming. There is an intense concentration of a wide range of alternative health practitioners. Artisan craftspeople abound, creating specialty foods and other handcrafted products. “Shop local” is the resounding cry to support small businesses, and farmers markets adorn every neighborhood in the summertime.

Idyllic as this sounds, there is a less appealing aspect to this picture. As Portland concentrates is cultural practices into a few baskets, the proliferation of other ideas diminishes. Ten years ago I would have characterized Portland as a place that had progressive perspectives. Now I would characterize Portland as a place with few ideas, all perpetually reinforced and more deeply ingrained every day.  People regurgitate a handful of versions of the same thoughts in ever narrowing expressions.  Everywhere you look it is repetition of the same ideas, whether it be on politics, design, or social culture. People strive to look the same, to dress the same, and to have the same lifestyle.  It is so pervasive, that women within a 30 to 40 year age range may display similar choices in hair, dress, and accessories.  What began as a city with progressive and forward looking ideas to develop a new urban course has become a closed container of cultural conformity.  There is a new cookie cutter in Portland, and it is young, alterna-hip, and white.

I grew up in a place like this…it is called Orange County.

Sweeping shocked gasps aside, this comparison is worth a long pause to consider.  Stripping away the key difference between Multnomah and Orange County of political affiliation, with Orange County being a historic Republican stronghold and Portland staunchly Democrat, these two counties have some key cultural similarities all hinging on a pivotal word used above: conformity. Conformity of dress, thought, and mannerisms, shared ideas and ideals, and a strong attitudinal belief that there is a “right” or “correct” way to be and to appear to others. There is also limited interest or investment in the arts, creative, innovative, or intellectual development. Just because the surface ideals these two places seem extremely different from each other, does not mean that they don’t breed the same obedience to a self-referencing norm within themselves. And by perpetuating their particular cultures and tailoring their environments to fit with a narrow range of ideals, the inhabitants of these areas increasingly live on the margins of reality and instead inhabit a fabricated cocoon of their own self-rewarding design.

What disturbed me most about Portland in the months leading up to my decision to leave was the increasingly strong social culture of invisibility. I am referring to the tendency of people in Portland to not acknowledge the physical presence of other people around them in close proximity. This can easily be seen by the increasing tendency of people to brush past you without making eye contact or saying “excuse me” and instead being intensely focused on some spot just beyond your left shoulder. But it manifests in countless other ways: letting dogs off leash (and not picking up after them), ignoring red lights and stop signs, allowing children license to act out without discipline in the presence of other adults.

In this city where conformity to a particular identity is so strong, people no longer see each other as people. People come in and out of your field of vision as an object to be ranked according to usefulness to you, and invariably avoided, ignored and dismissed the majority of the time. It is unpleasant, unsettling and dehumanizing. The countless tiny social interactions we have with other people throughout the day are the glue that hold us together as a community and keep us from being automatons randomly bumping into one another like the balls in a pinball machine. This critical stickiness in Portland is dissolving rapidly. As people lose the ability to engage and connect with one another, there appears to be an increasingly growing level of resentment, frustration and anger brewing under the surface of social interactions. Not just interactions where overt conflict is involved, but all of them. Because it feels like they all contain some level of conflict just by the occurrence of people being together in a place, time and circumstance.

There is little likelihood that I would ever have been physically assaulted in Portland. But I think there is a pretty strong likelihood that if I were physically assaulted that no one around me would react or get involved or help. Because chances are, I wouldn’t even be seen.

When confronted with difficult situations or challenging environments, often it is heard “it’s the people that keep me here…keep me working, living, etc. in this place despite its shortcomings”. In Portland, the situation is reversed….the environment is being made increasingly pleasant and comfortable, but it is the people that make it so difficult to live there.

Read Jennifer Wyatt’s blog about her cross country move at isaymissourah.wordpress.com.

The 2012 Year in Unemployment

I recently looked at the changes in jobs in metro areas for 2012. Here’s a follow-on look at unemployment. First a look at the national unemployment rate picture, which has improved remarkably.




2012 Unemployment Rate by County

To put this in perspective, here’s the corresponding map for 2009:




2009 Unemployment Rate by County

It’s interesting to see where there has been improvement versus where there hasn’t, though I stop thresholding at 10% so that if people we well above it but dropped to just merely above it, my maps wouldn’t show that improvement.

