Washington Policy Center Blog

The City: Now Your Broadband Internet Provider?

A good insider article from Peter Lewis over at Crosscut recaps the city of Seattle's desire to play internet service provider. Even though the city wants to partner with a private sector business to help run the service, let's just say that my confidence in such an endeavor is weak at best. We've seen this scenario play out in many municipalities around the nation and the results are less than staggering. I will say that at least the city is not interested, at this particular junction, in providing free (meaning ad-supported) WiFi service -- a catchy fad that is thankfully fading into obscurity. Turns out people are willing to pay for good service rather than suffer through poor, yet free, Wi-Fi service.

The city is relying on a couple of feasibility studies and surveys that shows, guess what?, people care about the price of the service they purchase. But my concern isn't so much that the city is able to provide less expensive broadband service. It's this: what happens when the city realizes it is running over budget and the system is under performing? When Verizon rolled out its FiOS (fiber optic to the home) plan a couple of years back and said they would spend billions nationwide in infrastructure development, I thought it was fantastic that this private company would risk a rather large amount of capital to serve its customers. If Verizon goes over budget they can't clean up their shortfall by taking tax dollars from those who do not use the service. But what happens when, and if, the city needs more capital to invest in the very expensive investment of upgrading fiber optic lines? That makes me nervous.

Secondly, before the city decides to jump on the technology provider bandwagon, it should take a look at the emerging technologies that private enterprises are rolling out. Free Wi-Fi failed for a number of reasons, among them the fact that Wi-Fi signals only reach about 150-300 feet and covering a city with thousands of nodes (stations that broadcast the signal) is cost-prohibitive. On the other hand, news came down yesterday of a deal between Kirkland's Clearwire, Sprint, Google, Intel, Comcast, Time Warner Cable, and Trilogy Partners to invest over $3 billion in developing a Wi-Max system. Wi-Max covers a far larger area (up to 20 square km) with one antenna. Thankfully, unlike Philly, San Francisco, Spokane and other cities, Seattle resisted the urge to spend millions on what is already a fairly outdated technology. The risk of developing these networks belongs with the private companies with private funding -- not when our tax dollars are at risk.

The point is that the City of Seattle is seeing itself as some altruistic provider of an essential service; a service so essential apparently, that a government-run entity is the best, and therefore, most logical choice in the marketplace. But from the numerous examples of failed or budget-busting projects around the nation, I'm not holding my breath.

Stop the discriminatory tax exemption madness!

Peter Callaghan of the Tacoma News Tribune has a great column today on the increasing strategy of businesses trying to carve out exemptions from the crushing burden of taxes they face. While I find no fault with these employers for trying to make doing business in Washington more palatable, the answer is not discriminatory tax relief, but instead universal tax relief for all employers and individuals in Washington.

From Peter's column:

"If cities like Tacoma and states like Washington are willing to offer tax breaks and other public funding to keep big employers, DaVita would be silly – even financially irresponsible – not to grab them.

DaVita didn’t create the atmosphere that allows companies to set up bidding wars. That was begun years ago, ironically by a business that has been deemed by federal courts to be a nonbusiness, exempt from antitrust laws. That would be Major League Baseball, which wrote the textbook on getting ladles of tax dollars.

All sports franchises had to do was threaten to move a beloved team elsewhere (and persuade the people who run those elsewheres to play along). In nearly every case, it worked.

But while pro sports leagues created the technique, The Boeing Co. brought it into the private sector and perfected it, at least around here.

First, the aerospace company won $60 million in tax breaks from Chicago and the State of Illinois to move a few hundred corporate office folks.

It then launched a second round of civic bidding with its competition to site the assembly plant for the 787. Washington won – or perhaps bought – that race. The Legislature gave up $3.2 billion in future tax collections to keep the plant in the state. The state also paid for road improvements, a $30 million dock that turned out to be unnecessary, and a training center.

