OpenMarket.org

Rising Voter Apathy

2012-02-10T18:04:03Z

I don’t always agree with Peggy Noonan, but she makes a good point about why voter turnout and cable news ratings are down in this election year:

Maybe the story the political class is missing is not “They don’t like the Republican field,” or “They don’t like Obama.” Maybe the story is that people are tuning out altogether. Maybe they’re bored with politics, and most especially with politicians. Maybe they don’t think our government can’t (sic) solve anything. Maybe, even, our political class has done such a good job depicting the crisis we’re in that the American people, with their low faith in institutions, think nothing, really, can be done about it. So let’s check out. Let’s watch the game.

As Nick Gillespie and Matt Welch point out in The Declaration of Independents, businesses that treat their customers as badly as the Republican and Democratic parties treat theirs tend to go out of business. This may be exactly what we’re seeing.

$26 Billion Mortgage Settlement Rips Off Investors to Trim Banks’ Massive Costs of Bailing Out Deadbeat Borrowers

2012-02-10T18:22:51Z

The $26 billion mortgage settlement announced yesterday is bad news for “bond investors including pension funds, according to Pacific Investment Management Co.’s Scott Simon,” notes Bloomberg News. He says that the settlement rips off innocent investors and pension funds in order to reduce the banks’ costs of bailing out delinquent mortgage borrowers and others. (As we noted earlier, the Justice Department, state attorneys general, and the biggest banks reached an agreement to provide $26 billion to delinquent mortgage borrowers and others, such as left-wing housing counseling similar to ACORN — in what the New York Post calls a “deadbeat bailout”). As Simon notes,

“They’re using other people’s money to pay for a ton of this. Pension funds, 401(k)s and mutual funds are going to pick up a lot of the load.”
Asset managers are frustrated with the deal because, in addition to the debt the banks own, it gives credit to the lenders for changes to loans they hold no interest in and oversee for investors. That “treats people’s 401(k)s and pensions,” which hold mortgage securities, “like perpetrators as opposed to victims,” Simon said. The deal comes after all 50 states announced a probe into foreclosures in 2010 . . . costing bondholders as liquidations of bad debt were delayed.
“Think about this, you tell your kid, ‘You did something bad, I’m going to fine you $10, but if you can steal $22 from your mom, you can pay me with that,’ ” Simon said yesterday. . .
Laurie Goodman . . . who has advocated for mortgage forgiveness in testimony to Congress, joined him in criticizing the agreement yesterday. . .“There is a difference between principal reductions and giving banks credit for spending others’ people money.”

As we noted earlier, by ripping off mortgage investors, this deal will make investing in mortgages more risky, which will in turn drive up interest rates that homebuyers have to pay in the future. This deal only covers borrowers at certain banks, not those borrowers who mortgages are held by the government-sponsored mortgage giants Fannie Mae and Freddie Mac, which (unlike the private banks) have never repaid their bailout, and are currently still being bailed out at an ever-increasing tab of $170 billion.

This deal is not the only way that federal and state officials are messing up the housing market. The Obama administration is forcing banks to make risky loans (in the name of “fair lending”), thus planting the seeds of a future financial crisis. The Justice Department is suing banks that refuse to do so, and forcing them both to award preferential loans based on race, and to cough up money in “settlements,” some of which goes to left-wing “community” groups.

The Obama administration recently launched a multibillion dollar bailout for speculators. Bloomberg News reported that the administration is vastly expanding aid for certain “delinquent homeowners,” paying banks up to 63 cents for every dollar in principal they write off for such homeowners. Speculators will benefit, because bailout recipients don’t even have to live in a house to get its mortgage principal reduced at taxpayer expense.

The STOCK Act’s Muzzle and How to Fix it in Conference (Update)

2012-02-10T18:02:21Z

My colleagues David Bier and Ryan Radia contributed to this post.

Per the scenario in a previous post, it’s April 2012. You are a conscientious congressional staffer who still takes seriously the need to be a steward of taxpayers’ money. (Yes, I know for a fact, there are more than a few of these folks around on Capitol Hill.) You are watching closely events surrounding an “omnibus” or “minibus” spending bill deemed even by conservative Republican members as “must-pass” because it funds the military as well as other parts of government.

