A Conservative Case for Highway Tolling

As of today, using toll finance to rebuild part or all of a state’s Interstate highways is under discussion in 14 states that I know of. In some states, these discussions are bipartisan, but in other states, some conservative legislators have become outspoken opponents of tolling. Current examples include Connecticut (where Republican legislators are fighting hard against tolls), South Florida (where Miami Republicans have gotten anti-toll measures through the legislature), and Texas (where the governor and conservative legislators have forbidden TxDOT from putting any state funds into new toll projects).

I’m concerned about this for two main reasons. First, I think increased use of tolling is essential if we are going to fix the major shortcomings of our highways and freeways. And second, I think tolling can and should be consistent with basic conservative principles, as I explain in a new Reason policy brief, “A Conservative Case for Tolling,”.

In that brief, I discuss five of the main reasons conservatives give for opposing tolls, as follows:

  1. Tolls seem, to them, to be no different from taxes;
  2. They say it’s unfair to have to pay tolls and gas taxes on the same road or bridge;
  3. Governments (e.g. Pennsylvania) divert toll revenue to other uses, making toll rates higher than they should be;
  4. Many see governments as slapping tolls on existing highways, with only vague statements about improving those highways (maybe, someday); and,
  5. A lot of the revenue is consumed in the costs of collecting tolls (compared with the low cost of collecting gas taxes).

Some of these points have merit, as I discuss in the policy brief (which I hope you will read). Tolls ought to be, but today often are not, pure charges for service, like your electric bill or phone bill. You pay for what you get, you know who the provider is, and you can hold them accountable. That’s how traditional toll roads operated, including the thousands of private toll roads in 19th century America and Britain.

Nobel Prize-winning economist Milton Friedman wrote a paper about the poor management of U.S. highways, which I quote in the policy brief. He concluded that tax-funded U.S. highways are inefficient state-owned enterprises that aren’t accountable to their customers. “When the state goes into business, nobody worries much whether people are getting what they are willing to pay for, or whether the people doing the paying are those who are receiving the services,” Friedman noted. I cite a number of other conservative thinkers and policymakers who see tolls as far better than gas taxes.

My conclusion is that America needs to re-think tolling as it evolved in the 20th century, to come up with a new approach, which I call value-added tolling. It would have five key features:

  1. Charge a toll or a fuel tax for a highway, but not both (no double-charging);
  2. Build a better facility first, and only then start charging (no user costs until there are user benefits);
  3. Dedicate all toll revenues to the tolled facilities (no revenue diversion);
  4. Guarantee proper maintenance for the useful life of the facility; and
  5. Reduce the cost of toll collection to the lowest possible extent.

The policy brief explains each of these features.

The point of these provisions is to create a genuine value proposition for all cases where tolls are used to finance reconstruction or replacement of aging facilities. Perhaps eventually they could also be applied to existing tolled facilities, but that’s a longer-term objective. I contend that if these principles were followed, it would open the door to enough new funding to deal with the large backlog of needed projects that are mostly not being built these days. I also argue that this kind of funding would be more sustainable long-term, and would be fairer than gas taxes because people who use major (costly to build) highways would pay more per mile than those who only use inexpensive two-lane highways and local streets, which today’s fuel taxes can pay for.

I hope you will read the full policy brief (.pdf) and let me know what you think.

This commentary originally appeared in the December 2019 edition of Surface Transportation Newsletter #194.

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Agriculture, U.S. Constitution, lose in California court

A 72-year-old judge, Christina A. Snyder, appointed by President Clinton in 1997, handed the North American Meat Institute (NAMI) , U.S. agriculture,l and the Constitution of the United States a stunning legal defeat at a November 18, 2019 court hearing in U.S. District Court in the Central District of California (North American Meat Institute v. Becerra).

Judge Snyder, a member of the Beverly Hills California Bar Association, eviscerated NAMI’s arguments that California’s Proposition 12 was unconstitutional. You may recall from my October blog NAMI alleged California’s Proposition 12 violated the U.S. Constitution’s Commerce Clause . NAMI claimed Proposition 12 discriminated against out-of-state producers, distributors, and sellers of pork and veal.  It also argued California was impermissibly regulating the production of pork and veal in the other 49 states.

It was also argued that Proposition 12 burdened interstate commerce in a manner which succeeded any legitimate local benefits.

