Stories by Mason Herron

Mason Herron is a policy analyst at a non-profit in New York City.

Christie 2012? Forget About It

November 29th, 2010 at 8:51 am 12 Comments

It’s clear that the conservative fascination with New Jersey Governor Chris Christie has been rising over the past few months. But despite the enthusiasm for a 2012 presidential bid, sale Christie should sit this race out.

It’s easy to understand Christie’s popularity with the conservative grassroots. He’s battled the teachers’ union, unhealthy cut a reported $13 billion in government spending in his first eight weeks in office, vetoed a “millionaire’s tax,” and capped annual property increases at 2.5% in a state with a $10.7 billion projected deficit that is, relative to the size of the budget, the highest in the country. His most recently publicized gesture was to cancel a tunnel between New York and New Jersey, which had a projected cost of $8.7 billion—an episode that reveals, if anything, the alarming complacency we have with deficit spending, as proponents of the plan found the excuse that “we don’t have the money,” entirely insufficient. These policies, along with his confrontational and candid behavior, have allowed him to commandeer more of the media spotlight than would typically be granted to a governor still in his first year in office.

All of this has provoked talk of a potential presidential run, as many conservatives believe that Christie fills the “anti-Obama” role that many believe could be the key to a Republican victory in 2012. An overweight white guy from New Jersey vs. a skinny African-American from Hawaii? Try to imagine a bolder contrast.

Christie has indeed displayed an ability to be an effective Republican chief executive in a typically liberal state. A recent Zogby poll showed him as the leading contender for the nomination amongst Republican voters. A “Draft Christie” movement recently launched. Most importantly, however, is that his approval rating in the state is still above 50%, despite the funding cuts listed above. Considering all this, it’s tempting to imagine Christie taking the oath of office on January 20, 2013.

With that said, however, it’s too soon. He has been in office for less than one year, which would make him—at the time he would presumptively declare his candidacy in 2011—the least experienced candidate in high office among a list of potential contenders that includes Mike Huckabee (10 years as governor), Tim Pawlenty (8 years), Haley Barbour (7 years), Mitch Daniels (6 years), John Thune (6 years as senator), Mitt Romney (4 years as governor), Newt Gingrich (4 years as Speaker), and even Sarah Palin (a little over 2 years as governor).

Considering that Republicans made such a large issue of Obama’s lack of experience, this could pose problems for a potential Christie run. Furthermore, history isn’t exactly on his side, as Christie would be the only governor to abandon the governorship during his first term to ascend to higher office since Theodore Roosevelt (who acceded to the vice presidency). Since the formal primary process began in 1972, Jerry Brown is the only governor to run for president while still in his first term (he ran in 1976).

Christie’s biggest problem would be translating his success at a state level onto the national stage. The budgetary problems most states face these days are rooted in public pensions, or, as in the case of New Jersey, generous compensation to specific constituencies—New Jersey ranks fourth in the percentage (66) of unionized public employees—such as teachers’ unions and other state employees. For this reason, it’s a bit easier for governors to trim budgets early on, as singling out particular groups—sometimes justifiably, sometimes not—as a cause of the state’s financial problems is politically palatable.

Unfortunately, lone constituencies aren’t the cause of the budget problems that the country faces; they’re caused by universal entitlements. Although the main beneficiaries of Social Security and Medicare are typically seniors, they are entitlements we all pay for and expect to receive when the time comes. That is why cutting them will prove difficult, and while Christie has been successful railing against groups in New Jersey that are typically enemies of Republicans, it might prove much harder to tell the entire country that it’s time for tough love. Although he did make cuts to government departments, the three major programs that Christie decided not to freeze or reduce spending for were funding for hospitals, children’s health care, and—wait for it—senior citizen access to prescription drugs. Even Chris “The Wrecking Ball” Christie has been reluctant to trim universal benefits for seniors.

The other problem for Christie is that he would be facing multiple governors who already have significant executive experience. Huckabee, Daniels, Barbour, and Romney all come to mind, and it’s difficult to point out what Christie has done that Daniels has not—other than provoke unions—an issue that would unify and energize the most effective part of the Democratic base come general election time. Daniels, meanwhile, who now has a supermajority in the Indiana state legislature, boasts a 75% approval rating and might be an even more effective governor over the next two years as a result.