Suddenly, you hear about an outrageous earmark about to be slipped into the bill that would enrich a Fortune 500 company. You decide to alert a network of fiscal watchdogs you’ve met with over the years to wage an instant campaign against this piece of corporate welfare.

You have all the information in the e-mail and are about to hit “send.” But then you remember something from a briefing you attended a couple days ago. The subject was the STOCK (Stop Trading on Congressional Knowledge) Act – aimed at stopping “insider trading” by members and employees of Congress – that your boss and nearly every other member of Congress voted into law in February.

At the time, you didn’t think the law would affect you since the only trading you do is indirect, through your mutual funds and pension. You were surprised to learn, however, that you now have a broad “duty of confidentiality” that encompasses not just trading on “material, nonpublic information,” but disclosing information to those who might.

You sit back and think, “It is indeed possible that someone I send this to could buy stock in the company, or could short the company based on the coming outrage.” You stare at the computer screen wondering how virtually no one noticed how this law could have potentially criminalized an act of whistleblowing as abetting “insider trading.”

Such a scenario is almost certain if House and Senate versions of the STOCK Act are not modified before a final bill is sent to President Obama. The House passed the bill yesterday with a 417-2 vote after a similarly overwhelming 96-3 Senate vote last week. Both bills must go to “conference” to produce a final identical bill to be voted on by both houses, giving members an opportunity for a fix to help make sure that whistleblowing and routine communication with outside groups from being caught in the law’s web.

The legislation gained steam after a series of revelations in conservative author Peter Schweizer’s best-selling book, Throw Them All Out, that pointed out that many members of Congress regularly trade stocks and options, sometimes after receiving sensitive information. A “60 Minutes” report based on some of Schweizer’s findings propelled the issue into the spotlight, with President Obama calling on Congress in the State of the Union to ban “insider trading” among its members and staff.

But lost in the justifiable outrage about politicians’ perks is discussion about how provisions in the bills would actually work. Among the most important things to know about the STOCK Act is that by specifically applying “material, nonpublic information” rules that govern officers and directors of a corporation to Congress, the bill would bar in many instances the disclosure of such information as well as trading on it.

The bills specifically impose a “duty of confidentiality” on members of Congress and their staffs. They state that “each Member of Congress or employee of Congress owes a duty arising from a relationship of trust and confidence [emphasis added] to the Congress, the United States Government, and the citizens of the United States with respect to material, nonpublic information.”

The term “confidence” in the context of securities law does not mean faith in a particular institution — indeed it would be difficult to legislate confidence in Congress or any branch of government — but rather keeping matters in confidence. And under the “duty of confidentiality” imposed with regard to publicly-traded companies, many have been prosecuted for sharing information as well as trading on it.

A so-called “tipper,” wrote attorney Nelson Ebaugh in the Texas Journal of Business Law, “is exposed to insider trading liability for simply communicating material, nonpublic information even if he did not personally use the information to trade in the company’s securities.” Ebaugh added that courts are split on whether a “personal benefit” is even required for guilt.

Ebaugh and other experts have argued that insider trading rules have been applied so broadly to such “tippers” of corporate information that they inhibit disclosure about corporate wrongdoing. If these rules were applied to information about upcoming congressional action, it would have serious, if not more severe, effects in muzzling whistleblowers.

In addition to the e-mail to activists from the beginning of this article, conference calls and off-the-record meetings with ideological activists, such as the famed “Wednesday meeting” created by conservative activist Grover Norquist and similar gatherings organized by liberals, could also be curtailed. In the corporate word, the Securities and Exchange Commission has cracked down on what it calls “selective disclosure” to analysts. As a result, under Regulation Full Disclosure, most public companies put information about conference calls on their web site and/or post the recorded call for all to hear.

Following this precedent, if the STOCK Act is passed, the SEC may require meetings and calls in which Congress members and staffers participate to be open to the public or not occur at all. The result would be less outflow of information from Congress and a less-informed public.