The legal posture on November 18 was NAMI filed a Motion for Preliminary Injunction (PI) along with numerous declarations to stop implementation of Proposition 12. The declarations did a terrific job in describing the enormous impact California’s Proposition 12 will have on animal agriculture in 49 other states. Immediately animal welfare organizations such as Humane Society of the United States (HSUS), Animal Legal Defense Fund, Animal Equality, The Humane League, Farm Sanctuary, and Compassion in World Farming USA filed to intervene in opposition to NAMI’s request for a PI to stop Proposition 12’s requirements.

What does it all mean?

— In less than a month (Jan. 1, 2020), all veal calves sold into California must have 43 square feet of floor space per calf. If a farmer cannot prove this fact, then he/she will not be able to sell veal product into California.

— By Jan. 1, 2022, all pork operations will be required to have 24 square feet per sow.

— California’s law requires a meat processor to sell “whole veal meat” and “whole pork meat” from calves and sows housed pursuant to California’s space requirements.

California voters and the state’s persuasive animal rights friends are imposing these requirements for animal production on 49 other states. California and its intervenor friends believe animal cruelty is being practiced because of farm animal confinement (CAFOs). California consumers and its government believe that such confinement threatens their health and safety (NONSENSE).

Judge Snyder accepted these arguments totally and pointed out California’s initiative passed with 63% of California’s voters. Judge Snyder stated that NAMI “…fail[ed] to establish that discrimination against out of state commerce, or economic protectionism, drove passage…” of either Proposition 12 or its implementing legislation.

Is confinement safe?

She claimed legislative history demonstrated there were health risks from food-borne bacteria derived from confinement. She stated public health reports by the Pew Commission on Industrial Farm Production, the World Health Organization, and the Food and Agricultural Organization of the United Nations support California’s rationale. Judge Snyder stated “…that Proposition 12 does not have a discriminatory purpose that would invalidate it per se.”

Because of Judge Snyder’s “extensive” agricultural experience, she stated Proposition 12 did not impose nor contemplate “differential treatment of in-state and out-of-state economic interests that benefits the former and burdens the latter.”

Judge Snyder, a graduate of Stanford Law School stated, “A state statute is unconstitutional not just when it discriminates on its face or in its purpose but also where it has a discriminatory effect.” Her Honor relied on a 9th Circuit case dealing with force-fed ducks or geese in a Foie gras case . She found the Foie gras case in every respect exactly the same as NAMI’s challenge.

Judge Snyder said,  “Proposition 12 does not have a discriminatory effect that requires per se invalidation.”  She believes California and the animal rights groups have a right to determine that animal production techniques used in 49 other states “…are inhumane and harmful.”  Judge Snyder also stated, “The Commerce Clause is not a safety valve for those who are simply political process losers.”

A version of this commentary originally appeared in the December 2, 2019 edition of Farm Progress.

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Will Virginia’s Presidential Vote be Cast by New York and California?

Will Virginia’s new Democratic majority in the General Assembly help kill the Electoral College?

Millions who slept through government class were stunned to learn in 2016 that the popular vote doesn’t pick a president. It had also happened in 2000, with a similar pattern of disappointed Democrats complaining the Electoral College process is archaic, anti-democratic and gives smaller states too much weight. Given the wide Democratic majorities now common in New York and California, a repeat in 2020 is easy to imagine.

But a clever, perhaps too clever, proposal simply makes the Electoral College meaningless. The proposal awards a state’s electors to the candidate with the largest national vote, without regard to the result in that state. According to the advocates at National Popular Vote, sixteen states with 196 electoral votes have voted to dis-enfranchise their people, and in several others at least one legislative chamber has agreed.

It was proposed in Virginia, but the General Assembly simply ignored House Bill 2422 during the 2019 Session. Its three sponsors, Northern Virginia Democrats Mark Levine, Kay Kory and Marcus Simon, will surely be back with a longer list of sponsors for 2020, and face first a House Privileges and Elections Committee with a Democratic majority.

This is an end run around the United States Constitution, which has included the Electoral College process since its 1787 drafting. It was the feared electoral punch of then-massive Virginia (compared to the other states at the time) that led the founders to this compromise. What irony it would be if the Virginia General Assembly was the deciding vote to send the idea to the dustbin of history.

It is also an end run around the usual process to amend the Constitution. Why take that trouble? States can simply agree on their own to award their Electoral College votes to the winner (by majority or plurality) of the national popular vote, whoever determines that. The U.S. Constitution gives legislatures control over the choice of electors, with most now simply choosing electors pledged to the winner in that state.