Here’s a look at the large metro areas, ranked by total decline in unemployment rate.

Rank by Total Improvement Metro Area 2011 2012 Total Change
1 Las Vegas-Paradise, NV 13.5 11.2 -2.3
2 Orlando-Kissimmee-Sanford, FL 10.2 8.4 -1.8
3 Tampa-St. Petersburg-Clearwater, FL 10.6 8.8 -1.8
4 Miami-Fort Lauderdale-Pompano Beach, FL 10.2 8.5 -1.7
5 Jacksonville, FL 9.9 8.3 -1.6
6 Sacramento–Arden-Arcade–Roseville, CA 11.9 10.4 -1.5
7 Birmingham-Hoover, AL 7.9 6.4 -1.5
8 Cincinnati-Middletown, OH-KY-IN 8.6 7.1 -1.5
9 Riverside-San Bernardino-Ontario, CA 13.6 12.1 -1.5
10 Nashville-Davidson–Murfreesboro–Franklin, TN 8.1 6.6 -1.5
11 Louisville/Jefferson County, KY-IN 9.7 8.3 -1.4
12 San Jose-Sunnyvale-Santa Clara, CA 10.0 8.6 -1.4
13 Columbus, OH 7.5 6.1 -1.4
14 Kansas City, MO-KS 8.0 6.6 -1.4
15 Houston-Sugar Land-Baytown, TX 8.1 6.8 -1.3
16 Charlotte-Gastonia-Rock Hill, NC-SC 10.8 9.5 -1.3
17 Seattle-Tacoma-Bellevue, WA 8.7 7.4 -1.3
18 San Francisco-Oakland-Fremont, CA 9.4 8.1 -1.3
19 Los Angeles-Long Beach-Santa Ana, CA 11.4 10.1 -1.3
20 Salt Lake City, UT 6.7 5.5 -1.2
21 Phoenix-Mesa-Glendale, AZ 8.5 7.3 -1.2
22 St. Louis, MO-IL 8.8 7.6 -1.2
23 Dallas-Fort Worth-Arlington, TX 7.8 6.7 -1.1
24 San Diego-Carlsbad-San Marcos, CA 10.0 8.9 -1.1
25 Detroit-Warren-Livonia, MI 11.6 10.5 -1.1
26 Portland-Vancouver-Hillsboro, OR-WA 9.3 8.2 -1.1
27 Atlanta-Sandy Springs-Marietta, GA 9.8 8.8 -1.0
28 Austin-Round Rock-San Marcos, TX 6.8 5.8 -1.0
29 San Antonio-New Braunfels, TX 7.5 6.5 -1.0
30 Memphis, TN-MS-AR 10.0 9.0 -1.0
31 Chicago-Joliet-Naperville, IL-IN-WI 9.8 8.9 -0.9
32 Minneapolis-St. Paul-Bloomington, MN-WI 6.3 5.5 -0.8
33 Raleigh-Cary, NC 8.5 7.7 -0.8
34 Providence-Fall River-Warwick, RI-MA – Metro 11.1 10.3 -0.8
35 Richmond, VA 7.1 6.4 -0.7
36 New Orleans-Metairie-Kenner, LA 7.2 6.5 -0.7
37 Cleveland-Elyria-Mentor, OH 7.8 7.1 -0.7
38 Oklahoma City, OK 5.5 4.8 -0.7
39 Denver-Aurora-Broomfield, CO 8.6 7.9 -0.7
40 Hartford-West Hartford-East Hartford, CT – Metro 9.0 8.4 -0.6
41 Milwaukee-Waukesha-West Allis, WI 8.0 7.4 -0.6
42 Indianapolis-Carmel, IN 8.4 7.8 -0.6
43 Baltimore-Towson, MD 7.7 7.2 -0.5
44 Virginia Beach-Norfolk-Newport News, VA-NC 7.1 6.6 -0.5
45 Boston-Cambridge-Quincy, MA-NH – Metro 6.6 6.1 -0.5
46 Washington-Arlington-Alexandria, DC-VA-MD-WV 6.0 5.6 -0.4
47 Philadelphia-Camden-Wilmington, PA-NJ-DE-MD 8.6 8.6 0.0
48 Pittsburgh, PA 7.2 7.2 0.0
49 New York-Northern New Jersey-Long Island, NY-NJ-PA 8.6 8.8 0.2
50 Rochester, NY 7.8 8.1 0.3
51 Buffalo-Niagara Falls, NY 8.1 8.5 0.4