Fortunately, some simple language — a “mens rea” or “guilty mind” requirement — could be added in conference to help ensure the new rules don’t inhibit the free flow of information necessary for accountability in Congress. A clause could be added stating something like:

“Nothing in this subsection shall be construed to impose liability on Members of Congress or employees of Congress for acts of disclosing material, nonpublic information to nonaffiliated third parties, unless the Member of Congress or employee of Congress discloses the information to a nonaffiliated third party:

(A) As a means for making a private profit;

(B) With knowledge that the recipient of the information, or persons acting in concert with the recipient of the information, intend to use the information for purposes of making a private profit;”

The First Amendment is also threatened by a measure added to the Senate bill by Sen. Charles Grassley (R-Iowa) that would require so-called political intelligence (an oxymoron if there ever was one!) firms to register as lobbyists. But these firms do not lobby for legislation, but merely gather information for investors, businesses, and sometimes, as University of Minnesota law professor Richard Painter points out, non-profits such as churches and unions. The work that they do is not that different from the news gathering of high-priced investment magazines and newsletters for wealthy subscribers, which no one doubts have First Amendment protection.

As Sen. Joseph Lieberman (I-Conn.) said on the Senate floor, “We are ultimately dealing with First Amendment rights here, and ought not to legislate until we are prepared to do so in a reasoned way.” Fortunately, the House bill did not contain Grassley’s amendment, but Grassley and Democrats will fight to reinsert the measure in the conference bill.

The exposes of Schweizer and others raise serious issues about power and privilege that need to be addressed. The STOCK Act contains some sensible measures, such as more rapid and specific disclosure of investment holdings. Unfortunately, the “political intelligence” provision of the Senate bill and the “duty of confidence” in both bills would muzzle the communication necessary for sunlight and reform. For the sake of transparency and accountability, this potential muzzle must be lifted.

Today’s Links: February 10, 2012

2012-02-10T16:16:29Z

OPINION

DON BOUDREAUX: “The Twistocracy”
“[U.S. Senator Kirsten] Gillibrand (D-NY) said: ‘The power to decide whether or not to use contraception lies with a woman – not her boss. What is more intrusive than trying to allow an employer to make medical decisions for someone who works for them?‘ The twisted logic underlying Ms. Gillibrand’s worldview is stunning. First she wants to collectivize health-care funding. Second, she then expresses indignance that express orders by the state on how private parties spend their funds are resisted by those private parties. And third, she parades her indignance as being a defense of private spheres of actions that ought not be intruded into by outsiders!”

PETER SCHWEIZER: “Warren Buffett: Baptist and Bootlegger”
“Warren Buffett is very much a political entrepreneur; his best investments are often in political relationships. In recent years, Buffett has used taxpayer money as a vehicle to even greater profit and wealth. Indeed, the success of some of his biggest bets and the profitability of some of his largest investments rely on government largesse and “coddling” with taxpayer money.”

KATY WALDMAN: “Uncle Sam Is Not Coming For Dinner”
“America is fat, but Americans disagree about what this means. Either the country’s obesity rates—one third of all adults are obese—are a dangerous health crisis, or they show that the nation is healthier and wealthier than ever. Either the government must act immediately to curb our waistlines, or we must act to curb our bloated government. These were the questions debated in NYU’s Skirball Center last night at theSlate/Intelligence Squared live debate, in which four health and policy experts argued the motion that “Obesity is the government’s business.””

NEWS

LEGAL: Tribe Suing Beer Makers Over Alcohol Problems
“A Native American tribe sued some of the world’s largest beer makers Thursday, claiming they knowingly contributed to devastating alcohol-related problems on South Dakota’s Pine Ridge Indian Reservation. The Oglala Sioux Tribe of South Dakota said it is demanding $500 million in damages for the cost of health care, social services and child rehabilitation caused by chronic alcoholism on the reservation.”

TSA – No Female TSA Agents Means No Flight For Denver Woman
“A Denver woman claims she couldn’t board a flight from Wyoming to Denver because of her gender. [...] ‘They asked if I was on the flight to Denver, I said yes, they said that they couldn`t screen me because they sent all the female TSA agents home,’ Winning said.”

HEALTH – FDA Outlines Path for Lower-Prices Biotech Drugs
“The guidelines issued by the FDA on Thursday are the final step in a decades-long effort to lower the price of biotech drugs, high-tech injectable medications that cost the nation billions of dollars each year.”

Principles of Law: Simplicity is Beautiful

2012-02-10T05:24:39Z

Countries across the world have turned to democracy in recent decades. There are still a few monarchies here and there, and plenty of dictatorships. Cuba and North Korea are even keeping the last dying embers of communism alight. But more and more, democracy is seen as the way to go.