The good news for Christie—if he does have presidential ambitions—is that he has more than enough time to turn New Jersey around, close the budget gap over the next few years, and build up an impressive resume to run on. He’ll need to find some more creative ways of closing the deficit that extend beyond targeting unpopular funding, and he’ll probably have to raise taxes eventually—another potential case study for gauging an electorate’s response. Should his current record continue, he‘d be in prime position to make a successful run in the future.

Christie has unequivocally stated that he will not run in 2012. Although he did spend this recent election season campaigning for other candidates, he has not taken the steps necessary for potential presidential contenders, so it appears we can take Christie at his word. As for the possibility of a potential vice presidential bid, I wouldn’t bet on it. Although potential candidates often declare that their priority is their home state without meaning it, I take Christie at his word; he’s well aware of the monumental obstacles that his state still has to overcome, and he seems determined to finish what he started.

The 2016 election, meanwhile, is only a few short years away.

How Repealing the Health Mandate Could Backfire

November 23rd, 2010 at 12:07 am 45 Comments

As debate about whether or not the incoming Republican House should attempt to “repeal and replace” the Patient Protection and Affordable Care Act continues, the general attitude prevailing amongst conservatives is that Americans found the health care bill unpopular, so Republicans should repeal it. And yet–as pollsters continually tell us–while the bill as a whole is unpopular, many of its individual features are not. They are, in fact, overwhelmingly popular. However, there is one unpopular section of the legislation: the individual mandate, which sixty-eight percent of Americans want to see repealed. Today, the judicial battle over the mandate could be one of the more consequential judicial and policy decisions in recent memory.

When states and individuals began to bring suits against the individual mandate a few months ago, many commentators and politicians simply dismissed the lawsuits as frivolous political obstructionism with little possibility of victory. Yet, those challenging the individual mandate do indeed have a far greater shot of success than many believe, as legal professor Ilya Somin cogently argues.

There are two potential outcomes to the eventual judicial ruling: either the courts rule the mandate constitutional and it’s implemented as instructed, or it is ruled unconstitutional and a vital part of the health care reform bill is toppled, eliminating any potential cost-reductions that the reform strives for. The first result has serious long-term implications for future constitutional interpretation by the courts; the second will have a dramatic impact upon our nation’s health care system which could leave us with a system that is worse than before.

Let’s examine the first result. Currently, those who argue that the individual mandate is constitutional do so with the reasoning that it is simply a tax and merely modifies the tax system much like other tax incentives do. For instance, the numerous tax credits our system already contains are, in essence, penalties on those who choose not to do those things. Theoretically, we already endure a number of mandates, as our ineligibility for certain tax credits (i.e. certain energy credits) can be construed as a de facto penalty. However, if the courts decide that it is not a tax and instead a penalty, then it becomes much more difficult to make a constitutional argument. President Obama seemingly agrees with this latter line of reasoning, as he stated in September 2009 that “for us to say that you’ve got to take a responsibility to get health insurance is absolutely not a tax increase.”

However, as Somin argues, advancing the notion that the bill is constitutional under the commerce clause is simply incorrect: “instead of regulating pre-existing commerce, the bill forces people to engage in commercial transactions they would have otherwise avoided.” Refuting the idea advanced by Michigan district Judge George Caram Steeh that the mandate is constitutional because it is “economic activity,” Somin argues:

if I choose to spend an hour sleeping, I necessarily choose not to spend that time working or buying products. Under Judge Steeh’s logic, the Commerce Clause authorizes Congress to force workers to get up earlier in the morning so that they would spend more time on the job.

In essence, the precedent that this sets for future congressional legislation and the reach of the federal government is troubling. There would be no activity that the federal government could not force us to engage in, and there would be judicial precedent that future judges would feel obligated to adhere to. Even those who are advocates of the mandate should be concerned about such legislative freedom.

But what if the courts strike down the mandate? Consider it as a victory for limits on the federal government, but the policy implications are unsettling, especially as it pertains to the cost of health care within the framework of the new reforms.

The success of the health care reform bill rests upon three pillars: guaranteed issue, subsidies, and the mandate. You need the mandate in conjunction with guaranteed issue so that people don’t simply wait until they are sick to buy insurance, and you need the subsidies to ensure that everyone is able to comply with the mandate. If one of these pillars is removed though, the whole thing falls apart.

