Out of Control

A commentary from UtiliPoint, taking a realistc look at the investment , timeline, and portfolio needs to really dramaticaly change where we get energy from, linking it nicely to the emerging focus of global capital on this problem. Private investment will lead the way.

Why We Can't Grow Our Way Out of Energy Dependence
By Peter C. Fusaro
Chairman, Global Change Associates

What I now see happening is that the true energy professionals are coming into the space, mostly as private equity funds for clean tech and clean energy alternative. These are established teams that have built energy projects all over this country and the world. The know-how is coming into place. Big energy will be the exit strategies and buy these new technology upstarts. We have entered the bottom of the first inning. This is a long game. It is survival of the energy fittest, and we need to start now!

A nice Q&A on dealing with congestion with my colleague Sam Staley. If you want to read it with the ads, go here.

Decongesting America
By Bill Steigerwald
PITTSBURGH TRIBUNE-REVIEW
Saturday, January 27, 2007

In my last post on Greg Mankiw's campaign to raise the gas tax, I only got started.

Mankiw buys into Pigou's idea of an optimal tax to solve some policy problems, hence raisign gas taxes will do many wonderful things. I respond that the government has a demonstrated inability to make optimal decisions.

Let me expand on that. Ted's earlier post pointed to a nice interview with Mankiw by Russell Roberts that gets at some of these questions. Indeed, as Roberts paraphrases:

Greg [says] that yes, there are going to be political complications, but if we let political complications stand in the way of good economic policy, we may as well fold up our tent and go home. There are always going to be political complications. So if economists want good policies, they should advocate good policies even if in practice, they may not always turn out ideally.

Wrong! Economic policy needs to take into account the real world. Economics biggest problem is creating theory in a world of perfect markets or optimal governments with no relevance to non-economists whatsoever. That is why public choice theory emerged--to take into account the realities of "political complications" in economic policy. I talked about that in my previous post.

But there is another aspect to Mankiw's wrongness. We also have a nice theory of non-market failure that parallels the theory of market failure that underpins Pigouvian thinking, and thus Mankiw's gas tax proposal. Charles Wolf at RAND developed the theory best and it tells that just as sometimes there may be market failures and institutions need to emerge to deal with them, the same is true of government. There are structural forces driving government decisions away from theoretical optimality.

So, back to the gas tax idea and dealing with "political complications." Good economic policy must take into account those complications and recommend approaches that best deal with complications of both the market and government action. And an increase in the gas tax for general revenue is not good economic policy.

Thanks to Ted's post the other day, I caught up on some of the latest on economist's Greg Mankiw's campaign for increasing the gas tax. Another oppnent Ted did not flag is the NoPigou Club.

That site makes some excellent points on the particulars of how Mankiw's proposal runs aground on the facts. But Mankiw extends fallacious partial selection of the evidence to the level of theory. Pigou has a theory that one can create optimal taxes to resolve externalities. Public choice theory demonstrates that the government's reach for optimality will always exceed its grasp. Mankiw simply ignores the latter, for no reason he has cared to defend as far as I have seen.

Just look at how the government fails to act optimally on some of the specific areas Mankiw hinges the joy of higher gas taxes upon.

The environment. Vehicles emit a trivial percentage of total human emissions of carbon dioxide, a vanishingly small percentage of global carbon dioxide emissions. Even the mythical "optimal" carbon tax would be less cost effective than modest investments in sequestering carbon dioxide by planting trees and similar measures to lock up carbon dioxide and offset vehicle emissions.

Road congestion. A gas tax set to reduce demand ignores the supply side of congestion, which is caused by the demand for roads exceeding the supply. Right now the government very un-optimally uses transportation funds in ways the create undersupply of roads and cause congestion. For example, nationwide, transit carries abut 2 percent of trips, but recieves more than 20% of transportation funding. In many of our large metro areas transit receives more than 50% of all transportation funding while carrying between 2% and 8% of trips. Hardly an optimal allocation of resources. Raising the gas tax would simply pump more revenue into this congestion-inducing spending plan. Or worse--see the budget below.

Regulatory relief. Mankiw argues that Pigouvian gas taxes would be less distortionary than CAFE regulations. But the typical government official thinks, "Hey, if we can design optimal taxes, why stop at that? Surely we can also design optimal technologies and designs as well." As practices by a real world bureaucracy, an attempt at optimal taxation is simply a monetary form of picking winners.

The budget. Mankiw likes raising the gas tax to raise revenue for our federal government because it is on an "unsustainable path." He has close personal knowledge that the unsustainability of the federal budget is caused by spending growth that far outstrips economic growth, not by any lack of revenue growth. If we have non-optimal government budgeting--and what could be more true--how can it help to pump more money down that drain? Worse, a concept near to Pigouvian taxation is that a user fee is more efficient than a tax. We use gas taxes rather than sales taxes, for example, to fund transportation, because gas taxes are a second best to a direct user fee. Imposing a gas tax for general revenue removes even that slender second-best advantage.

Tax incidence. Higher taxes would reduce gasoline use and thus drive down gasoline prices, Mankiw argues. Hmm, ever glanced at the gas price elasticities in this country, Greg? Indeed, government policy makers have a long and storied track record of missing the optimality mark thanks to utter ignorance of relevant elasticities.

I could go on, but I think my point in made. Government policy makers and optimality have never occupied the same real estate. As Nobel laureate economist Frederich Hayek pointed out, they never really have adequate information to calculate the "optimal answer", and as Nobel laureate economist James Buchanan pointed out, they wouldn't have the incentive too anyway.

Earlier today I linked to an LA Times oped by Reason’s Manuel Klausner, which recalls last week’s DEA raids of 11 medical marijuana dispensaries in the LA area. Klausner argues that federal agents should concern themselves with more important matters and stop hassling patients who use cannabis for medical reasons.

Shortly after the raids I spoke with some onlookers, protestors, sheriff’s deputies, and patients in West Hollywood. For a short video clip of part of my conversation with an AIDS patient, go here.

Salary was one of the least important requirements of a dream job, cited by just 12 percent of respondents in [a new] survey by CareerBuilder.com, an online job site, and The Walt Disney Co, which is holding a contest in which winners can get a chance to work at a Disney theme park job for a day.

Having fun at a dream job was cited by 39 percent, with 17 percent saying making a difference in society was most important, the survey showed.

