Washington Policy Blog

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 United 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.

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. 

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.

As I mentioned in an earlier post, the cost for China to build a 22 mile, 6 lane bridge was $1.7 billion. That translates to about $12.8 million per lane mile.

The cost per lane mile for the 6 lane, 6 mile 520 bridge replacement is about $122 million. That means China is able to build one lane mile of bridge for 950% less than Washington officials can.

Consider the following chart, which shows the cost differences (inflation adjusted) between three major projects. The green bars represent the cost of the original structure and the red bars represent the estimated cost of a new structure.

There are generally two drivers of
costs in transportation projects: natural and non-natural. Natural cost drivers
occur as a result of basic economical principles. They include inflation,
material expenses, and higher costs for new technologies.

Unnatural costs are governmentally
created policies that artificially inflate costs on transportation projects.
These policies do not occur naturally and are implemented for reasons that are
not necessarily required to fund a project. These non-natural cost drivers include
prevailing wages, imposing government-to-government sales taxes, apprenticeship
requirements, inefficient permitting, onerous regulations, and setting aside
money for public art.

These policies are valuable and
serve important political interests. But as we have seen, they can significantly drive up
expenses.

Can someone explain why China can build a 6-lane, 22 mile bridge for $1.7 billion, but Washington leaders can't build a 6-lane 520 span between 405 and I-5 for less than $4 billion?

The first 520 bridge had a cost of about $225 million in inflation adjusted dollars. That means we could build about 20 of the current 520 structures for the same cost WSDOT estimates the new version will cost today.

Many who favor heavy-handed government approaches to reducing greenhouse gas emissions argue that such efforts are needed because people won't adjust on their own. One recent example of this argument is that we need to have extremely high oil prices or gas taxes to reduce CO2 emissions.

At a recent forum at Town Hall, an energy economist who advocates efforts to reduce carbon emissions was shocked when more than one person in the audience called for $400 per barrel oil. In response to my recent piece about carbon prices, one comment on the Sightline blog entry about the proposal asked "what if the carbon price needs to be $300 or $500 a tonne or more as some economists say?"

First, no economists say $300 or $500 a ton. The gurus of climate doom, Al Gore and Nicholas Stern call for $100 a ton. Most economists call for something much lower than that.

Second, as with so many debates, while government decides what to do, market forces are already at work. A recent report finds that the price of small cars and trucks are climbing because demand for fuel efficient vehicles is increasing. The US News article notes that "Last year U.S. consumers bought a record 2.8 million of them [small cars], and with sales up 4 percent in the first quarter this year, the record almost surely will be shattered." This is more permanent than changes in driving behavior. It is an every-day improvement in fuel efficiency for years to come.

These numbers are more evidence that while some believe only the government can steer us toward energy efficiency, millions of individuals working through the market respond more quickly and effectively.