It's Not About The Climate: How the Left Lost Sight of Social Justice

Over the last few decades, humans achieved one of the most remarkable victories for social justice in the history of the species. The percentage of people who live in extreme poverty — under $1.25 per day — was halved between 1990 and 2010. Average life expectancy globally rose from 56 to 68 years since 1970. And hundreds of millions of desperately poor people went from burning dung and wood for fuel (whose smoke takes two million souls a year) to using electricity, allowing them to enjoy refrigerators, washing machines, and smoke-free stoves.

Of course, all of this new development puts big pressures on the environment. While the transition from wood to coal is overwhelmingly positive for forests, coal-burning is now a major contributor to global warming. The challenge for the 21st Century is thus to triple global energy demand, so that the world's poorest can enjoy modern living standards, while reducing our carbon emissions from energy production to zero.

For the last 20 years, most everyone who cared about global warming hoped for a binding international treaty abroad, and some combination of carbon pricing, pollution regulations, and renewable energy mandates at home. That approach is now in ruins. In 2010, UN negotiations failed to create a successor to the failed Kyoto treaty. A few months later cap and trade died in the Senate. And two weeks ago, the slow motion collapse of the European Emissions Trading Scheme reached its nadir, with carbon prices, already at historic lows, collapsing after EU leaders refused to tighten the cap on emissions.

What rushed into the vacuum was "climate justice," a movement headed by more left-leaning groups like 350.org, the Sierra Club, and Greenpeace. These groups invoke the vulnerability of the poor to climate change but elide the reality that more energy makes them more resilient. "Huge swaths of the world have been developing over the last three decades at an unprecedented pace and scale," writes political scientist Christopher Foreman in "On Justice Movements," a new article (below) for The Breakthrough Journal. "Contemporary demands for climate justice have been, at best, indifferent to these rather remarkable developments and, at worst, openly hostile."

For the climate justice movement, global warming is not to be dealt with by switching to cleaner forms of energy but rather by returning to a pastoral, renewable-powered, and low-energy society. "Real climate solutions," writes Klein, "are ones that steer these interventions to systematically disperse and devolve power and control to the community level, whether through community-controlled renewable energy, local organic agriculture or transit systems genuinely accountable to their users…"

Climate change can only be solved by "fixing everything," says McKibben, from how we eat, travel, produce, reproduce, consume, and live."It's not an engineering problem," McKibben argued recently in Rolling Stone, "it's a greed problem." Fixing it will require a "new civilizational paradigm," says Klein, "grounded not in dominance over nature but in respect for natural cycles of renewal."

Climate skeptics are right, Klein cheerily concludes: the Left is using climate change to advance policies they have long wanted. "In short," says Klein, "climate change supercharges the pre-existing case for virtually every progressive demand on the books, binding them into a coherent agenda based on a clear scientific imperative."

As such, global warming is our most wicked problem. The end of our world is heralded by ideologues with specific solutions already in mind: degrowth, rural living, low-energy consumption, and renewable energies that will supposedly harmonize us with Nature. The response from the Right was all-too predictable. If climate change "supercharges the pre-existing case for virtually every progressive demand," conservatives long ago decided, then climate change is either not happening, or is not much to worry about.

Wicked problems can only be solved if the ideological discourses that give rise to them are disrupted, and that's what political scientist Foreman does brilliantly in "On Justice Movements." If climate justice activists truly cared about poverty and climate change, Foreman notes, they would advocate things like better cook stoves and helping poor nations accelerate the transition from dirtier to cleaner fuels. Instead they make demands that range from the preposterous (e.g., de-growth) to the picayune (e.g., organic farming).

Once upon a time, social justice was synonymous with equal access to modern amenities — with electric lighting so poor children could read at night, with refrigerators so milk could be kept on hand, and with washing machines to save the hands and backs of women. Malthus was rightly denounced by generations of socialists as a cruel aristocrat who cloaked his elitism in pseudo-science, in the claim that Nature couldn't possibly feed any more hungry months.