Even “hours worked” is a rather unreliable measure. According to a Money Magazine/Salary.com survey:

The hours category showed a real shocker -- that extremely satisfied employees are putting in a lot more time at work than others. The most satisfied reported averaged 56 hours a week -- 11 hours more than the least satisfied group. Almost without exception, as satisfaction rose, workers reported putting in longer hours.

In this overview of telecommuting trends (pdf), I point to other surveys where workers say they prefer perks like flexible schedules to more pay.

Sounds like good news, but look at the title of this MSNBC article: Most U.S. Workers Not Living the Dream

Overall, 84 percent of respondents said they are not in their dream jobs, the study found.

OK most workers aren't living the dream, but what's more interesting is what the framing of this issue says about our elevated expectations. From a historical perspective the fact even a sizable minority of respondents has a dream job is something that should spur Cruise-like fits of couch-jumping joy. It wasn’t long ago when the vast majority of the workforce toiled away in the fields. The fact that we even think that a job should be more than something that gets us food, clothing and shelter reveals enormous progress.

Reason’s Manuel Klausner writing in the LA Times:

IN THE FICTIONAL world of the hit show "24," federal law enforcement agencies are pouring every last resource into the search for a nuclear terrorist in Los Angeles.

In the real world, federal agents apparently have so much free time that they can dress up in bulletproof vests and masks in order to raid clinics that serve patients battling cancer, AIDS and other diseases. That's what happened last week as Drug Enforcement Administration agents stormed 11 medical marijuana dispensaries throughout L.A. and West Hollywood. We can all rest easier knowing that lollipops, cookies, candies and candy bars laced with marijuana are in no danger of reaching seriously ill patients.

More here.

Related:

Stretched thin from fighting in Iraq and Afghanistan, the U.S. military has sharply reduced its role in the war on drugs, leaving significant gaps in the nation's narcotics interdiction efforts.

Article here.

Related: Bombs or Pot?

Related: Rapists or Tokers?

A Colorado state lawmaker plans to introduce a law that would exempt bars from a statewide anti-smoking law. Bars interested in the privilege would shell out an extra $500 for their liquor licenses.

Note the D in front of the pro-freedom pol and the R in front of the nannystater:

These are adult establishments," said Sen. Lois Tochtrop, D-Thornton, who wants to modify the indoor smoking ban that went into effect July 1. "This bill would include all places that have a liquor license: the small mom-and-pop bars, private clubs such as the Elks, the Moose."

…

"Hopefully, it will never see the light of day," said House Minority Leader Mike May, R-Parker, chief sponsor of the smoking ban.

Banners like to say that anti-smoking laws don’t really hurt businesses and the local anti-smoking activist claims that the ban is “about protecting workers.”

However:

Golden Tavern owner Angie Godfrey said she has been struggling to keep her West Colfax neighborhood bar afloat since the smoking ban took effect.

Since July, she said, Angie's Tavern, which has been in business since the 1970s, has taken a $17,000 hit in sales and has had to lay off four workers.

Remember, smoking’s not allowed in the unemployment line:

"I'm a small place that holds up to 50 people, and half my customers aren't coming in," Godfrey said. "I haven't gotten new people like they said we would. I don't know how much longer I can hold on."

The Colorado License Beverage Association said Godfrey is not alone. The bar owners' group cited a recent survey showing that nearly 60 neighborhood pubs have reported a decline in business, ranging up to 45 percent.

The survey also found that 29 neighborhood bars in the metro area have gone out of business and telephones at another 30 bars have been disconnected.

"We're concerned about the 60 bars that have closed or are barely hanging on since the enactment of the smoking ban," Tochtrop said.

Of course, May doesn’t buy that line. But who’s most likely to understand how bans affect businesses? Ban-pushing pols or the business owners who have to balance the books each month?

Article here.

Meanwhile, the California city of Belmont has voted to delay what would be the nation’s most restrictive smoking ban till at least March:

Belmont is poised to become the first city in the nation to ban smoking almost everywhere and evidently the whole country is watching and paying attention. The smoking ordinance will ban smoking everywhere including bars, restaurants, parks, cars and the university.

The only exception to the law will be inside single-family detached residences.

Article here.

I have piece in this week’s LA Business Journal:

An Uzbek restaurant in LA—who knew? I didn’t until I happed to drive past it one night and ever since then I’ve wanted to check it out. The restaurant (conveniently named Uzbekistan) sits only eight miles from my home, but a year passed before I dug into my first bowl of ogra. Why? Traffic congestion.

Whole thing reprinted here.

Related: Congested Culture

Many planners and politicos assume that humans are hard-wired to hate buses. But economists like Daniel McFadden and Jonathan Richmond have noted that travelers care about features like reliability and speed more than whether they’re riding on rails or tires.

A while ago I highlighted a case in point: some Denver commuters were mighty peeved when bus routes were replaced by less convenient light rail.

Now this:

Unending complaints from riders who lost their fast and comfortable bus commutes when the T-REX light rail line opened in November paid off: RTD is restoring some of the canceled service.

Many riders of the former routes P, T, W and 6X said RTD's attempt to force them onto light rail along Interstate 25 made them spend an additional hour or more each day riding to work.

The RTD board voted Tuesday night to bring back service as soon as the schedules are worked out. It is expected to cost nearly $600,000 a year.

While some service is being restored, it won't be all that it used to be.

Route P from Franktown and Parker to downtown Denver used to have 13 trips in the morning and 13 in the evening. The renewed service will have five trips each way.

Route T went from Boulder to the Denver Tech Center. When T-REX opened, riders were told to use the Boulder route to Denver Union Station, take light rail to the Tech Center then use local buses to get to their workplaces. The renewed service will have three trips each in the morning and afternoon instead of five.

Article here.

It would be hard to add anything to the flurry of criticisms President Bush is receiving for his unrealistic renewable and alternative fuels mandate launched in last night’s State of the Union address—even the Sierra Club’s Carl Pope is calling Twenty in Ten “magic wand stuff.”

Dan Clifton at American Shareholders Association put out some great stuff on how tax cuts are accounted for in federal budgeting...and how they're always wrong.

"The Joint Committee on Taxation forecasted the 2003 capital gains tax cut would “cost” the Federal Treasury $5.6 billion through fiscal year 2006. The new numbers today showed the federal treasury received an “unexpected” $133 billion of capital gains tax collections through 2006. Capital gains tax collections in FY 05 and FY 06 were nearly double the initial forecast. Policymakers who believe they can generate tax revenue to the federal government by raising the capital gains tax are simply mistaken."

You can see Dan's full analysis here.

