Virginia’s Economy Needs a Real Boost

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virginia-outline-150Government bad news is oftentimes released late on a Friday afternoon when the taxpayers and voters are least likely to be paying attention.

Late on Friday afternoon, July 8, after most folks were heading home or starting their vacations, the Governor announced that the state’s budget was going to be $266 million short of its goal.

That budget shortfall for this past fiscal year, likely means a $500 million deficit for the two year budget unless something dramatic happens.  But don’t count on it.
State employees, teachers, college faculty and sheriff deputies will not see the pay increases they had hoped for and which the legislators and governor had agreed to. The money isn’t there.

This shortfall should not be a surprise.  Government policies or lack of action has consequences and in this case it is reflected in these recent numbers that show an economy not moving forward. An economy languishing, limping along, barely growing.

Federal government anti-growth policies are having an impact.  Obamacare cut the definition of “part time employment” from 35 hours to working only 29 hours. And part time employees do not have to be covered in a company’s health care under the misnamed Affordable Care Act.  So many hourly employees have seen their hours cut by 17% over the past few years.  And now the “new definition” of overtime, and who needs to be paid for working more than 40 hours, is also reducing payrolls.  Of course, we all know that many of those working today are paid less than in years past, and millions have dropped out of the workforce.

On top of this, federal policies are putting thousands of Virginia coal miners out of work.  And when that happens, it impacts all those businesses that rely on these folks’ payrolls – clothing stores, restaurants, hardware stores, grocery stores, etc.

So, of course, payroll and income taxes coming into the state treasury are not what our state government wanted.  Projections of future economic growth were not accurate because the impacts of federal government policies were underestimated.

But we are also seeing a serious reduction of federal spending in Virginia. Billions of dollars less in federal government spending are coming into Virginia.  And this is likely to continue.
So what can we do to build our economy and put more people on private sector payrolls and thus increase the total taxes paid into our state treasury?

For several years, the Thomas Jefferson Institute has urged our elected leaders to tackle real tax reform.  Yet, we struggle under an antiquated tax code crafted about 45 years ago.

Our current tax system was created for a different economic era so it needs to be re-designed to better reflect today’s economy.  Our current state tax system was passed when Richard Nixon was president; the Vietnam War was raging, and John Wayne and Elvis were top entertainers. Cell phones did not exist and Selectric typewriters and not computers were on our desks.

Virginia’s tax system is way too old and out-of-date to give our economy the boost that’s needed.

For too long Virginia has not taken the actions necessary to reflect the clear fact that our reliance on federal government spending is not healthy.  Not only is the consequence of sequestration a continued drag on our state’s economy but so is our aging tax system.

Our political leaders need to rewrite the tax code.  As a starting point, the Thomas Jefferson Institute has proposed a tax restructuring idea that can create close to 70,000 new jobs over the next five years.  It gives all Virginians a tax break, eliminates two oppressive business taxes that discourage hiring – the gross receipts tax and the Machine and Tool tax, and it broadens the sales tax to better reflect today’s service economy.  This tax restructuring plan is revenue neutral and Virginia’s localities will be kept whole, they will not be harmed.  It encourages economic growth by simply re-arranging the tax system to bring jobs to our state and grow our economy. The total “government take” will be the same.  But with 70,000 new jobs, our economy will grow and expand.

Had the state adopted this tax restructuring plan a few years ago we would likely not be facing the economic “wet blanket” that we were presented with earlier this month.
It’s time for serious action to encourage economic growth.  Our state elected officials can’t change federal policy, but they can create a strong business climate, where more and more people are employed in good paying jobs, and where we rely on the private sector and not the federal government to grow our economy.

The longer we wait to take this action, the longer our economy will languish.

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Why We Can’t Live Without Autonomous Vehicles

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Koala-front2-180x180What if an airliner, loaded with 400 passengers, fell from the sky, killing everyone aboard? What if it happened every year? Every week? Every day?

What if it happened every three hours?

You’d probably think twice before booking airfare for your next vacation.