Now, at the very moment modern energy arrives for global poor — something a prior generation of socialists would have celebrated and, indeed, demanded — today's leading left-wing leaders advocate a return to energy penury. The loudest advocates of cheap energy for the poor are on the libertarian Right, while The Nation dresses up neo-Malthusianism as revolutionary socialism.

Left-wing politics was once about destabilizing power relations between the West and the Rest. Now, under the sign of climate justice, it's about sustaining them.

This piece originally appeared at The Breakthrough.

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A Lasting Solution to the Transportation Funding Dilemma

President Obama's FY 2014 budget request includes $77 billion for the Department of Transportation and an additional $50 billion  "for immediate transportation investments." His next transportation bill to follow the current MAP-21, calls for a 25 percent increase in funding over current levels and assumes a transfer of $214 billion to the trust fund over six years "to maintain trust fund solvency and pay for increased outlays." To offset this spending, the Administration proposes using the "savings" or "peace dividend" from winding down the war in Afganistan. 

House T&I Committee Chairman Bill Shuster (R-PA) was not impressed.  "The President's budget," he said,  "repeats his call to increase spending without identifying a viable means to pay for it. .... You can't just keep on spending money that you don't have."  "A proposal we have seen three times before," observed Rep. Tom Latham (R-IA), House Transportation Appropriation Subcommittee chairman referring to the $50 billion request. With massive stimulus spending politically out of fashion, the Administration is repackaging it as "transportation investment." Bill Graves, president of the American Trucking Association, spoke for many stakeholders when he remarked, "For five years, we've waited for President Obama to clearly state how we should pay for these critical needs and, I'm sad to say, we continue to get lip service about the importance of roads and bridges with no real road map to real funding solutions." As for the "peace dividend," the idea has been dismissed as "budgetary gimmickry"  by congressional Democrats and  Republicans alike.

In sum, a large segment of congressional and public opinion has pronounced the White House proposals variously as "vague", "repetitive," "unrealistic," "implausible" and "politically unachievable." Even the President's most loyal supporters in the transportation community, the liberal advocacy groups, seemed disappointed and circumspect in their comments.  

This said, no one disputes President Obama's and the infrastructure advocates’ claim that some of America’s transportation facilities are reaching the limit of their useful life and need reconstruction. Nor does any one disagree about the need to expand infrastructure to meet the needs of a growing population. But fiscal conservatives among infrastructure advocates (and we count ourselves among them) contend that this does not rise to the level of a national crisis requiring a massive $50 billion federal crash program as proposed in the President's budget message, or the expenditure of more than $100 billion per year as recommended by the American Society of Civil Engineers (ASCE) in its latest "Report Card."

Instead, as we have argued in recent columns, the challenge can be met if each state did its part to progressively bring up its transportation facilities (including its Interstate highway segments) to a "state of good repair," using its own tax revenues and its formula allocation of the Highway Trust fund dollars (which are expected to total $38-41 billion per year over the next decade.)  As numerous news dispatches attest, that's precisely what is happening (see below). A large number of states are not waiting for the federal government to come to the rescue. They are using their own resources and raising additional revenue to pay for reconstruction and modernization of their aging facilities and to maintain their transportation systems in good working condition. "Governors and state legislatures realize that the level of federal assistance beyond 2014 is highly uncertain and they are acting on a credible assumption that federal funding will remain at current levels or may even be cut back," an association executive who is familiar with the thinking of senior-level state officials, told us.

What about large-scale reconstruction and system-expansion projects that require billions of dollars---transportation investments that are beyond the states' fiscal capacity to fund on a pay-as-you-go basis out of annual cash flow? Those investments,  provided they are credit-worthy (i.e. are revenue producing or backed by dedicated tax revenue),  will be mostly financed through long-term credit instruments  and public-private partnerships. The future of capital-intensive infrastructure projects is intimately tied to the financial involvement of the private sector and to a wider use of  tolling, "availability payments,"  and innovative credit instruments such as TIFIA and private activity bonds (PABs), a veteran facilitator of public-private partnerships told us. We list below some of the transportation megaprojects that are being financed (or are planned to be financed) largely with public and private credit rather than with federal dollars out of congressional appropriations.