To see a first-hand example of this, look at what happened to New York. In the 1990’s, Gov. Mario Cuomo instituted new regulations within the state’s health care industry that included requirements for guaranteed issue and community rating. As Stephen T. Parante and Tarren Bragdon explain, New York’s health insurance costs are some of the highest in the country:

Today, New York’s private individual insurance market is among the nation’s most expensive and highly regulated. New York City residents buying private, unsubsidized individual insurance coverage pay at least $9,036 a year for individual coverage and $26,460 for family coverage. New York’s average premiums in the individual market are more than twice the national average, according to a 2007 eHealth Insurance survey.

With an increase in the total amount of high-risk patients insured, premium costs skyrocketed by an estimated 35-40%.

Should the courts repeal the mandate, the country as a whole could face similar results. Furthermore, such a consequence wouldn’t occur had the original bill not passed at all. PPACA has placed the country in a precarious position. Should the courts determine the mandate to be unconstitutional, President Obama and the Democrats in Congress who passed the bill might begin to wish they had never done so: first, opponents can accurately accuse them of passing unconstitutional legislative; second they face the possibility of spiraling costs staring them in the face as an indirect consequence of the legislation.

If the mandate were removed, Republicans might face an even stronger temptation to repeal the bill entirely than they feel today. Such a strategy might not even be a bad idea if intolerably high costs are the alternative. Unfortunately, Americans overwhelmingly approve of guaranteed issue and subsidies according to recent polling. It would be politically difficult to repeal either, and especially difficult to repeal both together.

Of course, it’s difficult to anticipate what might occur within the next 3-4 years, before the mandate and guaranteed issue begin in 2014. At this point, an ideal outcome would be the implementation of the recently introduced Wyden-Brown bill, which would grant states leeway in constructing their own healthcare reform while still receiving federal dollars, assuming they meet certain coverage benchmarks. This would potentially allow states to opt-out of a hypothetical mandate-less system and move either to the left or right of the current system, depending on their preference. States such as Vermont could enact a single-payer plan, should they so desire, while other states could experiment with high-risk pools or other market friendly initiatives.

Americans should hope that when it comes to the mandate, there’s a third way. Otherwise, we’ll be left making a tough choice: nearly unlimited federal government, or skyrocketing health costs.

Time to Derail the Dems’ Bullet Train Dreams

November 14th, 2010 at 11:25 pm 54 Comments

Among the many obsessions Democrats are currently preoccupied with, high-speed rail is the most perplexing—not because it isn’t the type of project that Democrats typically embrace (high-speed rail is, in fact, the epitome of such), but rather it’s a project that–like many in recent history–provides minimal economic benefit relative to cost. Demand for high-speed rail (HSR) is what happens when liberalism tends to get ahead of itself, and when the temptations of idealism tend to squeeze out considerations of practicality. Most recently, buried within President Obama’s stimulus package, was an $8 billion earmark for high-speed rail throughout the country, including an additional $1 billion annually.

It’s quite fun to imagine trains zipping around the country, allowing us to grab dinner in NYC and be back to DC in time to watch Sunday’s HBO lineup with no security lines or traffic delays to deal with. The consistent strain of Europhilia and occasional Sinophilia (namely, Tom Friedman) that runs through idealistic liberals has caused advocates to point to the success of high-speed rail in other countries as, among other things, evidence of America’s decline, structurally and otherwise. Commentators love to cite this country’s lack of HSR as a sign that Americans lack the ability to “have a bold vision about our future” or that we “lack the willingness to take the bold sort of steps that have defined our past,” or similarly vapid phrases.

Critics, however, are not so convinced, and the reason is simple: high-speed rail is expensive, in both initial construction and long-term operation costs. This country also has air and road travel that gets the job done just as well, typically at cheaper rates. Finally, constructing high-speed rail often requires the construction of entirely new rights-of-way, a process that requires significant planning, funding, and, most abhorrent, the confiscation of property in order to make way for track. None of this would be so unpalatable were it not for the fact that America’s transportation system, despite its imperfections, is able to operate fluidly enough without exceeding capacity.