Yet collectively we think nothing of getting in our cars every day, despite the fact that 1.2 million people die each year in automobile accidents worldwide. This is the rough equivalent of that hypothetical jumbo jet dropping from the sky every few hours. 38,000 of those actual recorded deaths are in the United States alone according to the National Safety Council. Automobile fatalities are the #1 cause of death globally for people aged 3-34 years old. $1 trillion in economic damage occurs just in the U.S. each year via car accidents. Despite our remarkable vehicle safety advancements and improvements, such as seatbelts (1959), anti-lock brakes (1971), airbags (1973) and ‘automatic collision avoidance’ technology (2003), we had not found a solution to this preventable epidemic of death and destruction. Until now.

The answer is elegantly simple. We human beings thus far still remain part of the driving equation.

Remove that core element, and everything changes. This technological evolution in human affairs is unstoppable, and autonomous/driverless vehicles will literally reshape our economy, culture and ultimately our world. But let’s unpack these radical pronouncements, and first accept that it’s not far-off fantasy; it’s already happening all around us, right where we live and breathe, right now.

Horribly, human error is responsible for 94 percent of vehicle crashes in the world. Let that number sink in. Part of this awful figure is the 70% of drivers who admit to using their mobile phones while driving. Plus 112 million annually who operate vehicles under the influence of alcohol. Then add the millions more who drive while fatigued, medicated, with failing eyesight and reaction times, and are possibly otherwise impaired or distracted. The obvious solution and alternative to accidents and deaths is to remove the human driver–every human driver–from the driving equation.

Is that really safer, you ask? If you’ve seen recent news reports, you’ve heard of a Tesla Motors accident in Florida, where a Model-S drove down a highway in semi-autonomous “AutoPilot” mode, which failed to recognize a tractor-trailer pulling out in front of it. The Model-S went under the trailer–at full speed–shearing off its roof and killing the driver, who as early accident reports indicated, was not only not paying attention to the road, but was also watching a Harry Potter movie on a portable DVD player. Until this accident, Tesla vehicles had collectively driven more than 130 million miles with the semi-autonomous “AutoPilot” feature engaged. This is significant, since in the United States there is an auto fatality every 94 million miles on average. Worldwide, there is an auto fatality every 60 million miles.

Semi-autonomous and autonomous vehicles are being developed and can save us from ourselves. In May of 2013, the National Highway Transportation Safety Administration (NHTSA) released its official policy on autonomous vehicle development, which is to provide guidance to the states and permit testing of emerging vehicle technologies on their roads. New and updated NHTSA guidelines are imminent and expected in July of 2016. These forward-looking parameters will specifically identify which aspects of autonomous vehicle regulation will be uniform and which will be left to the states’ discretion. NHTSA created four levels of autonomy; Function-specific Automation (Level 1); Combined Function Automation (Level 2); Limited Self-Driving Automation (Level 3); and Full Self-Driving Automation (Level 4).

As the levels ascend, automation takes over, arriving finally at Level 4, in which a vehicle is designed to perform all safety-critical driving functions and monitor roadway conditions for an entire trip. This design anticipates that a human will provide destination or navigation input, but this “driver” is not expected to be available for control at any time during the trip. This includes both occupied and unoccupied vehicles. At Level 4, there is not even the reassuring presence of a steering wheel or a brake pedal.

Here in the Commonwealth of Virginia, all four levels of vehicle autonomy are already on our roads. Ford’s 2016 lineup of vehicles offers menus incorporating more than 30 different options of semi-autonomous (Level 1-2) features. In June of 2015, Virginia designated a 70-mile circle, encompassing Interstates 66, I-495, I-95, and State Routes 29 and 50, as “Virginia Automated Corridors,” marking them as locations where automakers can test each level and mode of autonomous vehicle operation. These corridors also include two test tracks: the Virginia International Raceway, and the Virginia Smart Road at the Virginia Tech Transportation Institute. Governor McAuliffe and the General Assembly have worked in tandem to ensure there are no statutory or regulatory barriers to members of the automotive industry who wish to test automated and autonomous vehicles in Virginia. This form of ‘naturalistic’ testing is extremely vital to the autonomous vehicle industry–an industry projected to spend more than $25 billion on research and have more than 10 million autonomous vehicles on the road by 2020.