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Lending credibility to the above funding scenario and hastening its adoption are the new realities underlying the federal role in transportation today. Those realities include: (1) a federal program that no longer has a clearly defined mission or purpose and many of whose functions are properly a state and local responsibility;  (2) a  Highway Trust Fund that has lost its capacity to support large-scale transportation investments and that has come to depend for its solvency on periodic injections of  general funds;  (3) a bipartisan absence of political will to raise the federal gas tax and (4) continued inability to identify another credible revenue source  to supplement or replace the gas tax.  

In sum, having the states assume financial responsibility for fixing their aging transportation facilities and for preserving them in a state of good repair,  while employing public and private financing for major capital-intensive infrastructure investments, offers the best solution to the current  federal funding dilemma.

NOTE: States that recently have undertaken to raise additional funds for transportation include: Virginia and  Maryland (broad transportation funding overhaul  that includes a dedicated sales tax applied to the wholesale price of gasoline.  A sales tax, it has been argued, is no less a "user fee" than the gas tax since every consumer who pays a sales tax also is served by or "uses"  the highway system for goods delivery );  Arkansas (one-half cent sales tax increase to back a $1.3 billion bond issue to fund highway construction over the next ten years);  Illinois (six-year $12.6 billion statewide construction program to improve roads and bridges);  Massachusetts ($13.7 billion bond-financed transportation plan); Maine ($100 million transportation bond proposal) Michigan ( $1.5 billion road plan funded with vehicle registration fees and a tax on fuel at the wholesale level); Missouri (proposal for a dedicated one-cent sales tax for transportation; the tax is expected to raise $7.9 billion over ten years); New Hampshire (12-cent hike in the gas tax over three years approved by the House; Senate approval uncertain);  Ohio (turnpike toll-backed $1.5 billion bond issue for highway and bridge improvements);  Pennsylvania ($2.5 billion Senate transportation funding plan; House approval uncertain); Texas (statewide tolling);  Wisconsin ($824-million boost to the state transportation fund);  Wyoming (10-cent fuel tax increase, the first in 15 years); and California, Oregon and Washington (exploring new mechanisms for project finance through the cooperative West Coast Infrastructure Exchange). In addition, several states which derive significant revenue from their tollroads have raised toll rates. See also, "State Transportation Funding Proposals,  AASHTO Center for Excellence in Project Finance, April 2013

Recent major transportation infrastructure projects largely financed,or to be financed, with long-term credit instruments rather than federal dollars include: the I-495 Beltway HOT lanes project in Northern Virginia; New York's Tappan Zee Bridge replacement; the San Francisco Bay Bridge Eastern Span replacement; the I-5 Columbia River Crossing;  the Highway 520 floating bridge and the Alaskan Way Viaduct in Seattle, the Midtown tunnel linking Norfolk and Portsmouth, VA; East End Crossing over the Ohio River near Louisville; and the PortMiami Tunnel. Please note that, except for the California High-Speed Rail venture, there are no transportation megaprojects currently being planned whose construction would depend primarily on federal appropriations.

Chinese Cancel Treasure Island Investment as Brown Seeks High Speed Rail Funds

California's Governor Jerry Brown and an entourage of public officials and corporate executives has spent much of the last week traveling around China trying to drum up business for the state. One of his principal objectives is to entice Chinese investors to take a stake in the California high-speed rail project. From the Governor's perspective, this makes all sense in the world.

California's high-speed rail program may be the current holder of the largest projected funding deficit of any infrastructure in the world, at approximately $50 billion. (That's after shaving $30 billion off the project and losing the support of former California High Speed Rail Authority Chairman, former state Senator Quentin Kopp, who charges that the line is no longer "genuine high speed rail").

As Governor Brown concludes his trip to the Orient, word comes from The San Francisco Chronicle that "A $1.7 billion deal with China Development Corp., the Chinese national railway and Lennar Corp. to construct 12,500 homes on the former Hunters Point Naval Shipyard in San Francisco and a string of high-rises on Treasure Island has collapsed." The project was to be built over up to three decades and would have housed 20,000 people. The deal is said to have fallen apart over not allowing the Chinese investors sufficient control and "unresolved tax issues."

The now defunct deal may have been the largest serious Chinese investment proposal in California.

There are important lessons for proponents of the high-speed rail system, who sometimes fantasize about China as the bailout investor of last resort. The Chinese, like the other investors who have found better things to do with their money are not likely to be swayed by the line's excessively high cost or its modest ridership potential. Nor will the Chinese bear gifts to California.