Greg Mankiw’s Piguo Club—named after the economist A.C. Pigou who pioneered the use of taxes and subsidies to correct externalities—is getting plenty of pub. In fact, one day Mankiw may be more famous for his Piguo Club than for being the guy who took a (horribly unfair) drubbing for defending offshore outsourcing.

Anyhow, Russell Roberts does not Pigou. Here he sounds off on the prospect of raising the gas tax and links to a podcast where he explores the issue with Mankiw.

Key nugget:

It would be naive to argue that we shouldn't worry about pollution because people will feel guilty polluting and that will discourage pollution. Similarly, it strikes me as naive to encourage government to solve the pollution problem via a gasoline tax if you know that the level of the tax will be set wrong and that the money will be badly spent.

Related: Why I prefer tolls to taxes

If the issue is pedestrian safety, the tots are doing pretty well—quite a bit better than another demo:

A middle-aged male pedestrian is four times as likely, on any given trip, to be killed by a car as is an elementary school student, according to a new interactive [Carnegie Mellon—AAA] Web site that lets people compare travel risks.

The site allows users to assess the dangers of driving, walking, and riding a motorcycle or a bicycle, by season, region and personal characteristics of the traveler.

For example:

the risk of death for an 18-year-old male driver is about the same as that for an 80-year-old female driver, but both are safer than the operator of a motorcycle. And counterintuitively, risk is higher in the mountains in summer than in winter.

Article here; via Marginal Revolution.

In the previous post commenter Bob Smith says he doesn’t trust officials in California and LA to spend the Prop 1B dough wisely:

“Instead LA will be spending most of it on worthless light rail projects and other transportation boondoggles that suck up huge amounts of money but do nothing to actually solve congestion. Of course, that's the point: as long as the government doesn't solve a problem, it can keep asking for more and more money.”

Point taken, but let’s not assume light rail is the only way officials will waste the loot.

From the lead editorial in today’s LA Times:

Much of the nearly $20 billion in bonds that voters approved in November to fund transportation projects will be spent to build carpool lanes on the state's freeways. On Wednesday, the California Department of Transportation released its list of recommended projects for the first $4.5-billion chunk of the Proposition 1B money, and it calls for devoting nearly all of Los Angeles County's share to carpool lanes on the 5, 10 and 405 freeways.

There's just one problem with this strategy: Carpool lanes don't work. At least not if their purpose is to get commuters to form carpools.

L.A. County's network of carpool lanes is among the nation's most extensive. Yet, according to the U.S. census, even as the construction of carpool lanes has skyrocketed, carpooling has declined — from 20% of commuters in 1980 to 12% in 2000.

The editorial is friendly to the Reason carpool lane perspective:

Some traffic experts, notably the libertarian scholars at the L.A.-based Reason Foundation, propose turning carpool lanes into toll lanes. Buses and registered vanpools could still use them for free, but everybody else would have to pay. It's a notion worthy of study, especially considering the success of the 91 Express toll lanes in the median of the Riverside Freeway.

Editorial here.

Related: Pregpools, Fampools don’t cut congestion

Related: Bob and I explain (pdf) why carpools don’t work and what should replace them.

Sam and I had a piece in Friday’s LA Times:

Everyone in Los Angeles knows we can't do anything about traffic congestion. We complain about it, but gridlock just keeps getting worse. Each year, the typical rush-hour traveler wastes 93 hours — more than two workweeks — stuck in traffic. Under current plans, congestion will drive up travel delays by another 11% over the next 25 years, ensuring that L.A. remains the congestion capital of the nation.

Even our regional planners resign themselves to ever-worsening congestion. The passage of Proposition 1B, which allows the state to sell $19.9 billion in bonds for transportation, still doesn't generate enough money to pay for all the improvements we need. We're restrained by technical problems, and we don't have space for new lanes.

Yet other cities of the world have faced the same challenges without surrendering to congestion.

Whole thing here.

Yesterday our book got a mention in this Detroit Free Press column.

In Digging Up Trouble: The Health Risks of Construction Pollution in California, the Union of Concerned Scientists (UCS) claims air pollution from construction vehicles is killing more than 1,100 Californians each year, sending similar numbers to the hospital, and sickening hundreds of thousands more. UCS estimates the economic toll at more than $9 billion per year. Fortunately, these claims have little to do with reality. UCS exaggerates harm from air pollution by excluding contrary evidence and ignoring weaknesses in studies that support its predetermined conclusions.

Read Reason's analysis of the report, by Joel Schwartz, here.

Laer, at Cheat Seeking Missles, weighs in here.

A brief reprieve from the bleak march of smoking bans, discussed here just a couple of days ago: Three Chicago-area towns have suspended bans on smoking indoors at bars and restaurants until after the Super Bowl.

The Chicago Tribune reports:

The southwest suburbs took the emergency votes after bar owners complained bitterly that since the ordinance took effect Jan. 2, smokers were patronizing competitors in towns without bans to enjoy the playoffs. Several claimed business was off as much as 50 percent despite the Bears playoff run.

Perhaps now that network neutrality legislation appears to be a real threat to the unregulated Internet, more technologists are coming out with warnings about it.

What’s tough is that network neutrality, if enacted, will have a profoundly negative effect on how network technology evolves. And when technology enters the discussion, eyes glaze over. Instead, everyone gloms onto the misguided idea that without enforced network neutrality, all of our Internet freedoms are in danger.

At last, however, the right questions are being asked. Like how exactly is Internet freedom preserved by prohibiting the development and use of any mechanisms for quality control or application prioritization inside the network? Why is traffic optimization at the network "edge" acceptable, while traffic optimization in the network "core," is not? True, the Internet Protocol (IP) was developed to work over neutral, dumb pipes—but this was a necessary condition of the time given the limited capabilities of carrier networks, not some underlying doctrine that the first authors of the Transmission Control Protocol/Internet Protocol (TCP/IP), the underlying Internet language, adopted by choice to safeguard an Internet democratic ideal, as the net neutrality side would have us believe. The Internet developers worked with what they had.

And at last we’re beginning to hear this from some of those authors (at least those not employed by Google).

Here’s Robert Kahn, a co-developer of TCP/IP, speaking at a recent event in his honor at the Computer History Museum in Mountain View, California, as reported The Register, a U.K.-based on-line tech newsletter:

Kahn rejected the term "Net Neutrality," calling it "a slogan." He cautioned against dogmatic views of network architecture, saying the need for experimentation at the edges shouldn't come at the expense of improvements elsewhere in the network….