Let’s look at three regions that have built high-speed rail lines that have drawn envy from advocates of HSR: Japan, China, and Europe. Japan’s geography is conducive to high-speed rail, due in part to the fact that the thin island runs mainly along a north-south axis which allows essentially one corridor in order to provide access to it’s major cities. The Shinkansen line linking Tokyo and Osaka was originally built in order to solve problems of excess capacity, and earned enough money to cover operating costs and original construction costs. However, once Japan’s high-speed lines expanded, they have operated at a loss. The lesson that Japan teaches is that geography matters: for the United States, this means that high-speed corridors along the California coast (already planned), and the Northeast Corridor (semi-existent) are most conducive to high-speed rail, which relies upon limited turning in order to maintain top speed. In addition, cities running in a line are more cost-effective, as less ground has to be traveled in order to incorporate every city.

China, meanwhile, is building a significant portion of its high-speed infrastructure from scratch, which means it gains a far greater marginal utility per dollar spent on high-speed rail. China, realizing that if it must build rail lines might as well build them to equip high-speed, has done just that. In the United States, meanwhile, with significant rail infrastructure already in place, overhauling the system to simply shave off time from commutes or add limited convenience provides far less benefit per additional dollar spent. In addition, the Chinese government is far less sensitive to the political and ethical considerations of property confiscation, otherwise known in America as eminent domain, which is widely required for any sort of significant rail development. It isn’t exactly in the American government’s interest to go about confiscating property to spend billions of dollars in this political climate.

Europe, meanwhile, benefits from a densely populated cluster of cities and surrounding suburbs, where most economic activity occurs. In addition, American air infrastructure is far more sophisticated than that of Europe, due mainly to our geography, just as Europe’s trains are suited to its geography. In addition, the price of gas in the EU is substantially higher than in America, as are toll fares, meaning that driving is far less cost-efficient in Europe than it is in America.

A key aspect of America’s current rail infrastructure is that much of it is devoted to freight. As The Economist noted back in July:

…the problem with America’s plans for high-speed rail is not their modesty. It is that even this limited ambition risks messing up the successful freight railways. Their owners worry that the plans will demand expensive train-control technology that freight traffic could do without. They fear a reduction in the capacity available to freight. Most of all they fret that the spending of federal money on upgrading their tracks will lead the Federal Railroad Administration (FRA), the industry watchdog, to impose tough conditions on them and, in effect, to reintroduce regulation of their operations.

Furthermore, “American rail freight is among the cheapest in the world, costing less than half as much as in Japan or Europe. After adjusting for differences in purchasing power it is cheaper even than in China.” This is significant, and should not be overlooked. 70% of coal, which must often be transported from isolated rural areas dominated by the mining industry, is carried by freight. In light of these facts, it’s difficult to justify expanding passenger rail service considering that

[Freight] capacity will have to rise by nearly 90% to meet forecast demand by 2035. The investment bill could rise yet more because of a change in the pattern of trade: in 2014 the Panama Canal opens a second lane, doubling its capacity and allowing it to carry bigger container vessels and bulk ships. Coming through to Gulf of Mexico and East Coast ports, these vessels will increase the need for better rail links inland.

Finally, and most concerning, is the fact that “the trouble for the freight railways is that almost all the planned new fast intercity services will run on their tracks. Combining slow freight and fast passenger trains is complicated.” The result is that either high-speed rail will have to be built on top of already existing infrastructure, limiting top-speeds and disrupting pre-existing freight routes, or entirely new routes will have to be constructed. The complications from the former have been explained, those from the latter are perniciously expensive.

Edward L. Glaeser, professor of economics at Harvard University, has estimated the costs of high-speed rail in the United States. Glaeser based his estimates around a hypothetical 240-mile link between Houston and Dallas, in which he used GAO estimates of $50 million per mile in construction costs. Taking into account interest and capital costs, he concluded the actual cost to be “$2.5 million a mile per year, or $600 million for a 240-mile line.” Adding conservative annual maintenance costs to that figure brings the total to $648 million per year. He continues:

How many riders will take high-speed rail between Houston and Dallas? Amtrak gets about 11 million customers in the Northeast Corridor, which has four large consolidated metropolitan areas together totaling 44 million people. If that four-to-one ratio held in Texas, then the high-speed rail link could expect three million riders, and more to come as Texas grows.” The resulting conclusion is that “1.5 million trips times $68 a trip means $102 million for benefits minus operating costs. Annual capital costs came in $648 million, more than six times that amount. If you think that the right number is three million trips, then the benefits rise to $200 million, and the ratio between the per rider net benefits and costs drops to one-to-three. This is the cruel arithmetic faced by people, like myself, who would love to be pro-rail.