That worked out so well for Boeing that it has begun to set the stage for a third contest – this one to host the plant for the jetliner that will eventually replace the mid-sized 737.

Russell Investments must have learned from the Boeing example. Not just that there is money to be had but that seeking it can lead to bad feelings among taxpayers. Boeing looked greedy by asking, so Russell escaped that by not really asking. It continues to act as though it doesn’t even realize that cities and developers are drooling for a chance to host the company.

Altogether, Tacoma, the state and the feds have developed a package worth $140 million. But Russell has declined to comment throughout the competition, so no one knows if it will be enough.

Now comes DaVita. Russell employs 1,100 people downtown with promises of hundreds more if it stays. DaVita employs 850 and also predicts expansion. Russell jobs pay more, while DaVita is a solid employer of workers in its billing, accounting, information technology and government reporting sections.

DaVita has the city’s interest. But who’s next?"

It’s past time for elected officials to address the business climate (tax relief) on a universal basis and stop using the tax code to reward those employers deemed worthy of relief by the government. No more exemptions and subsidies, instead one flat universally low tax rate. Same goes for individual taxes. No more sin taxes or special exemptions (except for maybe food and medicine). If government wants to raise taxes, they raise taxes on everyone and if the tax rate is too high (which it is) they lower taxes for everyone. No more tax code winners and losers determined by the power and force of government influenced by he with the strongest lobbyist.

Pick the Headline

Here's your environmental quiz for the day. Which headline appeared today?

"Al Gore Ties Myanmar Cyclone to Global Warming"

"Scientists Tie Myanmar Cyclone to Global Warming"

See the answer here.

Learning from the Past and Creating our Future

On April 15, 2008, former Comptroller General of the U.S., David M. Walker, provided the keynote address at our Government Reform Conference. The title of his presentation was "Learning from the Past and Creating our Future." Here are excerpts from Walker's speech:

". . . I am here to tell you, our Republic is at risk. Washington is out of touch and out of control. I’ve had the good fortune of going to 26 states and 40 cities as part of the 'Fiscal Wake-Up Tour' during the last two years. I’ve been to a number of other states, and many more cities in my capacity of the role as Comptroller General of the Unites States, and now in my capacity as President and Chief Executive Officer of the Peter G. Peterson Foundation . . .

Frankly, I’m not just concerned about the sustainability challenges we face. I’m concerned about how far this nation has strayed from the solid foundations that our Founding Fathers provided for us in 1789. And let me mention just a few examples.

First, the size of government. The Founding Fathers believed in limited government. In 1789 the federal government was 2% of the economy. Today it’s 20% and is scheduled to get a lot bigger.

Second, the composition of government. At the beginning of our republic, the federal government focused on things that realistically only the federal government could do. Responsibilities like national defense, foreign policy, treasury, postal service, Congress and the Executive Office of the President of the United States. Today, the 38% of the budget that is deemed to be 'discretionary spending' contains every major express and enumerated responsibility envisioned by the Founding Fathers for the federal government. Every single one. What happened to the provision written by the founders: that any role or function not expressly reserved for the Federal government belongs to the states and ultimately to the people? We have lost our way . . .

Let me touch briefly on a few sustainability challenges then wrap up and go to Q&A. Firstly, our federal fiscal challenge. It’s not our current deficits, and it’s not our current debt levels that are the problem. Yes, the deficits are larger than they should be. Yes, our debt levels can hardly be justified given the principles our founders established, and frankly, America’s history, up until the 1970s. When we incurred significant debt because of wars, whether it was the Revolutionary War, whether it was the Civil War, whether it was World War I, or World War II, our nation had a tradition of paying down that debt as quickly as possible so we did not encumber future generations with burdens that they should not be expected to bear. But since the 1970s, that tradition has gone by the wayside, and it’s time that we think about bringing it back over time.

