Archive

Archive for the ‘Politics’ Category

Europe made the Cowardly “Courageous Decision”

May 10th, 2010 No comments

Markets are happy about the European bailout of Greece’s bad debt, and they should be for two reasons. First, Greece will not be allowed to default on its debt, injecting some certainty into the market, and secondly, the Europeans have finally done something together politically.

However, in the long-term, they did the wrong something.

In the long-term, Europe has created a worse moral-hazard than the bank bailouts in the United States caused with its financial bailouts: a clear signal has been sent that politicians can bargain their way to political power by writing blank checks to public unions and other rent-seeking interests, and there will be no day of reckoning. Worse, the signal has been sent that, if you are a responsible, Prussian government that controls wage inflation, you will be forced to pay for the spend-thrift irresponsibility of your over-mortgaged southern neighbors. The lesson is clear: savers are suckers.

Europe should have looked at how the United States handles bad local governments…let them go bankrupt. By letting bad local governments go under, local governments in the United States can get out from under the bad decisions of previous governments and restart under firmer footing. Indeed, as Alabama has shown in recent years at the county-level, the threat of a bankruptcy by a local government is usually enough to bring creditors to debt restructuring, saving the county from needing to file.

By contrast, Greece’s government now lacks the power to force its creditors, particularly its government unions, to renegotiate its debts, since Germany and France stand ready with an open checkbook to bail them out.

The responsible course of action would be to let Greece default, or partially default, while protecting the somewhat more tenable positions of Portugal and Italy. Germany could have credibly said, “Greece lied; Portugal did not; we will protect honest governments.” Given the fungibility of the term, “honest government”, this would have been a position that would have made an example out of Greece while preventing a, “spread of the debt contagion”.

Europe has traded the long-term future of the Euro for short-term financial stability, and punted a much-greater day of reckoning some five to ten years down the road. Proponents will (mis)quote Keynes and say, “In the long-run, we are all dead.” I once heard Prof. Garrison quote another economist, “Keynes is dead, and we are stuck in his long-run.”

Categories: Economics Thoughts, Policy, Politics Tags:

The Tampa-Orlando Train Will Not Work – Even for Me

July 9th, 2009 1 comment

I sent this to the St. Pete Times as a letter to the editor, but apparently they have declined to publish it.  So, I have edited and published the letter here.

This letter is a response to the Tampa-Orlando high-speed rail project, which you can read about here.

The Tampa-Orlando Train Will Not Work – Even for Me

I live in South Tampa, and my girlfriend is in school at UCF.  Almost every weekend, one of us makes the one hundred five mile drive on Friday afternoon, to return Saturday night or Sunday morning.  Even if there was high-speed rail, neither of us would use it for the trip, because the rail cannot be priced low enough for either of us to ride it.

The cost of driving one way from my place to her place is roughly $100, taking the IRS’s fifty cents a mile (high for my car), adding two hours of my time valued at $20/hour, finishing with the tolls on SR417 and SR408.

The closest termination point in Tampa is downtown for me, and the Orlando Airport for her.  I live eight miles from the Amtrack station downtown, which means that trip is $4 plus fifteen minutes of my time ($5).  UCF is twenty-three miles from the airport ($11.50) plus thirty minutes ($10), plus tolls ($2.50).  But remember, someone must drop me off at the train station in Tampa, and my girlfriend must pick me up from the station at the airport, so those two trips must be made both ways, giving a total of $66.

For the train to be worth it for me, the journey would have to be Star Trek transporter instant, and cost less than $34, with no waiting time on either end.  If you assume that the waiting time and travel time together is two hours, then the public must pay me six dollars to take the train instead of driving.

All of that assumes that I have no value for the flexibility that driving gives me, being able to leave and arrive when I want instead of when the train schedule dictates.  It also assumes I have no value for having a car in Orlando, or have any value for the extra cargo-capacity of my car.

If the two cities in question are New York and Boston, or London and Paris, then the train makes sense.  However, you will have to point a gun to my head for me pay for a train between Tampa and UCF instead of driving, which is exactly what the government is doing to build the thing.  Once the thing is built, and no one rides it, what’s next?  Higher car taxes and massive tolls on I-4 to force us to ride it?… high taxes to build public transportation in Orlando and Tampa to make the train usable?… or simply high ongoing taxes to pay for a train no one rides?

Even if the high-speed rail is built with Federal dollars, and even if it brings jobs to the state, it would be much better to take the money and pay construction workers to tear down half of Westshore and rebuild it, exactly as it is now.  At least then, our tax dollars would not be perpetually drained to pay the ongoing maintenance on a train no one rides.  Or, if you must do something useful with the money, widen I-75 to eight lanes from Naples to the Georgia border.

Categories: Economics Thoughts, Policy, Politics Tags: