Out of Control

Fourth TX Tollroad goes cashless

Highway 183A outside of Austin, Texas has become the fourth tollroad in the state to go completely cashless.

Eighty percent of users already use an electronic transponder (TXTag, EZ-tag, or Tolltag), and eliminating cash toll booths will save the Central Texas Regional Mobility Authority $1 million per year. Those without tags will be billed via mail.

The transition will take place in November 2008.

183A joins three other cashless tollroads: the Westpark Tollway in Houston (the nation's first, opened in 2004), Loop 49 in Tyler, and SH 121 in Dallas.

Why Transit is an "Inferior Good"

"Normal Goods', according to economists, are those where demand increases with income and wealth. Inferior goods find that their share of income falls as wealth increases. In my most recent post to the Planetizen.com blog, I argue that transit is an inferior good. Guess what? Planners disagree. The post prompted a rather lifely discussion string.

DC Gun Ban Overturned

A historic ruling has just come down from the Supreme Court in favor of the second ammendment. This is the first time in US history that the court has taken a definitive position on the second ammendment. Their 5-4 decision states that Americans have the right to own guns for self-defense and hunting. Washington, DC has always been one of the strictest laws when it comes to gun rights with a 32-year ban on handguns.
Check out Nick Gillespie's recent interview on reason.tv and along with Brian Doherty's coverage and articles here, here and even more here.

Drew Carey Talks Reason.tv on CNBC Tonight

Check out Reason.tv host Drew Carey tonight on CNBC’s Conversations with Michael Eisner at 9 p.m. Eastern (re-airs at midnight Eastern). Drew talks about his work with Reason.tv, his breakthrough appearance on The Tonight Show Starring Johnny Carson, and his current gig as host of The Price Is Right.

CNBC has posted a preview video, with Drew talking about his first deal with Disney.

You can find all of Drew's Reason.tv videos here.

Bob Barr Signs Oath of Presidential Transparency

On the heels of what some are calling Coburn-Obama 2.0, Bob Barr has joined Senator Obama in signing the Oath of Presidential Transparency. The Oath is being promoted by a diverse transpartisan coalition led by Reason consisting of 36 different organizations nationwide. You can view the members of the coalition and its letter to the candidates here.

Coburn-Obama 2.0, formally known as S. 3077 - the "Strengthening Transparency and Accountability in Federal Spending Act" was introduced by Sens. Obama and Coburn on June 3rd. Coburn-Obama 1.0 mandated the creation of usaspending.gov, a free, easy to use, searchable database including all federal grant and contract funding information on payments over $25,000 (with exceptions on classified information and individuals’ federal assistance). 2.0 is calling for improved accountability of the data reported as well as better accessibility for the greater public.

By signing the Oath of Presidential Transparency, candidates ensure that if they are elected, there will be timely implementation of, and administrative commitment to, the letter and spirit of the Federal Funding Accountability and Transparency Act (Coburn-Obama 1.0). Bravo to those who have made the commitment so far!

You can find additional candidates' signed Oaths and other goodies here Reason Foundation website. Additional blog posts on transparency here.

As the transparency train continues to chug along, I hope to see Sen. McCain get on board by signing the Oath of Presidential Transparency in his pursuit of the presidency.

Gas prices and the family budget

Lots of articles are being published about how rising gas prices are resulting in "fundamental" shifts in travel behavior and decisions on where to live. One of the more recent articles (an AP story) can be found here.

But consider this: The U.S. Bureau of the Census estimated that the average consumer household spends about 3.4% of its budget on gasoline and motor oil in 2005.

The average price of a gallon of unleaded regulor gasoline at the pump was $2.29 in 2005. That price increased to about $3.44 by April 2008 according to the US Department of Energy, an increase of 54%. Thus, by 2008, the average consumer household was spending $3,000 on gas & motor oil, or 5.1% (assuming household spending also has not changed).

This is hardly enough of a change to generate major shifts in consumer behavior, even though gas prices influence spending on the margin. The costs of moving would swamp any savings in travel for the vast majority of households, let alone the changes in the quality of life the move implies.

Roving Economic Nonesense

Former Bush advisor Karl Rove has an excellent article in the Wall Street Journal on the silly economic populism spouted by both presidential aspirants. Both McCain and Obama are chastizing Big Oil and US energy companies for not sinking even more money into risky and money losing alternative energy technologies.