One of the first things a new democracy needs is a constitution. One of a constitution’s jobs is to establish the government’s structure — how the executive, legislative, and judicial branches are composed, what their powers are (and aren’t!), and a few rules of procedure.

The U.S. Constitution is a model of simplicity. You can read the whole thing in under a half hour. And that is the secret of its success. It doesn’t need to outline the specifics of agricultural or trade policy. That’s Congress’ job.

The EU’s de facto constitution runs well over 200 pages. Where the U.S. Constitution paints with a broad brush, the European Union fills in every last detail. Most countries, including the U.S., are turning to this top-down model and rejecting the Constitution’s more bottom-up approach.

The thinking goes, “How can something so simple be effective when the modern world is such a complicated place? The 21st century is very different from the 18th century.”

Good question. The answer is that those extra layers of complexity are precisely why a bottom-up approach is more important than ever. Top-down governance is hard enough even in a simple agrarian economy. It is impossible in a world like ours. Too many variables. The more rules there are, the easier they are to subvert.

Transitioning democratic countries regularly used the U.S. Constitution as a model when drafting their own constitutions. But that’s happening less and less, according to a thought-provoking Investor’s Business Daily editorial.

The reason is a shift in the intellectual climate. Negative rights are out of fashion now. Positive rights are all the rage. Negative rights are the kind that pervade the U.S. Constitution: don’t hit other people, don’t take their stuff, don’t break your contracts. Don’t, don’t don’t.

Positive rights are much less dour. And they are all over most new constitutions. You have the right to health care, or a job with six weeks vacation, and so on. People think of new positive rights all the time, too. There is a push in some countries to give people the legal right to Internet access. Sounds great. Who could be against that?

I can. Positive rights do sound nice, but in practice they are profoundly illiberal. That is because positive rights often contradict each other. If I break a bone and my doctor has a legal right to be on vacation, one of us has to have our positive rights violated. That means someone has to decide. Someone with a lot of power. Life and death, in some cases. A government with the power to make those kinds of decisions is very powerful indeed. Positive rights systems require large, powerful governments. Rights violations are both frequent and arbitary.

Negative rights have no such conflicts. That’s a big reason why the U.S. Constitution is so simply constructed. In fact, most of it isn’t even about granting this power or that to government. Most of that is contained in Article I, Section 8. The majority of the document is about placing strict limits on those powers. When the people are left alone, they largely prosper. Let them build from the bottom up. The view from the top on down is too distant to catch the necessary details.

In the law, as in so many other areas, simplicity is beautiful. As democracy continues to march across the globe, newly forming governments should keep that in mind.

Time to Pay Your Neighbor’s Mortgage, Again

2012-02-11T05:30:58Z

The Justice Department, state attorneys general, and the biggest banks have reached an agreement to provide at least $26 billion to delinquent mortgage borrowers and others, such as left-wing housing counseling groups similar to ACORN. But if you were financially responsible, you very likely won’t benefit from this settlement, but may actually be harmed by it. It only benefits a small fraction of people who were foreclosed upon, as well as some underwater borrowers, most of them delinquent, whose mortgages were serviced by certain banks. You likely won’t get any money or principal reduction under this settlement if you paid your mortgage on time, especially if you were thrifty enough to make a large down payment (which usually prevents you from ending up underwater on your mortgage unless there is a huge decline in housing values). Instead, you may suffer, because the settlement may lead to mortgage interest rates rising in the future. (Politicians’ desire for this settlement was based on voodoo economics).

One feature of the agreement is that some delinquent borrowers who are underwater will see their mortgage principal reduced. But the cost of these principal reductions may be borne heavily by innocent third parties, not just the banks: the banks only retained a fraction of the mortgages they originated, selling the rest to mortgage investors (including some pension funds). So the banks are going to write off mortgage principal that is not wholly theirs, but rather the property of third-party investors, raising serious contractual and property rights issues. The settlement contains provisions which reward the banks for cutting mortgage principal balances through a specified formula, creating a serious conflict of interest between the banks and the investors on whose behalf the banks service the loan.