While fully-autonomous vehicles (Level 4) remain 20 to 30 years away, both the Governor and General Assembly in Richmond have shown commendable leadership together, getting well ahead of and in front of this emerging technology. Our elected lawmakers here agree that it’s not too early to get into what Ford Motor Company alone believes will prove to be a $5.4 trillion per year autonomous transportation marketplace. For perspective, the entire current automotive industry, which is expected to hit peak production in 2017, is currently estimated at $2 trillion annually. Better yet, McKinsey & Company predicts that by the time self-driving cars become our primary form of transport (sometime prior to 2050), the total number of vehicle crashes will have decreased by 90 percent, with a potential for a combined and total cash savings of more than $190 billion per year. This is to say nothing of the human factor: plummeting fatalities, a fraction of the injuries and almost omnipresent safety when traveling.

And with all those priceless lives preserved and piles of money saved on car repairs, you just might have to book your flight and vacation a whole lot earlier.

For the past eight years, Christopher West has been the Director of Government Relations and Grassroots Outreach at Jackson-West Consulting, LLP, a full-service and bi-partisan government and public affairs firm based in Alexandria, Virginia.
For the latest in autonomous vehicle news follow Chris on Twitter @L4AutoUSA.
For comments and questions, please reach out to him at cwest@jackson-west.com.

For the latest in autonomous vehicle news follow Chris on Twitter @L4AutoUSA.

For comments and questions, please reach out to him at cwest@jackson-west.com.

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Federal Spending Significantly Impacts Virginia

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fed reserveThe federal government spends billions of dollars buying goods and services from private sector firms each year.

Just as the fortunes of businesses dependent on federal spending ebb and flow with federal budgets, so do the budgets of the states where those employers are concentrated.

And while non-defense contract spending has supported economic growth in many states over the past decade, it will contract when budget reform becomes a priority.

When that happens, states like Virginia whose budgets are more dependent on that spending may experience shortfalls.

In the fiscal year that ended Sept. 30, federal contracts decreased by $5 billion, or 1.2 percent. And 64 percent of the purchases in the most recent fiscal year were driven by the Defense Department.

In Virginia, federal government contracts decreased more sharply, falling 4.4 percent — or by $2.4 billion — based on data from USASpending.com that Chmura Economics & Analytics adjusted for place and time of performance.

Virginia is more dependent on DoD spending than the nation.

Sixty-five percent of the purchases in Virginia during the most recent fiscal year are from Defense Department spending — and those purchases made up 7.1 percent of the state’s gross domestic product, compared with 1.5 percent in the nation.

While the majority of these awards support the Defense Department, numerous other federal agencies enter contracts to purchase goods and services. For example, the Department of Health and Human Services contracts with pharmaceutical companies to produce vacc-ines, and the Department of Energy awards contracts for, among other things, research and development.

The state also is more dependent on non-Defense Department federal spending, which makes up 3.8 percent of its GDP compared with 0.8 percent in the nation.

Since non-Defense Department contract spending has been less volatile than the department’s spending over the past 10 years, it has contributed to more stable growth in some states — like Virginia — that are dependent on defense spending.

In Virginia for the fiscal year that ended Sept. 30 compared with the prior 12 month-period, a $1.4 billion increase in non-Defense Department contract spending partially offset a $3.8 billion decrease in the department’s contract spending. In other words, Virginia would have been impacted more severely without the expansion in non-Defense Department contract spending.

Non-Defense Department contract spending advanced at a modest 32 percent from fiscal year 2005 to fiscal year 2010 compared with a 49 percent gain in Defense Department spending over the same period. The non-defense spending was particularly strong, jumping by $30 billion from fiscal year 2008 through fiscal year 2010 as fiscal policy expanded in response to the recession.