Instead ask this: Why should we stop with oil companies? They make about 8.3 cents in gross profit per dollar of sales. Why doesn't Mr. Obama slap a windfall profits tax on sectors of the economy that have fatter margins? Electronics make 14.5 cents per dollar and computer equipment makers take in 13.7 cents per dollar, according to the Census Bureau. Microsoft's margin is 27.5 cents per dollar of sales. Call out Mr. Obama's Windfall Profits Police!

McCain is not spared by Mr. Rove either. He writes:

This past Thursday, Mr. McCain came close to advocating a form of industrial policy, saying, "I'm very angry, frankly, at the oil companies not only because of the obscene profits they've made, but their failure to invest in alternate energy."

But oil and gas companies report that they have invested heavily in alternative energy. Out of the $46 billion spent researching alternative energy in North America from 2000 to 2005, $12 billion came from oil and gas companies, making the industry one of the nation's largest backers of wind and solar power, biofuels, lithium-ion batteries and fuel-cell technology.

All this bodes terribly poorly for private enterprise after this November's election.

The Prying Eyes of Government Never Stop

This just came in from our friends at FreedomWorks:

Apparently a buried clause in the Congressional housing bailout bill calls on the nation's payment systems to report the details of all electronic transactions to the federal government. The clause seems especially targeted at online transactions. The goal, naturally, seems to be more tax revenue, even though current law requires merchants to report income from all sales. Of course, a certain amount of tax dollars get away, but so do the cash proceeds of your average garage sale.

So in order to satiate its appetite for tax revenue, and its curiousity about what private citizens are doing with their money, the U.S. government wants America's credit card companies and small businesses to bear the cost of assembling a giant database of sales transactions complete with names, addresses, credit card numbers and social security numbers. That distant whirring you hear are the Russian mafia's PCs gearing up for a hack to end all hacks.

Here's a statement from FreedomWorks Chairman Dick Armey

"This is a provision with astonishing reach, and it was slipped into the bill just this week. Not only does it affect nearly every credit card transaction in America, such as Visa, MasterCard, Discover, and American Express, but the bill specifically targets payment systems like eBay's PayPal, Amazon, and Google Checkout that are used by many small online businesses. The privacy implications for America's small businesses are breathtaking."

"Privacy groups like the Center for Democracy and Technology and small business organizations like the NFIB sharply criticized this idea when it first appeared earlier this year. What is the federal government's purpose with this kind of detailed data? How will this database be secured, and who will have access? Many small proprietors use their Social Security number as their tax ID. How will their privacy be protected? What compliance costs will this impose on businesses? Why is Sen. Chris Dodd putting this provision in a housing bailout bill? The bill also includes the creation of a new national fingerprint registry for mortgage brokers.

"At a time when concerns about both identity theft and government spying are paramount, Congress wants to create a new honey pot of private data that includes Social Security numbers. This bill reduces privacy across America's payment processing systems and treats every American small business or eBay power seller like a criminal on parole by requiring an unprecedented level of reporting to the federal government. This outrageous idea is another reason to delay the housing bailout legislation so that Senators and the public at large have time to examine its full implications."

The gas "crisis" blame game I: Corporations

Everyone seems to be searching for someone to blame for the so-called "gas crisis". So, I'm going to look at some of the culprits in a series of posts over the next week. Let's start with the most obvious: those evil, greedy, short sighted corporations that can't seem to get their act together. Their transgressions are so great, Congress wants to levy a windfall profits tax on them in order to do the "right thing"--have the government invest in appropriate alternative technologies (e.g. ethanol or wind).

But, how short-sighted are the oil & gas companies? In truth, it's Congress that is short-sighted and opportunistic, not the oil companies. Oil companies have simply learned a few economic lessons--the hard way.

The oil industry has experienced more ups and downs over the last 30 years than the world's longest roller coaster (which, btw, is the Beast at Kings Island in Ohio). Let's take a look at the price of gas. Here's the price of unleaded regular gas at key benchmark dates according to the Energy Information Administration at the US Dept of Energy:

1976: $0.61
1980: $1.24
1985: $1.20
1990: $1.16
1995: $1.15
2000: $1.51
2005: $2.29
2008: $3.44 (April)

These are nominal dollars. Factoring in inflation, the real price of gasoline at the pump fell until the middle part of this decade. Note that the nominal value of gasoline also fell in the 1990s.