This also could make moot the constitutional provision for the House of Representatives to break Electoral College ties or pick a winner absent an Electoral College majority. No state law can overturn that, but this process means even a plurality winner of the popular vote will have control the Electoral College.

The 2016 election was the fifth time in U.S. history that the candidate with the most popular votes failed to be elected, with 2000 the other recent example. It first happened to Andrew Jackson in 1824, when he led in the popular vote and the Electoral College but lacked an Electoral College majority. The House of Representatives selected John Quincy Adams. Adams had less than a third of the popular vote, but many presidents have failed to reach 50 percent.

The interstate compact language proposed in Virginia doesn’t even require a majority of states to agree for Virginia to take this step. It only requires agreement in states with more than a majority of electoral votes to bind Virginia’s electors. That is simpler than getting two-thirds of the state legislatures to approve (ask the ERA supporters.) States with 74 more electoral votes are required, and the states where it has passed one chamber already would be sufficient.

The assumption of course is that Virginia voters won’t mind or really notice, since they have given its electoral votes to the same party three elections in a row now, with conventional wisdom predicting the same for 2020. But how will those same voters feel if the situation reverses, a Republican wins the popular vote but is on the knife’s edge in the Electoral College? Suddenly Federalism will enjoy a rebirth, even here in New Blue Virginia.

There apparently are a fair number of Democrats who understand the downside of this idea, and not just those in the smaller states that would suddenly become sideshows in a national campaign. There are some Republicans attracted to this idea, if polling cited by the advocates is to be believed. The moderating influence of the Electoral College won’t be noticed until it is gone.

The organized opposition comes from a group called Save our States, with their argument summarized in this article in The Hill a few months back. Author Sean Parnell from its staff paints a grim picture:

“It would be the Florida 2000 recount all over again any time the election was thought to be close, except on a vastly larger scale with lawsuits in most, if not all, of the nearly 4,500 counties and townships that administer elections.”

He reports at least one state, Colorado, is rethinking its position and plans to ask its voters about the idea in a 2020 referendum. He is right that a side effect of the compact would be pressure on states to go to a uniform voting and counting process, rather than the variety of rules we see now.

More popular with Virginia Republicans is another approach, to award Virginia’s electoral votes by congressional district. The 2019 House Joint Resolution 627 and Senate Bill 1002 would give two electoral votes to the candidate who won statewide, but then divide the rest based on the congressional district outcomes. Was that an admission the Republican sponsors see no chance of a future GOP win for a presidential candidate who will need all 13 Virginia electors? Save Our States takes no position on how states allocate their electoral votes internally.

Both are bad ideas. It really was the Miracle of Philadelphia, with the Electoral College one of the provisions intentionally creating a federation of states and not a democracy. Washington, Madison and other founders, fearing unchecked democracy, understood that. But in a country where we dare not even name a school for Madison or so many of the founders, how long can respect for their wisdom abide?

A version of this commentary originally appeared in the November 13, 2019 edition of the online Bacon’s Rebellion.

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China Steals Seed Technology

Sen. Tom Cotton (R-AR) stated, “People in Washington and Silicon Valley are overlooking the threat of Chinese agricultural technology theft because they think that food grows in a grocery store.”

In a Washington, D.C, newspaper article, Cotton claimed only President Trump is attempting to stop China from stealing intellectual property. He is particularly concerned about China’s espionage tactics in relationship to farm crops and seeds.

It appears many of agriculture’s commodity organizations are only concerned about exporting more product to China and seldom ever support Trump in his efforts to stop the stealing of intellectual property. The news media focuses on national security matters and Silicon Valley.

Cotton, who was born and raised on a cattle farm in Arkansas, said China is not capable of feeding itself. He claims this is why “…it tries to steal modern techniques and strategies of growing crops from places like Arkansas.” Cotton believes China’s espionage tactics are focused in-particular on crops and agriculture. Even FBI Director Christopher Wray states, “Put plainly, China seems determined to steal its way up the economic ladder, at our expense.”

A recent article by Jack DeWitt published on Oct. 17, 2019, raised the question of whether it is too late to stop China from stealing agriculture technology. He recites the familiar story of a 2014 case that exposed a group of Chinese nationals attempting to steal seeds by digging up freshly planted corn seed. He noted that only one Chinese person was arrested and the other six fled to China. However, it was noted this Beijing company “… had been stealing U.S. seeds since 2007.”