"If the goal is to encourage people to build new capabilities, then the party that takes the lead is probably only going to have it on their net to start with and it's not going to be on anyone else's net. You want to incentivize people to innovate, and they're going to innovate on their own nets or a few other nets,"

"I am totally opposed to mandating that nothing interesting can happen inside the net," he said.

So called "Neutrality" legislation posed more of a danger than fragmentation, he concluded.

Here’s David Farber, distinguished career professor of computer science and public policy at Carnegie Mellon University and informally known as the “grandfather of the Internet,” writing with Michael Katz, professor of economics at the University of California at Berkeley, in today’s Washington Post:

The current Internet supports many popular and valuable services. But experts agree that an updated Internet could offer a wide range of new and improved services, including better security against viruses, worms, denial-of-service attacks and zombie computers; services that require high levels of reliability, such as medical monitoring; and those that cannot tolerate network delays, such as voice and streaming video. To provide these services, both the architecture of the Internet and the business models through which services are delivered will probably have to change.…

Network neutrality is supposed to promote continuing Internet innovation by restricting the ability of network owners to give certain traffic priority based on the content or application being carried or on the sender's willingness to pay. The problem is that these restrictions would prohibit practices that could increase the value of the Internet for customers.

Traffic management is a prime example. When traffic surges beyond the ability of the network to carry it, something is going to be delayed. When choosing what gets delayed, it makes sense to allow a network to favor traffic from, say, a patient's heart monitor over traffic delivering a music download. It also makes sense to allow network operators to restrict traffic that is downright harmful, such as viruses, worms and spam.

The network neutrality debate is better for their participation. The consequences of network neutrality need to be understood—legislative lock-in of a network architecture that already could be obsolete. At the same time, those who support quality prohibitions in the network have failed to point to any concrete example where the use of any enhanced quality of service—at the edge or in the core—has violated anyone’s First Amendment rights. What we have here is the most misunderstood technology issue of our time. Kahn and Farber have added much needed clarity.

The irony is rich. It appears the municipal wireless advocates are poised to succeed where their foes—the largest and most deep-pocketed incumbent phone companies failed—stopping a major municipal wireless initiative.

The San Francisco Board of Supervisors, reports Red Herring, is sharply divided over whether to approve a plan to allow EarthLink and Google to build a citywide municipal system in partnership with the city. It is uncertain whether the project, which includes a tier of free wireless service, has the six votes needed for approval. Red Herring says Don Berryman, head of EarthLink’s municipal networks unit, counts four to five supervisors in favor of the proposition, three against, and three to four Iwho are still undecided. The vote is scheduled for next month.

Oddly, the point of contention is not over whether the city should be dabbling in a competitive market, which has been the focus of debate elsewhere. On the contrary, the protest is all from the extreme Left, which opposes the idea of someone attempting to make a profit from offering free wireless service. Dissenting supervisors who think that turning the financing, operations and marketing over to two experienced corporations, one of whom, EarthLink, is setting up wireless systems in cities all over the country, is just wrong, wrong, wrong. It would be far, far better, they say, if the city of San Francisco risk millions of taxpayer dollars to own, operate and manage a wireless system in a city that already has more hotspots than any other in the U.S., not to mention one of the highest rates of Internet connectivity.

Yesterday’s LA Times noted that “Police Chief William J. Bratton is calling for a moratorium on new [medical marijuana dispensaries] until strict rules can be adopted governing them.”

This afternoon an “updated” plan was put into action as law enforcement shut down many area dispensaries. I just returned from West Hollywood where the three dispensaries near the intersection of Santa Monica Blvd and Fairfax were shuttered.

Seemed a bit much that, hours after the raids, a half-dozen sheriff deputies were still on the scene. Some protestors had assembled, but, apart from one medical marijuana patient who hollered at deputies for a while, everyone was just milling around quietly. One deputy video-taped the onlookers and I spoke to another deputy who said that dispensaries should be done away with—and replaced with complete marijuana legalization.

Today most Americans (53%) live in areas that restrict smoking, and my guess is that a much higher percentage is just fine with some restrictions.

But the anti-smoking crowd keeps pushing to expand and tighten regulations. It seems that many lines that casual observers assumed would never be crossed are already being crossed. Will the folks who passively go along with the movement ever cry uncle?

Naturally, California is doing a lot of the crossing:

The Southern California city of Calabasas broke new ground for the United States in spring 2006 when it banned smoking in all public areas, including sidewalks. As of March 1, Emeryville will have anti-smoking laws almost as tough as Calabasas, with new widespread smoking bans, including in parks and on footpaths.

San Francisco now bans smoking in city parks, golf courses and public squares, and Belmont made international news in November with its pending proposal to ban smoking citywide, except in detached, single-family homes.

The Calabasas ordinance elevates smoking violations to criminal misdemeanors, and if the Belmont proposal passes (as it almost certainly will) condo and apartment-dwellers will be forbidden from smoking inside their own homes. Remember the good ol’ days when the Bay Area wanted to keep government out of our bedrooms?

Of course the banners don’t confine themselves to California. This article notes the growing movement to ban smoking inside public housing units and apartments in Washington state. (I’m fine with the apartment ban since apparently landlords themselves are pushing for it.)

In December, Henry County, Georgia "voted to prohibit the use and possession of cigarettes and similar tobacco products in all parks owned by the county."

Second-hand smoke researcher and smoking ban crusader Dr. Michael Siegel has apparently cried uncle. He now has big problems with the movement he helped create:

"It's a grass-roots social movement that's been so successful that it doesn't know where to stop," Siegel continued. "It's getting to the point where we're trying to protect people from something that's not a public health hazard."

At risk, he and other like-minded tobacco control advocates assert, is not only the credibility of public health officials but also the undermining of a freedom prized in democracies -- do as you wish as long as you don't harm others.

Surely, one line that won’t be crossed is adoption.

Then again:

St. Paul, Minn., is considering funding and operating a municipal fiber-to-the-home (FTTH) network at a cost ranging between $196 million and $296 million, reports the St. Paul Pioneer Press (in an article for which I was interviewed), or $1,625 to $2,225 for every home and business in the city.

This decision comes just weeks after trade press reports that Qwest, the incumbent phone company in St. Paul, is evaluating bids for a major fiber-optic upgrade across its region that will support advanced video and high-speed Internet services. On top of that, Comcast already provides high-speed Internet access across the city.