Even if we assume, like critics such as Ryan Avent, that Glaeser’s numbers neglect a substantial number of not-so-obvious future economic benefits, an annual shortfall of hundreds of million dollars is, ultimately, what HSR would face. Even if it led to exponential economic development and significantly increased ridership, it’s difficult to make up such a deficit—it’s simply too big.

Let’s assume that the routes such as Dallas-Houston, or Portland-Seattle, or NYC-Chicago are ideal because they offer an alternative to air travel by providing direct links between large commercial hubs. It brings delight to imagine popping onto a train in New York and arriving in Chicago a few hours later as the outdoor scenery whizzes by, without any stops. It seems to me that this is what most people envision when they think of high-speed rail. Yet such a route seems politically impossible. Can you imagine a world in which politicians willing to fund such a route would do so knowing that a high-speed line would be passing through their constituent towns without stopping? One can already hear the echoes of indignation.

Robert Samuelson recently took down two-pillars that high-speed rail advocates tend to rally around: environmental benefits and congestion relief. While these two benefits are typically tacked onto arguments in favor of rail in a way similar to the “But wait! There’s more…” type of tag lines, the numbers aren’t so impressive:

High-speed inter-city trains (not commuter lines) travel at up to 250 miles per hour and are most competitive with planes and cars over distances of fewer than 500 miles. In a report on high-speed rail, the nonpartisan Congressional Research Service examined the 12 corridors of 500 miles or fewer with the most daily air traffic in 2007. Los Angeles to San Francisco led the list with 13,838 passengers; altogether, daily air passengers in these 12 corridors totaled 52,934. If all of them switched to trains, the total number of daily airline passengers, about 2 million, would drop only 2.5 percent. Any fuel savings would be less than that; even trains need energy.

Indeed, inter-city trains – at whatever speed – target such a small part of total travel that the changes in oil use, congestion or greenhouse gases must be microscopic. Every day, about 140 million Americans go to work, with about 86.5% percent driving an average of 25 minutes (three-quarters drive alone; 10 percent carpool). Even assuming 250,000 high-speed rail passengers, there would be no visible effect on routine commuting, let alone personal driving. In the Northeast Corridor, with about 45 million people, Amtrak’s daily ridership is 28,500. If its trains shut down tomorrow, no one except the affected passengers would notice.

Matthew Yglesias, meanwhile, argues that spending $1 trillion on a national high-speed rail system would be a bargain, based on thirty-year bond interest rates. But is it really? Do the costs truly outweigh the benefits? It would appear, from the collected and injected analysis above, that this is not the case. Even if a nationwide high-speed rail system would bring improved convenience to some parts of the country, the price tag is still difficult to justify, especially in these times. Simply wishing to upgrade our already extant rail system while we face huge budget deficits in order to keep up with the rest of the world is the equivalent of buying a big screen television in the midst of a bankruptcy, simply because your neighbors got one.

Such an ambitious plan to implement a national high-speed rail program illustrates the trend over the past few decades that every policy receive federal focus and devotion. If Texas deems it economically imperative that they develop a high-speed rail system, then let them vote on it, develop it, and pay for it. We shouldn’t be paying billions (Yglesias’ “bargain” $1 trillion system would cost $58 billion per year over thirty years) to subsidize a tiny portion of Americans who would potentially use high-speed rail.

Republicans, anxious as they are to make budget cuts, might not feel so radical contemplating placing—at the very least—a freeze on the earmarked $1 billion a year dedicated toward high-speed rail. Until Americans begin genuinely clamoring for a high-speed rail system, we should be hesitant to commit financially to such a tenuous venture. Speaking on the subject of China’s high-speed rail system, Zhao Jian, a professor at Beijing Jiaotong University claimed that his government “just wants to have the biggest and fastest number one train set in the world.” The United States would be wise to avoid this temptation.