One sign that this cost-shift is real is that the stock price of Bank of America, the bank that will reduce the largest number of mortgages under this settlement, actually went up today, even as most banks’ stock price went down, despite bad news on other legal fronts for Bank of America. Once this cost-shifting happens, mortgages will become a more risky, less attractive investment for Wall Street investors and pension funds in the future, and banks will get less money from investors for them at any given interest rate — which will lead to banks charging a higher interest rate to borrowers to offset the increased risk. AEI’s James Pethokoukis, a former Reuters financial reporter, discussed earlier how Obama’s proposed mass refinancing proposal might have a similar effect that would backfire on America’s borrowers and home purchasers and result in increased interest rates in the future.

So essentially, responsible people are being tapped once again to bail out the irresponsible. As The New York Times notes, “Despite the billions earmarked in the accord, the aid will help a relatively small portion of the millions of borrowers who are delinquent and facing foreclosure.”

Curiously, while the government apparently wants to milk innocent third party investors to finance the settlement, government agencies and government-controlled mortgage giants are not chipping anything in yet. As USA Today notes, the settlement’s principal reductions “will not include any loans owned by mortgage giants Freddie Mac, Fannie Mae, or the Federal Housing Finance Administration.” This is in contrast to 2009, when the Obama administration made these government-sponsored mortgage giants run up $30 billion in losses bailing out even high-income mortgage borrowers. The Obama administration earlier lifted the $400 billion limit on bailouts for Fannie Mae and Freddie Mac, so that they could continue to buy up junky mortgages at taxpayer expense, and showered their executives with $42 million in compensation. The administration has spent $170 billion propping up these two government-backed mortgage giants, which helped spawn the financial crisis, and has given them competitive advantages over private enterprises.

Meanwhile, the Obama administration is forcing banks to make risky loans (in the name of “fair lending”), thus planting the seeds of a future financial crisis. The Justice Department is suing banks that refuse to do so, and forcing them both to award preferential loans based on race, and to cough up money in “settlements,” some of which goes to left-wing “community” groups that are allied with the Obama administration.

The Obama administration recently began a multibillion dollar bailout for speculators. Bloomberg News reported that the administration is vastly expanding aid for certain “delinquent homeowners,” paying banks up to 63 cents for every dollar in principal they write off for such homeowners, a tripling of what banks can currently get under the HAMP bailout program. Speculators will benefit, too: they don’t even have to live in a house to get its mortgage principal reduced: “Investors who rent out their properties would be eligible to refinance under the new rules.”

CEI Podcast for February 9, 2012: The Immigration Tariff

2012-02-09T19:41:50Z

Have a listen here.

Immigration law is second in complexity only to the income tax. In a new CEI paper, Policy Analyst Alex Nowrasteh proposes scrapping the whole thing and replacing it with a tariff. This is a much more humane approach to immigration, and in many cases will be less expensive for immigrants than the lawyers and fees they currently have to pay while they live in legal limbo. A tariff would also reduce illegal immigration by eliminating black markets. Money that currently goes to illegal smugglers and human traffickers could instead go to the U.S. Treasury. The idea can appeal to both the left and the right.

Massive Anti-Bullying Law and Bullying Initiatives Were Based on Misleading Publicity

2012-02-09T20:17:09Z

“It launched a hundred ‘anti-bullying’ initiatives at all levels of government, but much of what you think you know about” the Tyler Clementi case “is probably wrong,” notes legal commentator Walter Olson at Overlawyered, the world’s oldest law blog. Andrew Sullivan discusses this as well, linking to Ian Parker’s article in The New Yorker.

We wrote earlier about how the current panic over bullying is leading to attacks on free speech, political debate, and free association in the schools; political pandering; dishonest stretching of existing federal laws by federal officials; and violations of basic principles of federalism.

Reason’s Jacob Sullum writes about New Jersey’s massively-long “Anti-Bullying Bill of Rights,” enacted after Clementi’s suicide at New Jersey’s Rutgers University, and how it infringes on free speech and imposes illegal unfunded mandates. When New Jersey passed this incredibly complicated anti-bullying law, which contains 18 pages of “required components,” that gave a huge boost to a burgeoning “anti-bullying” industry that seeks to define bullying as broadly as possible (to include things like “eye-rolling,” or always associating with the same group of friends) in order to create demand for its services. Hundreds of New Jersey schools “snapped up a $1,295 package put together by a consulting firm that includes a 100-page manual.”