And lest we forget, St. Paul is planning a municipal wireless network as well. So not only will it putting itself in competition with two deep-pocketed, experienced private-sector companies, it would be competing against itself, too.

But suddenly the consensus is that wireless services, even though they are perfectly suitable for routine multimedia applications, are insufficient and solving the “digital divide” means running high-capacity fiber lines to every home on the taxpayer’s dime—or, more accurately, nearly 3 billion of them.

But others, including advocates for greater connectivity to poor and low-income households, are leery of using the digital divide as reason to pour city money into an FTTH network, since most analysts see the payback from these networks coming from entertainment applications such as video file sharing, multiplayer gaming and movie downloading.

In the article, Catherine Settanni, director of the non-profit Twin Cities-based Community Technology Empowerment Project, said disadvantaged people need access to the Internet to complete job applications or take online practice tests for school. What's important for disadvantaged communities is access, not speed. “The digital divide is not about being able to order movies on demand,” Settanni said.

In 1960, there were 1.55 males for every female undergrad, but by 2003 there were 1.3 females for every male undergrad. What happened?

In The Homecoming of American College Women: The Reversal of the College Gender Gap (NBER Working Paper No. 12139), authors Claudia Goldin, Lawrence Katz, and Ilyana Kuziemko offer some explanations for the change.

Summary here.

Dry but telling, the latest data is out from the United States Highway Statistics and National Transit Database for 2005. As always, the Urban Transport Fact Book has quickly organized some useful snapshots from it.

How much of travel is by car and how much by transit? Overall urban transit share of travel in 2005 was 1.51%, down from 1.70% in 2000, a precipitous fall from 100% in 1900.

What about use of transit in the 50 largest urban areas in the US? New York area is first withn 9.6%, Bay Area second with 5%, and it drops off sharply from there. Only 9 urban areas have 2% or more of travel by transit. Story is even starker when you look at the 100 largest urban areas.

See how much of transit in the US is just in New York. 41% of all the transit travel in the US is in New York. The 5 urban areas over 5,000,000 population account for more than 60% of ridership.

Bottom line: In spite of decades of spending far more on transit per user than on roads, transit carries less of the traveling public every year. New York is the only urban area where transit carries enough people to make it a really significant part of the system. The painful thing is, this is caused by bad transit policy. We spend absurd proportions of our transportation dollars on transit systems designed not to served transit users, but to try to get people out of their cars--especially light rail projects. By every meaningful empirical measure, this has not worked. Transit's niche in urban travel and transit riders would be far better served by high quality bus transit services that include bus lanes that keep express busses out of traffic. To whit, virtual exclusive busways using a HOT lanes network, integrated with quality network buses services. The billions spent on light rail projects could deliver very nice, attractive, efficient, high quality bus transit and make everyone better off.

Later this month the LA Business Journal will publish a piece I wrote that examines how traffic congestion hurts the offbeat offerings that make cities interesting—basically establishments, from funky ethnic restaurants to performing arts venues, that serve niche markets.

The LAT’s Steve Lopez explores the same general theme:

[L.A. County Supervisor Zev] Yaroslavsky said it's a big topic at downtown cultural institutions, where they're wondering if traffic combat fatigue is keeping Westsiders from filling up seats at music, dance and theater events.

…

[Santa Monica lawyer Kevin] Sheehy … told me he and his wife subscribed to the Geffen Playhouse in Westwood several years ago, in part because the trips to downtown arts and entertainment events had become such a nightmare.

And patrons at Wednesday night's chamber music performance at Disney Hall — which had 160 no-shows (people who bought tickets but didn't attend) — told me Westside bottlenecks are making it harder to justify the trek. David Nimmer, who lives in Beverly Hills, said he recently picked up his mother in Westwood at 6 p.m. and they missed a 7:30 curtain for the L.A. Opera.

"It's definitely something I think about all the time," said his friend Robert Smith, who lives at Pico and Robertson boulevards and is reconsidering his commitment as a volunteer at a kosher food bank near downtown. "You have to be there at 6 o'clock, and you just can't go east after 4 in the afternoon."

Apart from one-way street conversions, I don’t have much to agree with regarding the solutions discussed in the piece. But the whole thing is well worth reading.

Related: Congested Culture—Bay Area Edition

Related: Congested Business

On Tuesday Reason’s Bob Poole appeared on “Lou Dobbs Tonight” to discuss tollroad privatization. Being the self-styled champion of pitchfork-populism that he is, Lou doesn’t much care for things that might benefit corporate fat cats or--for the love of apple pie--foreigners. So it's no surprise that he misrepresented Bob's comments and mangled the whole issue.

Here Peter Samuel, editor of the excellent resource TOLLROADSnews, provides the CNN transcripts peppered with his own clever rebuttals to the many distortions in the segment.

The intro:

DOBBS: Coming up next, critically important parts of our national infrastructure are being sold.

SAMUEL COMMENT: Wrong. Sold means legal title is being transferred in perpetuity. Turned over unconditionally. Under the toll concessions legal title is being retained by the states. Private investors are being selected in return for concession fees to get longterm concessions to run the tollroads at their risk under the detailed terms of control of a concession contract. Those contracts give the state a continuing say in many aspects of how the road is operated and they usually contain caps on toll rates.

Another bit:

DOBBS: And incredibly, [privatization is] being done with the federal government's encouragement. The Bush administration likes this idea.

SAMUEL COMMENT: For a good reason. Tax funds are limited and totally insufficient to fund the construction needed to avert growing congestion on the roads. Hence it would be irresponsible for the federal government NOT to favor tapping private investment funds.

DOBBS: Some of the leading bidders: Foreign investors.

SAMUEL COMMENT: Of course, because the international groups have experience operating tollroads, whereas the US has not until now been hospitable to private investment in tollroads. The location of shareholders is irrelevant. Their conduct of the roads will be governed by US written contracts and US law. If they mess up the roads revert to the states. The investors can't roll up the roads and take them to Madrid or Sydney.

Then again, Samuel would say that. He is, after all, (DUM, DUM, DUM) a foreigner!

Related: Lou vs. Communist China

Related: Lou ignores the robot threat

In February's Reason I wrote a was one of a group of writers who offered predictions about "What to expect from the long-awaited, much-anticipated return of gridlock." My comments focused on what would happen under the new Congress to competition and privatization, predicting we will see it cut back.