As we know, China bought the Swiss company Syngenta through a state-owned company – Chemchina. DeWitt notes by this one move China “….gained access to one of the world’s largest portfolios of patented seeds and agricultural crop protection products.“ DeWitt also noted in his article that President Xi Jinping has stated he would like to “…speed up the innovation and application of biotechnology breeding in agriculture.”

The FBI has called agricultural economic espionage “a growing threat.” Another example of stealing agricultural technology involves rice, which concerns Cotton. Ventria Bioscience, a Kansas company, has developed a genetically engineered rice. The intellectual property included in the engineered rice is to grow human proteins for medical uses. Ventria Bioscience, according to one report, invested approximately $85 million in developing the engineered rice. The company expected the potential from this rice to be approximately a billion dollars a year. China, through one of its contacts, conspired to steal the company’s trade secret and the rice was found in their luggage. This case occurred in 2013. This case and Iowa are cases which have given rise to criminal prosecution.

These cases are being prosecuted under the Economic Espionage Act of 1996. It is this kind of stealing of seed technology the Trump administration is attempting to protect American agriculture from. It should be no surprise that China is interested in technology related to agriculture. There is simply no way any entity in agriculture can dispute the value created by seed research and technology.

What is a surprise is that leaders in agriculture are not vocal in supporting Trump’s efforts to improve the trade relationships between China and the United States. Given that agriculture is a large industry in virtually every state, it is critical that technology developed for farmers is not stolen by China. Agriculture is just as much a national security issue as computer and military technology.

A version of this commentary originally appeared in the November 12, 2019 edition of the online Farm Futures.

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Virginia Retailers should see holiday sales higher than the national forecast

The kickoff to the holiday selling season starts this month.

It is an important time of year for retailers as holiday sales represent about 20% of the retail industry’s total sales.

Despite businesses having uncertainty over tariffs and seeing somewhat slower economic growth, consumer spending continues to expand at a 2.9% annualized pace in the third quarter, according to the latest gross domestic product report.

The strong consumer spending makes sense in light of the continued strong employment growth and increasing wages in October.

Personal income is up 4.9% over the 12 months ending in September, an increase of $880.5 billion.

American consumers like to spend, so much of that increase in income usually translates into purchases.

But will that result in more sales over the holidays than last year?

The National Retail Federation, the nation’s largest retail trade group, predicts holiday sales will increase between 3.8% and 4.2%, which translates into $727.9 billion to $730.7 billion.

The forecast, which excludes sales at automobile dealers, gas stations and restaurants, represents sales to be generated in November and December. Holiday sales saw an average increase of 3.7% during the last five years.

Global financial services firm Deloitte is looking for this year’s holiday sales to rise between 4.5% and 5% from November through January compared with the same period a year ago. They expect e-commerce sales to rise between 14% and 18%.

In its 34th annual survey of more than 4,000 respondents, Deloitte found that the average household expects to spend nearly $1,500 during the holidays. Three-fourths of the respondents say they are likely to spend the same or more than last year during the holiday season.

One concern for retailers this year is that there are six fewer shopping days between Thanksgiving and Dec. 25.

Sales in Virginia’s metropolitan areas are likely to fall somewhere between the NRF and Deloitte forecasts.

Virginia’s nonfarm employment grew 0.6% in the 12 months ending in October — less than half of the 1.4% pace for the nation. During the same period, employment increased 0.8% in Richmond and 1.2% in the Washington metro area.

The seasonally adjusted unemployment rate in Virginia stood at 2.7% in September — lower than in the national rate of 3.5% for that month. The seasonally adjusted Richmond metro unemployment rate also was 2.6%, but Northern Virginia was even lower at 2.1% in September.

A seasonally adjusted six-month moving average of retail sales in Virginia shows 4.8% growth from a year ago in August. The Richmond area has seen an average retail sales growth of 3.9% over the same period, and retail sales are up 5.6% in Northern Virginia.

Based on recent trends in retail sales in Virginia, retailers in the state likely will see growth in holiday sales higher than the national expectations when compared with last year. Of course, a federal government shutdown would put a dent in sales.

With such low unemployment rates in the nation and state, however, some retailers may be hard pressed to find the workers needed to serve all their customers.

Long lines and slow delivery times could put a damper on in-store sales while shifting more of the market share to e-commerce.

A version of this commentary originally appeared in the November 10, 2019 edition of The Richmond Times-Dispatch.

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