After peaking at $152.9 billion in fiscal year 2010, annual non-defense contract spending has declined by only 1 percent. That compares with a 19.4 percent drop in defense contract spending after it peaked at $336.7 billion in fiscal year 2009.

Non-defense contract gains by state

non-defense-spending part1

non-defense-part2

Here are the non-defense contract gains by state from fiscal year 2005 (12-month ended Sept. 30, 2005) to fiscal year 2015. (The per capital gains are in parentheses.):

  • Virginia: $8,542,008,667 ($1,019)
  • District of Columbia: $5,839,744,820 ($8,687)
  • Maryland: $5,593,916,049 ($931)
  • Pennsylvania: $3,285,748,606 ($257)
  • Massachusetts: $2,857,615,828 ($421)
  • California: $2,039,365,210 ($52)
  • North Carolina: $1,173,863,398 ($117)
  • Florida: $1,173,274,726 ($58)
  • Colorado: $939,922,764 ($172)
  • Mississippi: $929,920,035 ($311)

Source: Chmura Economics & Analytics

(This column first ran in the Richmond Times Dispatch on July 11, 2016)

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What is Behind the Great Transit Crackup?

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metro-180x150This year has seen a plethora of major troubles in legacy transit cities—Boston, San Francisco, and Washington, DC in particular (but there are also serious deferred maintenance problems in Chicago and Miami). In addition, there were major disruptions within the American Public Transit Association, the trade association for nearly all of America’s public transit systems.

The year began with what has been described as a “melt-down” at the Massachusetts Bay Transportation Authority, which failed to keep its trains running during a snow storm. San Francisco’s 44-year old BART system had to take 50 railcars out of service in March due to damage to electronics from a still-unexplained power surge. Philadelphia’s SEPTA recently took a fleet of new Silverliner railcars out of service, due to cracks in a key component of their suspension system. But by far the greatest fiasco was the closure of the Washington Metro for an all-up safety inspection, after a series of crashes and fires that have included a number of fatalities.

Broadly speaking, deferred maintenance is the common factor in most of these cases. As DOT Secretary Anthony Foxx put it in remarks delivered June 29th , the mentality in previous decades was “build it, build it, build it, and let’s worry about repairs later. We bought the house, but didn’t set aside any maintenance dollars for the house. So the roof got leaky, the floorboards started popping up. We decided we could live with it for a while, and now things have gotten so that the repairs are so much more expensive.” Referring to the Washington Metro in particular, Foxx said, “My view is that Metro needs to really get its house in order and focus on what it has, before thinking about doing any expansion.” Better late than never, but it’s tragic that no previous DOT Secretary (say 10 years or so ago) had the courage to say that.

The problem at many of these agencies is basically the incentives of the political appointees who constitute their governing boards. Zachary Schrag’s 2006 book, The Great Society Subway: A History of the Washington Metro, includes a serious discussion of what even then was “a looming maintenance backlog” that was greatly exacerbated “by the constant desire of politicians to prioritize shiny new stations and extensions,” rather than boring old maintenance work. (The quotations here are Eno Transportation Weekly editor Jeff Davis’s paraphrase of Schrag’s discussion.) In other words, what we have is an institutional failure, at its core a dysfunctional governance model.

In the case of San Francisco’s BART, much of its current maintenance problem was self-inflicted by engineering hubris. Back in the early ’60s, determined to reinvent rail transit, its designers opted for a unique 5′ 6″ track gauge, which required custom-made trucks and wheelsets, brake systems, and track repair vehicles, not currently available from any suppliers. They created a unique 1,000-volt electrical power system, for which no replacement parts are available. The train control system, still using 1972 microprocessors, is responsible for more than 25% of all delays, because it creates “ghost trains” wherein the computer freezes train movements due to images of a train that is not there.

