Over the past two years, the Wizard has attended countless events, luncheons, and public gatherings, not to mention read endless stories whereby various experts have pontificated on the causes of the current recession that America, and parts of the rest of the world finds itself in. Typically, the person giving the speech tells a long winded, complicated story about how a set of complex events set the stage for America's economic problems.
Paul Krugman recently wrote in his blog at the New York Times that
The 2007-9 recession was driven by the collapse of a huge housing bubble, and the resulting financial fallout. The Fed couldn’t cut rates sharply, because they weren’t all that high to begin with; there couldn’t be a housing boom, because housing was already overbuilt.
Krugman goes on to show a graph to illustrate his points, namely claiming that conservative economic policies didn't have anything to do with anything. Ezra Klein, a columnist at the Washington Post, whose column Mr. Krugman cites, goes on to talk about Kenneth Rogoff's articles, also cites that America suffered through a financial crisis, and that would also seem to have justified Congress's vast economic interference which it engaged in for the past two years. Mr. Rogoff himself said in November 2009 that the recession was turbocharged by a financial crisis.
The Wizard however, disagrees. A disclaimer before going any further - the Wizard has worked in the oil and gas industry for the past 22+ years. Having said that, the Wizard also knows quite a bit about economic and world history. The Wizard believes that the root of the current economic recession was a classic supply side shock caused by a rise in fossil fuel prices over the past decade, and that this shock effectively exposed and exacerbated any pernicious underlying economic problems which acts by the federal government had previously encouraged.
The Wizard musters economic history to illustrate my points. Over the past 40 years, every time in which there has been a major rise in the price of crude oil, for whatever reason, an economic recession has occurred soon thereafter.
1) A recession occurred in 1973 after the 1973 Arab Israeli war, when the Arabs famously embargoed crude oil to the West. The price of a barrel of oil went from $3 per barrel to $10-$11 overnight. America went through stagflation for most of the 1970's.
2) There was a second recession in 1980-1982 after the Iranian Islamic revolution, when crude oil went from $10 to $40 per barrel before coming back down.
3) There was a third recession in 1991-1992, which occurred after Saddam Hussein invaded Kuwait. World oil markets went into a flutter for a while before settling down again, and America went into a recession.
4) There was a run up in oil prices over the entire decade from 2000-2010, where the price of a barrel of crude oil went up from $20 per barrel to $75 per barrel, spiking up to $147 per barrel in 2008 before falling back down. America went into a recession in 2008 and still remains mired in a historically high levels of unemployment.
Once again gentle readers - economic recessions following rises in crude oil prices have not happened one time, they have happened every time over the past 40 years! That's what happens when you have an energy intensive society, but bear in mind that having an energy intensive society isn't a bad thing. There is a strong positive correlation between energy use, income levels, and economic development.
And the Wizard is not alone in his sentiments. City Journal magazine carries an article in its summer 2010 issue also stating out that there was a run up in energy prices, and argues that the problems with the defaults in housing markets, with Fannie Mae, Freddie Mac ( read these opposing justifications for Freddie Mac and Fannie Mae's existence), the derivatives, and so on all came after the run up in energy prices.
It's important to understand that, the breathless, up to the minute, face pressed up against the glass rantings over at the Oil Drum not withstanding, that world oil markets exhibit both inelastic supply curves and inelastic demand curves. So why can the Wizard confidently argue that the supply curves and demand curves are both inelastic? Well, when you have anywhere from 600 - 900 million vehicles now in use in the world, those vehicle owners are automatically going to use a lot of gas. And from the standpoint of producing crude oil, if you are going to fork out a lot of capital to produce a field of crude oil, you'd better have your ducks lined up when trying to make a decision as to how much capital to commit, and the oil and gas industry spends untold billions every year bringing oil and gas to markets, and refining its products. Once you've committed spending billions of dollars to find, develop, and produce from a field of crude, you'd better be confident that there will be a market for that product, and that creates an inelastic supply environment. Rising prices are also a signal that the marginal cost of lifting new crude oil supplies out of the ground has gone up.
So what to do? If the narrative that the root cause of America's recession was due to a rise in crude oil prices, then America is in for a long period of retrenchment in order to adjust to this new world, but does NOT mean that we should go into a flip out over "peak oil". One of the fears behind the peak oil hysteria is that there is no scalable substitute for crude oil in terms of its use as a transportation fuel, but this is nonsense. The Houston Chronicle has carried a number of articles that Honda makes a natural gas version of its GX, which retails at $18,000 for its gasoline version, but some $26,000 for its natural gas version which comes along with a home refueling station that costs $4,000. As the price of crude oil continues to rise, then if the relative price of natural gas as a fuel justifies a switch, the motorists may well switch to using natural gas as a fuel, and with the discovery of new shale gas extraction techniques, the world probably has generations of natural gas fuel available for the foreseeable future.