A New Jobs Stimulus the GOP (and Dems) Can Back

November 2nd, 2010 at 8:25 am 30 Comments

Republicans—should they take hold of the House—will face two simultaneous challenges. The first comes from the economy in the form of a stubborn unemployment number, rx which, should it remain at 8-9% while the party is in power, will be a significant weight around the neck of any Republican running for office in 2012. The second will come from their own supporters, primarily the Tea Party, who will undoubtedly demand that they live up to the small-government promises they have made for the past year on the campaign trail. In order to balance these constraints, the incoming Republicans will have to solve the first problem and placate the second.

Unemployment, meanwhile, is the result of two trends: an inability to create new jobs, and the destruction of already existing ones. The rhetoric in support of the Obama stimulus was tethered mainly to creating new jobs—a task it has mostly failed at in the eyes of the American public. Creating new jobs is expensive and especially challenging in a sluggish economy. Saving jobs, however, is a more surmountable obstacle. If Republicans wish to improve upon the Pledge to America—and if they’re serious about governing, they’ll have to—then a policy dedicated to saving jobs should be one to pursue.

High unemployment negatively affects both employers and employees, although in most cases the misfortune falls harder on the latter than the former. Nonetheless, employers face their own problems when letting employees go. Kevin Hassett, in a testimony to the House Financial Services Committee, explains why:

When a recession strikes, firms are faced with a dilemma: sales and profits are down, and many workers are idle. But finding skilled workers is costly and time-consuming, involving large fixed costs. If a firm fires workers, it may incur large hiring and training costs when the recession ends and sales turn back up. Thus, a firm would prefer, all else equal, to hoard labor during a recession.

If Republicans happen to be feeling particularly ambitious, they should examine Germany, where a jobs policy has allowed the country’s unemployment number to fall to 7.5%. Germany’s policy is called “Kurzarbeit,” which means “short work,” and, as Hassett explains, “if hours and wages are reduced by 10 percent or more, the government pays workers 60 percent of their lost salary. This encourages firms to use across-the-board reductions of hours instead of layoffs.”

A welfare program, Kurzarbiet is not. It is in fact just the opposite, and it is a program that conservatives should embrace. For the employee, it would allow continuous work, although at reduced hours, which means they would continue receiving most of his wages from their employer. This prevents them from collecting their well-being from the state in the form of far more costly unemployment benefits, which would happen should they lose their job entirely. Meanwhile, employers can retain their workforce yet exercise them at a limited capacity in accordance with their productive capacity. Small businesses would be able to operate at much higher levels than if they had to trim employees. As the government dispenses funds directly into the economy with limited inefficiencies along the way, this jobs program would have a multiplier effect much greater than that of the stimulus package. Finally, because this funding essentially only fills in the margins instead of subsidizing jobs entirely, it is far more cost-effective per job than the stimulus as well. The program would run only temporarily, terminating once the economy and unemployment have improved.

Unfortunately, the reduction in hours and overall pay—despite the government reimbursement—will still cause many households to feel the pain, as they will have to cut back on spending and long-term savings. It will, however, prevent many families from falling out of the middle-class—a story we’ve heard far too often during this recession when families see their household income slashed because of job loss. In addition, families entirely supported by only one working parent won’t face the grim prospects of homelessness and poverty as long as that parent or spouse retains employment, even if it is at a discount.

Of course, like any other policy, there are potential downsides. Paramount among them is the fact that future reduction in unemployment wouldn’t be as rapid as is typically seen in recoveries. Labor agency chief Frank-Juergen Weise believes that Germany “won’t see a mass of new hires as in previous upswings,” and that the country’s employment will grow by only “30,000 to 50,000 jobs.” Yet, the overall number isn’t necessarily what matters; if Americans feel less affected by the economic downturn, then the relative nominal rate of recovery won’t be as salient.

Kurzarbiet will have to undergo an Americanization of sorts. A more palatable name would certainly be first on the list. Legislators will presumably make other changes as well–perhaps more stringent requirements and incentives for both employers and employees, along with an adjustment in the required number of hours cut or the amount reimbursed. Whatever the outcome, there is little doubt that it will be influenced by the demands of constituents and American political culture.

This is the sort of policy that Republicans should be looking for if they wish to show that they are more competent at governing than Democrats. It is uncertain as to whether or not the House leadership will be able to bring the Tea Party Caucus along. But they may not have to; what Democrat could justifiably vote against such a program?