While all this was going on, a great shake-up took place at APTA. It began late in March when New York’s Metropolitan Transportation Authority announced that it was quitting the organization, effective immediately. In its letter explaining the decision, MTA’s top officials noted that there were no Legacy System members on the APTA Executive Committee, nor any operators of commuter rail systems—two segments that “alone make up the overwhelming majority of total customers served by public transit” in this country. Moreover, there was only one Executive Committee member from the Northeast, compared with six from California alone. The Legacy System members alone (all major rail and bus operators) account for almost 60% of all transit passengers. Their needs, especially “state of good repair” needs, are “an order of magnitude greater than the non-Legacy rail systems.” And after a period of serious cost-cutting at MTA ($1.8 billion in reduced costs in a $14 billion annual budget), MTA could not justify the $400,000 annual cost of continued APTA membership, compared with the value it was receiving from other memberships.

Less than a month after MTA’s April 8th letter, APTA President Michael Malaniphy had resigned, after less than five years on the job. So far there have been no announced changes to APTA’s Executive Committee, but Vice President Rosemary Sheridan told Politico that the criticisms raised by the MTA would not be ignored. Given how serious the problems facing legacy transit systems have become, that would be an appropriate challenge for APTA to focus on under a new president.

(This column first appeared in the July 12 issue of Surface Transportation News on Reason.org.)

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Federal Land Grab is An Assault On Private Property

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Utah’s Attorney General filed a lawsuit in February 2016 against the Bureau of Land Management (BLM) in the Department of the Interior and the United States Forest Service (USFS) in the Department of Agriculture. Utah claims that in 2015 a federal plan was issued which amounts to grabbing control of millions of acres of ranchland and directly prohibiting mining on 233,300 acres of land in Utah. In the West, 10 million total acres of land would be off limits to mining because the sage grouse habitat. Utah’s sage grouse plan, according to all studies, has been enormously successful. Utah claims the federal government plan amounts an improper “overthrow” of the state’s plan.

Generally states and their wildlife agencies have had the primary authority over the regulation and management of species such as sage grouse.(Photo: gdbeeler/Thinkstock)

this-land-is-your-land

Generally, states and their wildlife agencies have had the primary authority over the regulation and management of species such as sage grouse. Not content with the state’s success in managing the sage grouse, BLM and USFS want to use it as an excuse to take more control over mining and grazing rights on federal land.

The regulations of BLM and USFS are worth examining. (They are preposterous!) The federal agencies identify “grazing” as a threat to sage grouse in Utah and as a result impose “…numerous prohibitions and restrictions on grazing, permitting and leasing.” They include maintaining grass heights at 7 inches or higher until June 15 of each year while the sage grouse are breeding and nesting on ranch land. When cattle grazing occurs within 4 miles of a breeding and nesting sage grouse, from June 16-Oct. 30, perennial grass heights are to be maintained at 4 inches or higher. A requirement, which could only be written in Washington, declares “drought and degraded habitat cannot be used as a basis to adjust grass height table requirements.” Another requirement, “fences and roads identified as negative impacts…must be minimized.” BLM and USFS also declare that “construction of new permanent livestock facilities including windmills, water tanks, and corrals will not be permitted within 1.2 miles from the perimeter of occupied leks.” [breeding areas]

Ranchers will love the fact that they have to get rid of their ponds for watering cattle. The new rule declares “livestock ponds built in perennial channels that are negatively impacting riparian habitats must be removed and no new ponds will be permitted in these areas.” It is easy to see why ranchers and miners in the West believe that once again they are being forced off the land and out of business due to regulations coming from Washington.

The Wall Street Journal on March 11, 2014, in an article entitled, “Sage Grouse Rebellion” wrote that half of the land west of the Mississippi belongs to the federal government, which includes 48% of California, 62% of Idaho, and 81% of Nevada. The WSJ wrote, “In partnership with green activists, the Department of Interior may attempt one of the largest federal land grabs of all times.” The article claims the sage grouse population occurs on private property and that such property “…could become subject to some of the most invasive private land-use rules…in the history of protected-species law.”

A new administration will have its hands full in protecting property rights in the West and needs to issue a new Executive Order protecting property rights.

(This column first ran in Farm Futures on July 18, 2016)
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