These issues are described in detail in the new Reason Foundation Updated Due Diligence report by Joseph Vranich and me.

States Seek to Become More Self-Reliant for Infrastructure

During his March 29 visit to the privately built and financed PortMiami tunnel project, President Obama unveiled a new infrastructure plan. His latest proposal---costing $21 billion--- includes a renewed call for a National Infrastructure Bank capitalized at $10 billion,  a  $7 billion  "America Fast Forward Bonds" program modeled after the former Build America Bonds;  and a sum of $4 billion in direct loans and loan guarantees. The White House announcement did not make it clear whether  this latest infrastructure initiative --- " to encourage private investment in America's infrastructure" ---replaces or is in addition to the $50 billion "fix-it-first" infrastructure plan that the President announced in his State-of-the-Union address less than two months ago (see, "Infrastructure Advocacy and Public Credibility," InnoBrief, Vol. 24, No. 2, February 20).

Decidedly, infrastructure investment remains on the President's mind. It also continues to generate headlines. Just a week earlier, the American Society of Civil Engineers (ASCE) released its latest  "report card" giving the nation a D for highways and estimating the investment needs in surface transportation to the year 2020 to amount to a staggering $1.723 trillion. With expected funding during the same period amounting only to $877 billion, the funding gap comes out to be an astronomical sum of $846 billion--- more than $100 billion per year. As if to reinforce the ASCE conclusions, the Washington Post came out with a front-page story about the deteriorating state of the Capital Beltway, "a politically iconic and locally vital highway... dying beneath your turning wheels"  (Beneath the Surface, the Beltway Crumbles, March 31, 2013)

What kind of an impact the President's repeated pleas, combined with the ASCE report card and alarming press stories of "crumbling " infrastructure, will have on public opinion and congressional attitudes remains to be seen. As we have noted earlier, they come at a time of severe budget pressures and intense Republican efforts to curb excessive discretionary spending. To be successful,  pro-infrastructure advocates must explain to the skeptical lawmakers where the money would come from.  "At some point somebody  has to pay the bill," House Speaker John Boehner pointedly remarked in reaction to Obama's latest infrastructure proposal. The advocates also must persuade fiscally conservative House members that there are urgent and compeling reasons to boost spending on public works that override the imperative to reduce the deficit and get the nation's fiscal house in order. 

Second, the nation's taxpayers must become convinced that spending more on transportation will make a difference in practical terms such as easing congestion and improving the lot of  commuters, and that the money will not be wasted on questionable projects that have little to do with improving mobility. "The Bridge to Nowhere" as a symbol of wasteful spending still lives in the collective public consciousness. 

Third, infrastructure alarmists must contend with the upbeat conclusions of a Reason Foundation study, "Are Highways Crumbling?" That study has found that  America's highways and bridges are in a far better condition today than they were 20 years ago. "There are still plenty of problems to fix, but our roads and bridges aren't crumbling," said David Hartgen, lead author of the Reason study. "The overall condition of the public road system is getting better and you can actually make the case that it has never been in better shape." The study affirms what the traveling public experiences every day ---- that  the nation's highways and bridges not only are not "crumbling" but in most places are holding up pretty well. "Should I believe the pundits or my own eyes," asked Charles Lane, a Washington Post editorial writer, in a much-quoted column after having traveled thousands of miles "without actually seeing any crumbling roads."  (The U.S. Infrastructure Argument that Crumbles Upon Examination, October 31, 2012). 

Fourth, as one highly knowledgeable reader of ours (a civil engineer) has observed, "we must get an objective, precise and quantifiable assessment of bridge conditions  before launching full bore into repair or replacement actions" costing billions of dollars. "Today," he wrote, " no one, and I mean no one  has an objective, clear and precise understanding of the actual condition of America's bridges." Before asking taxpayers for billions of dollars to fix a problem based on subjective visual assessments of bridge conditions,  we want to be very sure that we have accurate data to back up our position, our reader concluded. His remarks about bridges could equally well be applied to the condition of the nation's roads.

Lastly, infrastructure advocates must overcome a cynical perception, common among the public, that pressures to increase federal funding for transportation are nothing more than special interest pleadings by interest groups that stand to profit from higher levels of public spending (ASCE is one of them, raising questions as to its objectivity, several observers have noted). 