Rod Dreher sees a lesson from the Clementi case about jumping to conclusions:

I too thought that Clementi had been outed after Ravi filmed him having sex. As Parker shows, Clementi was not closeted, and he wasn’t filmed having sex. And yes, Dharun Ravi [who is being prosecuted for hate crimes over the filming that allegedly caused Clementi's suicide] is an ass. But he is not facing criminal trial for being an ass. This is what moral panic does. . .It is hard for me to be fair [to the defendant] in these particular cases, but it is necessary to fight against my own instincts in this case and in every case. You too.

The Obama administration’s StopBullying.gov website defines bullying incredibly broadly in ways that conflict with freedom of speech and common sense. It defines “teasing” as a form of “bullying,” and “rude” or “hurtful” “text messages” as “cyberbullying.” Since “creating web sites” that “make fun of others” also is deemed “cyberbullying,” conservative websites that poke fun at the president are presumably guilty of cyberbullying under this strange definition. (Law professors like UCLA’s Eugene Volokh have criticized bills by liberal lawmakers like Congresswoman Linda Sanchez (D-Calif.) that would ban some criticism of politicians as cyberbullying.)

Anti-bullying regulations can backfire and have bad consequences for child development. As a school official noted after passage of New Jersey’s sweeping anti-bullying law, “The anti-bullying law also may not be appropriate for our youngest students, such as kindergartners who are just learning how to socialize with their peers. Previously, name-calling or shoving on the playground could be handled on the spot as a teachable moment, with the teacher reinforcing the appropriate behavior. That’s no longer the case. Now it has to be documented, reviewed and resolved by everyone from the teacher to the anti-bullying specialist, principal, superintendent and local board of education.”

Good News/Bad News On Human Spaceflight Regulation

2012-02-09T16:42:49Z

In a bill passed last week authorizing the Federal Aviation Administration for another year, the moratorium on regulation of the safety of spaceflight participants, in place since 2004, was extended for another three years, but not as long as proponents in industry had hoped:

Section 827 of the bill (on page 318), tucked away in the “Miscellaneous” section of the bill between sections on air passenger screening privacy and air transportation of lithium batteries, extends the current restriction on safety regulations, but only to October 1, 2015. The joint statement of managers of the conference report provides a few more details, on page 152 of the PDF document: “Nothing in this provision is intended to prohibit the FAA and industry stakeholders from entering into discussions intended to prepare the FAA for its role in appropriately regulating the commercial space flight industry when this provision expires.”

The current moratorium, which was due to expire at the end of this calendar year, was put in place by the 2004 Commercial Space Launch Amendments Act, which prohibited the FAA from regulating passenger safety for a period of eight years (its ability to license launches for the protection of uninvolved third parties was not affected). The idea was that the technology was insufficiently well understood by anyone, including the putative regulators, to put in place regulations that wouldn’t stifle industry development and innovation, given all the different approaches (vertical takeoff and landing, horizontal takeoff and landing, air launch, hybrid rockets, liquid rockets, etc.). The model proposed instead was on the basis of informed consent, in which participants would be given all information available on the design and operations of the vehicle, and make their own assessment of the risk, and whether or not it was worth it.

The problem was that everyone had envisioned more rapid progress, but in the seven years since, not a single commercial passenger flight has occurred, due to development problems with Scaled Composites’ SpaceShipTwo propulsion, and the financial crisis starving some of the other fledgling companies of funds needed for development. Accordingly, the industry had been pushing for Congress to extend the moratorium for another eight years to gather more needed experience to intelligently inform regulations, except this time the clock wouldn’t start when the bill passed, but rather when the first commercial passenger spaceflight occurred, to prevent the problem that arose from the first bill.

Though George Nield, head of the FAA office that regulates spaceflight, had wanted the moratorium to end, John Mica, the chairman of the transportation committee on the House side, was amenable, and the extension was included in the House version for months, but it was not in the Senate version, with reports of opposition by a single Senate staffer, and the bill was held up in conference committee for many weeks resolving other, unrelated issues.

Apparently, there was some danger that it would fall out completely, but House Whip Kevin McCarthy apparently went to bat for the industry (Mojave, California, where several of these companies operate, is in his district). He had written an op-ed a few weeks ago advocating the extension, and last week, in a press release with the Commercial Spaceflight Federation, took credit for getting the partial extension, though apparently it was a compromise.