This week Rep. Tom Davis, ranking member of the Oversight and Government Reform Committee, told the Consumer Electronics Show:

“We think this is a reasonable program to inject competition into the government and to spur along competition,” Davis said at the show’s government conference. “But unfortunately this has turned into a very partisan issue. It has really bogged down over the last two years. And I think it is likely to get worse under the new Congress as you have many federal employee organizations that don’t like this program at all.”

Competing interests will likely lead to the demise of the program, Davis said.

“One person’s efficiency and one person’s inefficiency is another person’s profit,” he said. “So we get into this game on Capitol Hill where you get very parochial, and I think A-76 could be one of the first casualties of the new Congress.”

That's what Atlanta Mayor Shirley Franklin said upon annoncing that she wanted to increase the city's general fund some $250 million or some 40 percent. Atlanta currently does not have a $250 million surplus - new taxes and fees are certainly on the horizon. The new funds will be used to improve city services and cover growing health care costs for its retirees -- a false dichotomy if I've ever seen one. In fact a Bain & Co report conmpleted for the city a few years noted that Atlanta spends more per capita for the same type of services than comparable cities...that they had a workforce that is 21 to 37 percent larger...and that they had not undertaken significant outsourcing or privatization of some central services functions such as information technology and motor transport services. Before looking in other people's pockets maybe the mayor should do some work herself bring Atlanta in line with comparable cities.

If that wasn't enough of a slap to taxpayers, Georgia Trend magazine, just named Franklin "Georgian of the Year." Among the chief reasons (and I couldn't make this up) “accomplishments like balanced budgets.” Its true that when she entered office she was faced with a looming deficit...at that time she pushed through a one percent sales tax hike and a hefty hike in property taxes to boot!

"Government is not the solution to our problem; government is the problem."
President Ronald Reagan, Inaugural Address, January 20, 1981

or

"We will govern to solve problems."
Governor Bill Ritter, Inaugural Address, January 9, 2007

hat tip to Jon Caldara at the Independence Institute who does great work in Colorado.

Over the coming months the Washington Examiner will examine some of the themes that Sam and I address in The Road More Traveled.

The first installment came December 26 (sorry no link); the second one comes today:

WASHINGTON - During the 1970s, local elected officials in the Washington area ignored their own transportation planners’ advice and erased dozens of planned highway projects from regional maps — while continuing to approve residential and commercial development. The result is the mess of overdevelopment and inadequate roads we face today. To understand why the commonwealth of Virginia continues to allow its most prosperous region to sink into gridlock, let’s look at another part of the country that did things differently.

In “The Road More Traveled,” authors Ted Balaker and Sam Staley point out that Houston, the nation’s seventh-largest metropolitan area and home to a major port and more Fortune 500 companies than any other city besides New York and Chicago, faced a similar congestion problem back in 1982.

More here.

Related: In this Boston Globe piece, Sam urges Beantown to make gridlock a priority.

Sens. Olympia Snowe (R, Maine) and Byron Dorgan (D., N.D.) have resuscitated the same network neutrality bill that was defeated last term in committee. If passed, the bill would impose major regulatory scheme on the Internet, supposedly to solve a problem that does not exist.

Network neutrality would prohibit the companies that build, own and operate the nation’s broadband networks from taking any strategic role in the management and optimization of information products that use their facilities, to the detriment of everyone who depends on a high-performance Internet. Network neutrality would pre-empt the development of an entire class of optional, but valuable, products, features and services that would make for a better network.

This strategic role has not been denied any other group of companies that have a stake in the future development of Internet services. Google, in the pursuit of revenues and profits, can use as much capital as it wants to add any amount of software or processing power to its servers to make its search engine work better for thiose who chhose to by ad space. Nothing prevents eBay from favoring its PayPal subsidiary, an Internet-based bank and transaction-processing company, in handling fee-based account settlements with buyers and sellers.

By way of an exercise, let's analyze the key languiage in the bill. The meat of the network neutrality legislation can be found in proposed Section 12 under the heading “Internet Neutrality.”

It can be tough to sort out all the pros and cons of owning a hybrid car. There’s the gas mileage advantage, but that’s often overstated.

Even though the savings may not be as grand as advertised, you'll still save money at the pump. But since you pay more at the dealership you’ll have factor in your driving habits and do a bit of number-crunching to figure out if your four-wheeled eco-statement will save you dough in the long-run. And there are plenty of other factors to consider. For example, what about maintenance costs and resale value?

A new study looks at the whole hybrid:

A study released today by auto industry analysts at IntelliChoice shows that all of the 22 hybrid models currently sold in the U.S. will save owners money thanks to lower total cost of ownership, compared with competing vehicles.

That news is significant vindication for manufacturers and consumers of hybrid gas-electrics that have often endured questions from critics and consumers alike about the long-term economy of the technology-packed cars.
…

The IntelliChoice survey focused on seven criteria, including depreciation, fuel costs, finance costs, insurance, repairs, maintenance, and applicable state fees. After the Prius, the group found the Honda Civic Hybrid, the Toyota Highlander 2WD, and the Lexus RX 400h (2WD and AWD) were the most cost-efficient over a five-year or 70,000-mile period. Those models are all made by the two leading hybrid manufacturers, Honda and Toyota.

Business Week article here.

Slide show of hybrid rankings here.

Related: What politicians drive

One of the points I make in the two reports on franchise reform that Reason will release Thursday is that telephone company entry into video is more than just “me too” competition for cable. Phone companies are rolling out video using new platforms, such as Internet Protocol Television (IPTV), which blurs the line between what’s been traditionally considered “broadcast" TV and Internet video. We’re really looking at a new generation of home video service. The coming year will see if state legislatures glom onto this and hekp speed these new services to constituents.

Microsoft Chairman Bill Gates drove that point home Sunday at the Winter Consumer Electronics Show currently underway in Las Vegas, discussing the a series of content agreements Microsoft has signed with a number of content providers. Video is fast becoming an Internet application. Here’s some sampling of the coverage:

From The Hollywood Reporter:

In addition, Microsoft said that it has signed Lionsgate to its roster of programming contributors to Xbox 360 Live Marketplace, joining Paramount and Warner Bros. Bach hailed the addition of a library of video content to Xbox Live that either can be streamed or downloaded, noting that 100 million downloads of games, TV episodes and movies have been generated over the past 13 months; he did not offer a separate account of how video alone has fared since Microsoft signed content partners including ABC, Comedy Central and the CW as of Nov. 22.