We have large deficits and debt levels, but the real problems are off-balance-sheet obligations. As per the latest federal financial statements, we have over $44 trillion (there are 12 zeros to the right of that 44) in off-balance-sheet obligations, primarily in the form of unfunded Medicare and Social Security obligations. Adding this number to our nation’s current net liabilities means that our total federal fiscal hole was about $53 trillion as of September 30, 2007. That unfunded hole is getting bigger by $2-3 trillion a year by doing nothing. If you balance the budget tomorrow, which we’re a long way from doing, that hole would still grow by $2 trillion-plus a year. $2 trillion-plus a year!

Now, what is $53 trillion? It’s $455,000 per American household. What’s median household income in America? Less than $50,000 a year! Therefore, based on our present policies and programs, the typical American household has an implicit mortgage of over nine times their current annual income, but no house to back that mortgage. That’s the big sub-prime crisis . . ."

To read the speech in its entirety, click here.

Couldn't have said it better myself...

Great letter ("What hurts? Not a square inch hasn't been squeezed") in The Seattle Times today by Teresa Holland, a small business owner, on the frustrating levels of taxation generated by state and Seattle city policymakers. She correctly hits the nail on the head about short-sighted taxation policy that is depressing (or at least frustrating) small business development in Seattle.

A recent study by the Washington Research Council highlights Seattle's dubious taxation policies and an older study by WPC addresses the over-regulation of some of the city's industries. Teresa's letter should be considered by policymakers as a real-world testimonial by a small business owner on the impacts of taxation policy run amok.

Note to Seattle....Britain's reversal on congestion pricing and pollution fees

A centerpiece in Boris Johnson's campaign to unseat the incumbent mayor of London, Ken Livingstone, was the mayor's proposal to expand the city's congestion pricing scheme.

Livingstone implemented a £25 charge on high polluting vehicles, entering the city. The CO2 fee is on top of the £8 congestion pricing fee. Using an exchange rate calculator shows the charge for someone driving an SUV into London is about $65. For someone who worked downtown everyday, the charge amounts to about $17,000 per year!

Boris Johnson ran on the platform of reforming the congestion and CO2 charges. This from the BBC:

Once installed at City Hall, Mr Johnson will be able to start his plans to reform the congestion charge, another high profile part of his election campaign.

Last month, the state of New York took a page from Johnson's strategy, killing Mayor Bloomberg's congestion pricing proposal, which was modeled from London's scheme.

Locally, the Seattle Times recently ran a story highlighting a new study that claimed widespread congestion pricing could reduce congestion. And other notable policymakers are on record supporting such a scheme here. 

But with 42% of the vote, Johnson defeated the incumbent (36%) Livingstone. This stunning reversal demonstrates that congestion pricing and CO2 fees are not popular with voters, who only have so much tolerance for higher tax burdens. 

Climate Advisory Team: Am I Hot or Not?

When the Washington State Climate Advisory Team began its work last year it had only one rule: no discussion of the science of climate change. The only question was how to address the crisis.

Maybe they should have eliminated even that rule. This note appeared recently on the Department of Ecology's web page on climate change regarding the CAT's January report:

"Errata for the HB1303 Interim Report: A Comprehensive Assessment of the Impacts of Climate Change on the State of Washington (Last updated: 1/24/2008)
3. Key Findings: Page 3, paragraph 1. “Based on results from a number of Global Climate Models (GCMs), we can expect annual temperature to increase approximately 0.5°C, or roughly 1.0°F, per decade over the next 50 years.” This statement should be revised to say, “Based on results from a number of Global Climate Models (GCMs), we can expect annual temperature to increase approximately 0.3°C, or roughly 0.5°F, per decade over the next 50 years."

In other words, the estimates of temperature increase, and the risks associated with that increase, were exaggerated by 100 percent. Earlier this year we noted that the new projections for sea level rise in Puget Sound had been exaggerated in a previous UW report by 300 percent.

It still makes sense to take responsible steps to reduce CO2 emissions encourage energy efficiency. These numbers, however, make it increasingly difficult to justify many of the dramatic and expensive proposals currently being offered by the environmental community.