As one transportation advocate at a recent conference observed, "there is an enormous disconnect between us and the American public" --- a disconnect that may not be easy to overcome.

States Are Acting on their Own

As we have argued in recent columns, no one disputes the infrastructure advocates’ claim that some of America’s transportation facilities, such as the Capital Beltway, are reaching the limit of their useful life and need reconstruction. Nor does any one disagree about the need to expand infrastructure to meet the needs of a growing population. But fiscal conservatives among infrastructure advocates (and we count ourselves among them) contend that this does not rise to the level of a national crisis requiring a massive $50-70 billion federal crash program as proposed by the President, or the expenditure of more than $100 billion per year as recommended by ASCE.

Instead, the challenge can be met if each state did its part to incrementally, over a period of years, bring its transportation facilities up to a "state of good repair" using its own gas tax revenues  and its formula allocation of the Highway Trust fund dollars. As numerous news dispatches attest, that is precisely what's happening (see below). A growing number of states are not waiting for the federal government to come to the rescue. They are using their own resources and raising additional revenue to pay for reconstruction of their aging facilities-- "one lane at a time" if necessary---and keep their transportation systems in good working condition. "Governors and state legislatures realize that the level of federal assistance beyond 2014 is highly uncertain and they are acting on a credible assumption that federal funding will remain at current levels or may even be cut back," an association executive who is familiar with the thinking of senior-level state officials, told us.

What about  large-scale reconstruction and capacity-expansion projects that require billions of dollars---transportation  investments that are beyond the states'  fiscal capacity to fund on a pay-as-you-go basis? Those investments,  provided they are credit-worthy (i.e. are revenue producing or backed by dedicated tax revenue),  will be mostly financed through long-term credit instruments  and public-private partnerships. The future of infrastructure megaprojects is intimately tied to the financial involvement of the private sector and to a wider use of  tolling, "availability payments,"  and innovative credit instruments such as TIFIA and private activity bonds (PABs), a veteran facilitator of public-private partnerships told us. " President Obama was right to have shined a spotlight on the PortMiami tunnel project and drawn attention to the importance of private investment in major transportation infrastructure. The Highway Trust Fund no longer can serve that purpose."

The scenario we have suggested above---i.e., having states assume financial responsibility for fixing their aging transportation systems, while relying on debt financing for major facility reconstruction and system expansion---makes practical sense in view of the uncertain future level of  federal transportation funding.  It also may constitute a way to save the Highway Trust Fund from insolvency and provide a lasting solution to the federal transportation funding dilemma.

NOTE: States that recently have undertaken to raise additional funds for transportation include: Virginia and  Maryland (broad transportation funding overhaul  that includes a dedicated sales tax applied to the wholesale price of gasoline.  A sales tax, it has been argued, is no less a "user fee" than the gas tax since every consumer who pays a sales tax also is served by or "uses"  the highway system for goods delivery );  Arkansas (one-half cent sales tax increase to back a $1.3 billion bond issue to fund highway construction over the next ten years); Massachusetts ($13.7 billion bond-financed transportation plan); Maine ($100 million transportation bond proposal);  Michigan ($1.5 billion road plan funded with vehicle registration fees and a tax on fuel at the wholesale level); Missouri (proposal for a dedicated one-cent sales tax for transportation; the tax is expected to raise $7.9 billion over ten years); New Hampshire (12-cent hike in the gas tax over three years approved by the House; Senate approval uncertain);  Ohio (turnpike toll-backed $1.5 billion bond issue for highway and bridge improvements); Texas (statewide tolling);  Wisconsin ($824-million boost to the state transportation fund);  Wyoming (10-cent fuel tax increase, the first in 15 years); and California, Oregon and Washington (exploring new mechanisms for project finance through the cooperative West Coast Infrastructure Exchange).

Recent major transportation infrastructure projects largely financed with long-term credit instruments rather than federal dollars include: the I-495 Beltway HOT lanes project in Northern Virginia; New York's Tappan Zee Bridge replacement; the San Francisco Bay Bridge Eastern Span replacement; the I-5 Columbia River Crossing;  the Highway 520 floating bridge in Seattle, the Midtown tunnel linking Norfolk and Portsmouth, VA, East End Crossing over the Ohio River, and the PortMiami Tunnel.