Xbox 360 also will provide an IPTV service that can deliver video programming, essentially functioning as a set-top box. Although that doesn't put Microsoft in the video distribution business, it opens up the possibility that the company could partner with AT&T to offer a mix of voice, video, data and wireless. Microsoft already provides software for AT&T's IP-based rollout, raising the specter that the telco’s current U.S. service, U-Verse, could eventually be bundled with Xbox 360.

From Daily IP:

Nevertheless, Microsoft’s overall IPTV strategy is very real. As [Jeff] Heynen [directing analyst for broadband and IPTV at Infonetics Research] explained, “Their presence among the world’s largest operators continues to grow, despite the technical hiccups. In addition, their presence inside subscribers’ homes via PCs, Xbox, Zune, and so forth also continues to grow. This confluence makes them a real force in this space. With Google pressuring them in the Web services arena, they are looking to the service providers as a major growth market for them, be it through IPTV middleware, mobile content, and enterprise VoIP and applications.”

Finally, from Telephony:

Having spent a virtual day at CES Sunday, courtesy of multiple Webcasts, I think what Verizon announced with its second generation of FiOS TV and what Microsoft added to its IPTV platform with the integration of Xbox 360 and Xbox Live elevates IPTV above the ordinary video fray. In Verizon's case, enabling consumers to not only view Web video on their TV set but to search for it from the comfort of the living room is a significant step forward. Microsoft is clearly targeting the younger generation with the ability to track buddies, initiate and receive voice or text chats via the TV set.

These are capabilities that are coming this year to IPTV consumers--capabilities cable doesn't have yet.

Heritage Foundation's Ron Utt is urging Virginia Gov. Tom Kaine to rethink his campaign promise to give local governments more power over planning decisions. Why? Well, just look at the results of what they've been doing with the power they already have:

In an effort to deter growth and upgrade community demographics, in the late 1990s Virginia counties began to adopt a series of restrictive land use regulations to limit the availability and affordability of building lots (down zoning and limited rezonings) and/or impose a substantial implicit tax on all new houses (called a proffer).

These higher fees and artificial land shortages caused home prices to soar, forcing families of moderate means into the rental market, or pushing them to the distant fringe of the metropolitan area--where lower land costs and less onerous land regulations provide affordable housing.

Forced to move farther away from their jobs, the time they spend on the road lengthens, and traffic congestion worsens.

Take for example Prince William County (approx. 30 miles south of D.C., home of Manassas, southern neighbor of Fairfax & Loudoun Counties), which recently adopted a building moratorium:

Data published each year by the U.S. Census Bureau reveals the adverse impact that Prince William's extant abusive land use practices have caused. In 2000, the median value of a home in the county was $149,600--25 percent greater than the national average.

But by 2005, the census reports that the median home value in the county rose to $391,500, 133 percent greater than the national average.

Reflecting the county's use of high home prices to upgrade its demographic characteristics, over the 2000-2005 period, the median income for households in the county rose 24 percent--from $65,960 to $81,904--while incomes nationally rose by just 10 percent.

Nonetheless, because home price escalation substantially outpaced income growth, Prince William County homes are unaffordable even by the distorted income standards of the region.

And with its new moratorium on home building, affordability will only worsen.

Utt goes on to suggest that Gov. Kaine, who ran on promises of "doing something" to address land use and transportation issues, should reconsider the wisdom of jumping on the regulatory bandwagon:

So what to do? In the center of it all is Gov. Kaine, who has yet to advance beyond campaign promises to give counties more control over growth. In fact, Virginia counties have tremendous control over growth, as Prince William has demonstrated by invoking a moratorium on it.

If such an extreme act of property rights abuse reflects limited control, then the logical enhancement of such existing powers must be to allow them a policy of "ungrowth" whereby existing subdivisions are bulldozed into rubble.

. . . .

Under the circumstances, the governor might want to reconsider his role in this debate, and a good place to start is to remember that he is a Democrat, and that his party has traditionally stood for the rights of the little guy over those of the privileged elites who have often abused their influence to enhance their lifestyles and bank accounts.

Thanks to more than a decade of land rights abuses implemented by local officials, Virginia has managed to achieve the ignominious distinction of experiencing the sharpest decline in homeownership of any state between 2001 and 2005--a period in which the nation's homeownership rate continued to increase.

So in essence, the same unintended consequences are playing out in Northern Virginia that play out time and time again in regulation-happy places like California and Oregon. Local governments adopt strong growth management regulations aimed at curbing "sprawl," housing supply is choked off and prices naturally skyrocket, traffic problems are exacerbated as people commute longer distances in search of affordable housing, and then policymakers scratch their heads and misdiagnose the problem. Instead of cutting regulation and red tape to target the self-imposed problem, the tendency is to prescribe even more regulation and to adopt policies and programs that at best have no discernible effect (i.e., light rail transit) and at worst compound the problem even further (i.e., inclusionary zoning policies). Simply brilliant thinking, eh?

Word comes from Light Reading that Qwest, the only remaining Baby Bell without a video strategy, has issued an RFP for a major infrastructure upgrade that will involve integration of voice, video and data over a fiber optic-based network.

Whether this will be a fiber-to-the-home initiative like Verizon’s FiOS, a hybrid next generation DSL architecture similar to AT&T’s IPTV, or something completely different, remains unknown. Qwest is said to be considering all options.

Light Reading writes,

In a portion of the RFP document, Qwest admits it “continues to be challenged to develop innovative, more cost effective solutions to meet ever changing market needs. Within the access environment, the ability to leverage the embedded base of copper and fiber plant to provide voice, data, and video services is critical.”

By all measures, Qwest is late with it video strategy, a situation attributable to its financial scandals in the early part of the decade and the legacy debt it needed to clear. As a result, a number of cities in Qwest’s 14-state region, which stretches from Washington State and Oregon to Iowa and Minnesota, and south to include Utah, Colorado, Arizona and New Mexico, have sunk millions of taxpayer dollars into municipal fiber systems, fearing that it would be years before Qwest delivered. These cities include Tacoma, Wash.; Ashland, Ore.; and Provo, Utah, all of which have experienced their own financial problems to one degree or another. Now they stand to face more “triple play” competition in the next 12 to 24 months.

And of the three remaining Baby Bells, Qwest by far operates in the states with the smallest population densities. It will still be at least a year before Qwest gets service rolling over its next-generation network, but it will be interesting to see where the company deploys first. Either way, the supposition that the broadband market “has failed” in medium and small markets is about to be put to the test.

The group Sense About Science has had it with celebs who spout off on science—or to be more specific, the group wants the celebrity spoutings to be accurate.