Washington Policy Center on KING 5's Up Front with Robert Mak

Up Front with Robert Mak today took a look at waste spending in the state budget, focusing on projects listed in The Washington State Piglet Book: Connecting the Dots on How Government Wastes Your Money.  WPC Vice President for Research Paul Guppy and state Rep. Hans Dunshee (D-Snohomish) discussed these projects and state spending in general.

Watch Up Front with Robert Mak here.

Climate Change: Our Greatest Challenge...Except for a Few Others

One year ago, I wrote a piece arguing that the environmental community doesn't really care about climate change. How else to explain the many counterproductive policies some advocate? I wrote that "In Washington state, green power advocates actively oppose our largest source of renewable energy that emits no carbon – hydro power. While they claim that no new sources of significant hydro power exist, they added additional barriers by classifying major hydro as non-renewable in the renewable energy initiative passed last year."

More evidence of their disdain for clean hydro appeared today.

An op-ed in the Seattle Times, written by two environmental activists, argues for tearing down the Snake river dams. They argue, without a hint of irony, that "Climate change makes removing the dams even more important, because the salmon and steelhead that will be saved are more likely to survive warmer temperatures."

The dams provide more than 1,000 Megawatts of average power. According to the BPA, we would need to install more than 2,000 wind turbines to make that up. The Stateline wind project, by way of comparison, will produce only about 100 average MW.

Washington state has one of the lowest rates of per capita carbon emissions in the country. Hydro power is the key reason for those low emissions. Undermining that clean energy source with the hope that we can replace the capacity with a massive, and expensive, wind power project is sheer folly. Wind power can be a good source of future energy, but some environmental activists want to dig a hole in the hopes that wind power will dig us out. That strategy can only undermine efforts to reduce CO2 emissions.

Maybe they don't care.

Eliminate federal gas-tax

Presidential candidates John McCain (R) and Hillary Clinton (D) are proposing a federal gas-tax holiday to alleviate the pain Americans are feeling at the pump. Barack Obama (D), however, is correctly rejecting this unsound voter pandering but is instead unwisely proposing a "windfall profits" tax on companies that invest in oil production.

The Tax Foundation has a good write up on the folly of these proposals here.

As for the current debate on temporarily suspending the federal gas-tax, a better course of action would be to eliminate the federal gas-tax and return that taxing authority to the states to use. Rather than send our gas-tax dollars to Washington D.C. only to have to beg to maybe have them returned back to the state with numerous strings attached, we could keep all those gas-tax dollars here and use them on our priorities instead of having them earmarked for a bridge to nowhere or for an interchange no one asked for.

There is already a proposal in Congress to do this.

Called the STATE Act (Surface Transportation and Taxation Equity Act), H.R. 3497 would amend the Internal Revenue Code of 1986 to reduce the federal tax on fuels by the amount of any increase in the rate of tax on such fuel by a state, returning primary transportation program responsibility and taxing authority to the states.

This means that if we increased our state gas tax by say 15 cents, the federal gas-tax we pay would be reduced by 15 cents so the overall tax burden would not increase but those gas-tax dollars would stay in the state for our transportation priorities – no federal strings attached.

The goals of the STATE Act are:

• Free state transportation dollars from federal micromanagement, earmarking, and budgetary pressures;

• enable decisions regarding which infrastructure projects will be built, how they will be financed, and how they will be regulated to be made by persons best able to make those decisions;

• eliminate the current system in which a federal gasoline tax is sent to Washington and through a cumbersome Department of Transportation bureaucracy;

• prohibit the federal government from forcing unwanted mandates on states by threatening to withhold transportation money; and

• achieve measurable congestion mitigation and infrastructure preservation and safety in a cost effective way subject to available resources.

It would be interesting to see what the presidential candidates think of the STATE Act and whether or not they support the goal of returning transportation taxing and decision making authority to the states.