But at least it buys time for the industry to continue to develop their vehicles without the uncertainty that had been hanging over their heads about new rules next year (XCOR Aerospace expects to start flying its Lynx rocketplane late this year, and Armadillo Aerospace and Scaled Composites expect actual flights into space, though without passengers). And the short extension, if nothing else, buys time to try to get the full eight years with the first-flight trigger, in a new Congress.

Even Liberal Reporters Sour on Stimulus-Funded California Rail Boondoggle

2012-02-09T02:51:38Z

Even reporters at the famously-liberal Los Angeles Times have soured on California’s $100 billion-plus rail boondoggle, whose cost will far outstrip whatever the state will get from the $800 billion stimulus package to build it. But the paper’s editorial board, which supported the stimulus package, continues to back the project, which has ballooned in cost from $33 billion to over $100 billion. (Managing to see the bright side of even the most pernicious government waste, the paper’s board cited other boondoggles with approval, like Boston’s disastrous Big Dig project, which resulted in motorist fatalities. It praised that infamous project for replacing “what used to be an expressway” with “a downtown park”, despite the fact that it caused “severe delays” for motorists and had a skyrocketing price tag of more than $15 billion.)

But as its own reporter, Steve Lopez, recently noted, there is no telling how much the project will ultimately cost, or when it will actually be completed:

The projected completion date has gone from 2020 to 2033. The anticipated cost has ballooned to as high as $117 billion, and no one seems to have a clue where the bulk of the money would come from. The state auditor and the state Legislative Analyst’s Office have raised serious concerns, and the rail authority’s own peer review group said the project represents “an immense financial risk” to the state. And two weeks ago, the railroad authority’s top executive resigned.To top it off, a poll last fall said nearly two-thirds of registered voters would run this train off the rails if they had a chance to vote again.

The rail project won’t even be useful or economically viable once it’s finished, since travelers will be able to travel more cheaply by road or air than by taking the train. As syndicated columnist Amy Alkon notes, “this is a totally unnecessary train (and I say that as a train lover). It’s $59 from LA to SF on Southwest if you book in advance,” less than a train ticket will likely cost. And although the project is misleadingly called a “high-speed” rail project, it turns out that “the train couldn’t really run high speed” after all.

As Tim Cavanaugh noted in Reason, the Los Angeles Times reporter, Steve Lopez, had

the good fortune to answer to the newsroom rather the opinion section, where bullet-train belief still reigns as supremely as it does in Gov. Jerry Brown’s rumpus room. The important thing is that one more prominent Golden State blowhard is sealing the case against the vacant and bankrupt high-speed rail project. . . . In a piece I missed earlier this month entitled “Keeping faith with California’s bullet train,” the ed board praised the High-Speed Rail project because it is similar to Boston’s notorious Big Dig and the building of the pyramids by slaves.

The Obama Administration still supports this boondoggle even though it has been criticized by other liberal newspapers like the Washington Post. That paper, which has not endorsed a Republican for President since 1952, criticized the project in an editorial entitled “California’s High-Speed Rail System Is Going Nowhere Fast.”

As we noted earlier, the small fraction of the stimulus package that was earmarked for transportation was devoted disproportionately to laying the groundwork for wasteful “high-speed” rail boondoggles that are not actually “high” in speed. These multibillion dollar rail boondoogles would provide work at inflated wages for politically-powerful unions. But these projects are expensive white elephants that would be used by very few travelers at an enormous cost per mile, and not enable trains to go anywhere near as fast as they do in Europe, Japan, or China. (Other union-backed provisions in the stimulus package wiped out jobs in America’s export sector.)

Obama relied on exaggerated claims to push through the stimulus package, claiming it was needed to prevent an “irreversible decline” in the economy, even though the Congressional Budget Office admitted that the stimulus package would shrink the economy “in the long run.” Even an old-fashioned Keynesian stimulus might have been something that America could not afford at a time of record deficits. The Congressional Budget Office, ignoring various flaws in the stimulus package, argued that it would boost the economy in “the short run.” But even the CBO conceded that the stimulus would shrink economic output in “the long run” by increasing the national debt and thus crowding out private investment.