Here the BBC assembles some SAS examples of celebrity junk science. Too bad most of them (with the exception of Ms. Ex Paul McCartney) won’t be familiar to Yanks. Then again, most of what matters most does not get lost in translation.

Case in point:

[“Lifestyle Guru" Carole Caplin] On how to prevent breast cancer by giving women more information about "the importance of keeping the lymph system clear and unclogged".

Prof Michael Baum, emeritus professor of surgery, University College London: "Carole's idea of keeping the lymph system "clear and unclogged" has no meaning whatsoever.

"It is not based on knowledge of anatomy or physiology of the human body, let alone of breast cancer."

Related: Can Celebs Save Africa?

Related: Bono? Bob? Chris?

Related: Free-Market Minnie

A new blog "dedicated to the goal of repealing all federal and state planning laws and closing all state and local planning offices" here.

Democrats extracted their pound of flesh from the FCC and AT&T, forcing AT&T to agree to two years of price controls and regulation of quality and management services they can offer big bandwidth users such as Google and Yahoo.

AT&T is now free to complete its purchase of BellSouth, but this shameful episode at the FCC highlights the way the merger approval in telecom has gotten out of control.

At one time, the Federal Trade Commission and the U.S Justice Department had jurisdiction. When these agencies demanded concessions, they usually had to do with ownership and market share. Often divestiture or spin-offs would be required, but there was always a test: would the consolidation lead to market domination.

With AT&T and BellSouth, the market domination issue was dismissed early. The merger was approved by all state commissions in BellSouth’s territory, as well as Justice and the FTC.

If these had been two other companies, the deal would have been done then and there. Instead, opponents saw the 2-2 party deadlock at the FCC as an opportunity to launch round-after-round of partisan horse-trading over issues that had little or nothing to do with the merger’s effect on consumers. These had to do with the number of union employees, rate caps on certain high-bandwidth services and the regulatory demand du jour—network neutrality.

A casual observer couldn’t be blamed for wondering that, if network neutrality is so important to the protection of the Internet, why did the FCC Democrats agree to exempt AT&T’s wireless and video operations? To me that’s a quiet admission that there are certain areas where transmission prioritization is required for applications to work properly and where content partnerships are good for consumers. Then there’s the hedge of a two-year expiration date for wireline Internet neutrality, a nice regulatory back door in case bandwidth hogging by the studios, the gaming companies and the big applications players becomes enough of a problem that quality tiering is indeed required to “save the Internet”—for the rest of us who just want to get an email through!

In fact, with broadband now accelerating due to greater competition, 24 months from now just might be the time we see Internet congestion issues creating demand for the Web prioritization. From this perspective, the concession agreement confirms serious misgivings on the part of regulators as to wisdom of net neutrality.

Like many frustrated-but-not-surprised libertarians, the GOP’s congressional reign failed to meet my very low hopes. I took a “serves ‘em right” attitude toward the R’s recent defeat, and if I can muster any hope now it’s for the effects of gridlock, not for the other team.

A case in point comes from How Free Trade Hurts, a recent WaPo oped by Senators Byron Dorgan and Sherrod Brown:

The result [of free trade agreements] has been a global race to the bottom as corporations troll the world for the cheapest labor, the fewest health, safety and environmental regulations, and the governments most unfriendly to labor rights. U.S. trade agreements paved the way for this race: While rejecting protections for workers or the environment, they protected investors and corporate interests.

Worker activism, new laws and court decisions changed all that during the past century.

Greg Mankiw reacts:

That last sentence is striking. There is no doubt that most Americans have seen dramatic improvements in living standards and workplace norms over the past century. But should we really give most of the credit to "worker activism, new laws and court decisions?" I don't think so.

I would give most credit to economic growth, which in turn is driven by technological progress, a market system, and a culture of entrepreneurship. As the economy grows, the demand for labor grows, and workers achieve better wages and working conditions.

Economic studies of unions, for example, find that unionized workers earn about 10 to 20 percent more by virtue of collective bargaining. By contrast, real wages and income per person over the past century have increased several hundred percent, thanks to advances in productivity.

Similarly, working conditions are poor in less developed countries today because productivity is low there. The key to improving lives in those nations is economic growth, not "worker activism, new laws and court decisions."

The Sens included the requisite “race to the bottom” canard and also continue to whip up fears about the trade deficit. Apparently Americans should yearn for the days when our nation boasted a trade surplus.

A while ago Don Boudreaux (no link) offered an important reminder:

… in 102 of the 120 months of that most economically depressed decade, the 1930s, the U.S. ran trade surpluses. On an annual basis, America had a trade surplus for nine of the ten years of the 1930s (with 1936 being the only year of a trade deficit). For the whole of that decade, the U.S. ran a significant trade surplus. Exports over those dreary ten years totaled $26.05 billion while imports totaled only $21.13 billion.

Clearly, just as a trade deficit is no sign of economic malaise, a trade surplus is no sign of economic vitality.

Related: Dismantling another Dorganism

Why don’t more people ride mass transit? One big reason is the “mass” itself. People, especially those in prosperous nations, demand personalized transportation.

And as I mentioned in this post, cost also makes it tough for mass transit to serve the masses. Reader Ryan Kennedy responds with some interesting thoughts:

A good substitute [to light rail] would be personal rapid transit (PRT). It's estimated that PRT can be built and operated at a profit.

I anticipate you saying, "Well then, if this is so, the market will implement it." Yes, in time they will. London Heathrow is currently building a small PRT system, and a company in Sweden is building a test track for its own system.

I know it would be preferable to have all transportation provided for privately, but government is so intertwined with transportation, I figure........ don't let the perfect be the enemy of the good. Whenever someone talks about/proposes LRT I find it useful to point out PRT can provide superior service without subsidies. They sort of look at me like a Martian at that point.

For more on PRT, go here and here.

The state's pension share went from $160 million in 2000 to an estimated $2.6 billion in 2005. In California in 2006 there was about $5 billion in expenditures taken directly out of operating budgets to help pay for retirement healthcare for public employees, said Steven Frates of the Rose Institute of State and Local Government. "By 2019 we expect that number to reach $30 billion," he said. "That's more money than the state spends on public safety."

. . .

Some governments are thinking about cutting back retiree benefits to help balance the growing debt. Another solution would be for unions like CalPERS to think about making the transition to contribution based benefits packages, such as 401K. That is what most businesses in the private sector offer.

. . .

Until then the debt can only be covered by selling government property, cutting services -- which has already begun -- and raising taxes.

Full story here.