Throughout this period, the spot price of crude oil remained steady, ranged from $13 to $20 per barrel. The spot price didn't increase to over $20 per barrel consistently until after September 1999. Even during this period, the price dipped below $20 during late 2001 and early 2002. Crude oil prices didn't jump to more than $30 per barrel until after March 2004.

Why did prices tank? Because we were getting plenty of oil to meet our needs from the rest of the world--most notably Saudi Arabia and other Middle Eastern countires--and the BRIC countries (Brazil, Russia, India, and China) had not yet taken off.

This is hardly a robust economic environment for the gas companies. The idea that companies should be investing in new capacity is simply unsupportable based on history and the data.

We can see the industry's fortunes flag in domestic employment. I like to use Wyoming as a benchmark for the health of the domestic oil industry because this is a small state that depends on natural resources for a good chunk of its economy. Moreover, it reflects the change in the marginal value of extracting oil from more difficult sources. Here's Wyoming's record for employment in "oil & gas extraction" over the last few decades:

1975: 10,300
1981: 22,700 (peak)
1990: 8,900
2000: 9,400
2005: 3,800
2007: 4,300

Not surprisingly, employment tanked in the 1980s and 1990s, reflecting the declining fortunes (and prices) of the industry itself. Employment hasn't ticked up by much, but given the declines and uncertainties of the previous decades, it's not hard to figure out why. Only sustained increases in prices over several years would justify a substantial increase in capacity. Given that US oil companies control only 1.6% of the world's reserves and about 7% of world production, the real capacity to meet rising world demand is going to have to come from elsewhere.

Thus, blaming the domestic US oil industry for not investing in reserves simply ignores the uncertainty and economic reality of the global energy market. Taxing their profits now also ignores the hard times of previous decades where oil companies were struggling to make money as crude oil prices languished and, and time, seemed to be in a free fall. To argue that the oil companies should have foreseen the spike in crude oil prices we've experienced over the past few years simply belies the hard, cold experience of the past several decades.
Moreover, it's not at all clear that oil prices won't fall dramatically again, just as they did after the OPEC oil market interventions of the 1970s.

Personally, I doubt they will fall to those levels. Moreover, innovation in the energy sector may have finally brought the costs of using alternative technologies far enough to create a broad-based market that will make the energy sector even more competitive. Toyota, afterall, sold its one millionth Prius this year, and production is approaching (if not exceeding) mass market levels. Honda has also launched a zero emissions plug in 4-door sedan, the FCX Clarity. So, times they are a changing, and the trends don't bode well for domestic oil companies over the long run.

Just Call Me. Or Not.

Wall Street Journal columnist Jason Fry today embarks on a meditation (subscription required) on the disappearance of phone directories—once omnipresent in American households. Part of the reason, of course, is the substitution of wireless for wireline as the phone service of choice. This trend skews heavily toward younger Americans, about 34.5 percent of adults aged 25-29 live in wireless-only households, Fry reports. Interestingly, these numbers come from a survey commissioned by the Center for Disease Control, not the FCC.

The migration to wireless has been matched by a marked lack of enthusiasm for traditional “White Pages” directories.

“Why not? Because in a number of important ways, the cellphone is more of a break with traditional telephone service than it is an evolution of it. And those differences will only become more apparent in the coming years.

The biggest reason wireless-only adults don’t need a directory is that they're reachable in other ways -- through their homepages, blogs, MySpace and Facebook outposts and of course through their email. Twenty years ago, the telephone was the only practical way of reaching someone -- and in that situation, a directory of telephone users was obviously crucial. Now, the phone is just one method in a range of communications options, and often it's not the best one. It seems like having a phone in our pocket would make it a more important device, but the rise of other ways of communicating have made that phone far less important.”

Fry’s comments about the changing ways people communicate are critical, especially as regulators continue to treat phone service providers as if they are monopolies or duopolies. Hence, we get discrimatory taxes, unlevel playing fields, regulatory arbitrage and other unintended consequences. Americans have far more methods at their disposal to reach each other aside from a telephone – be it wireline or wireless. Unfortunately, the policy climate often refuses to see this.