As the price of liquid transportation fuels rises, it will prove to be a natural curb to use of cars and trucks, while at the same time issuing a signal to producers of energy to come up with new ways of producing transportation fuels. The Wizard suspects that fuel from cellulose ethanol should become viable at somewhere between $7 - $10 per gallon of gasoline, and then it would be a matter of deciding how much arable land to devote to its production. In the meantime, we have shale oil, tar sands, and other forms of energy that could be produced.
But what about now? As the City Journal article notes, one of the problems that America committed both in the 1930's and the 1970's was that Washington committed a long series of well meaning, but misguided errors that got in the way of recovery. For America to get back on track, the country will have to incorporate higher costs for crude oil and transportation fuels in its future, and Americans will do that. Americans will react in different ways, based on their income levels and personal preferences, and we should note that the Obama Administration has already mandated higher fuel economy in motor vehicles that are produced in the future. Rising prices will mean that crude oil consumption will gravitate towards its highest and best uses, and away from more marginal ones such as driving for vacations or use of petroleum for plastics (we could revert to using glass containers for example). Some will swallow the costs and keep driving, others may decide to buy smaller homes and also keep driving. Some will pare back driving and move closer to work. Some may walk or ride a bike. One thing that few people will do, at least willingly, is take local public transportation.
At the same time, the narrative of higher fuel costs would also have helped explain the failure of the General Motors and Chrysler, as people cut back for the time being on buying cars. That would be seen as part of the creative destruction that occurs in a market economy, making it more efficient, but intervention and favoritism by Washington has interfered with that process.
But over the long run, higher energy costs aren't the most important issue we face. What is really at issue is that having so many interest groups making so many demands on the political system, sucking huge resources into the political system, and running massive federal deficits all do - especially when the country is not fighting for its survival - is that they send false signals on what there really is demand for. How many times, for example, will Nancy Pelosi call the House of Representatives back into session to bail out the local government schools to keep employees on the local government school system payrolls? Does America really need yet another stimulus? More to the point, it doesn't help that Americans will find themselves being hit with higher energy costs, while at the same time having an overactive federal government that is spending itself into oblivion because it is doing so much.
Americans also understand that interference from Washington, such as bailing out AIG, or nationalizing the automobile companies, creates a situation where the government is choosing favorites instead of being a neutral referee and letting things unfold and fall where they may. The real issue is that Washington needs to calm down and quit trying to commit to doing so many things, because running around trying to do so many things creates uncertainty as to government and its purpose. And creating uncertainty isn't good for America or its future.
Wizard
Addendum: A fellow named Philip Stadler writes
I used to wonder how bad things really would have been if AIG had been allowed to fail, to go into bankruptcy and have its carcass picked at by financial companies that were doing things the right way and were solvent enough to pick up those discounted assets. I used to wonder about the repercussions if General Motors would have simply filed for bankruptcy, instead of borrowing $60 billion and then filing for bankruptcy anyway. I don’t wonder about those things anymore. You see, the magic of a successful big government power grab is that now we will never know those answers. The government can never be proven wrong. It is quite possible that letting nature take its course would have cost us an additional three, seven, even ten years of recession... We will simply never know.
"Giving money and power to government is like giving whiskey and car keys to teenage boys." P. J. O'Rourke.
One of the issues that will be coming before City of Houston voters in the upcoming November 2010 elections will be the interest group backed Renew Houston charter amendment. The Wizard has held off commenting on the amendment for some time. The amendment has passed muster with City of Houston secretary Anna Russell's office in that she has given blessing that amendment backers have - on their face - produced the 21,000+ valid signatures necessary to place the amendment on the ballot. Much of the Wizard's tardiness in writing on the subject had to do with the fact that I had stopped writing for a while, but there were other aspects of the charter amendment that I wanted to study up on before posting something substantial about the topic.
The charter amendment can be read here. The Wizard will address each subject in due order.
Does Houston have an overall drainage and street maintenance problem?
That is entirely a subjective question and one the Wizard will not answer here. Yes, the Wizard has noted that there are streets in Houston that do need repair. Interestingly, some of these streets happen to be where Metro wants to built light rail lines. The Renew Houston backers state that the City's infrastructure is old and out of date, but effectively what Renew Houston's backers are really saying is that the City and all the interest groups down at the City Hall haven't bothered to keep up with infrastructure for decades. Now whose fault is that? Are they saying that Annise Parker has spent her entire career in City politics without having addressed this issue before? Why has Houston spent an inordinate amount of time and money building sports temples, redoing all the streets in downtown Houston, building new courthouses, and with Metro wanting to build rail lines? In other words, the Renew Houston camp is effectively telling the populace that Houston has been misplacing its priorities.
Setting that aside, Houston and Harris County already have rules on the books for dealing with drainage. CM Stephen Costello, whom the Wizard has heard speak three times now, has stated that the Renew Houston initiative was not meant to deal with the flood plain problem. He also insists that the City does not have enough money to deal with enforcing rules that require the creation of detention ponds and basins, a claim that the Wizard finds laughable. How much money does it cost to hire someone to drive around the City to simply inspect and report whether developers have installed the required detention, as well as maintaining ditches or storm sewers, and for the City's legal department to take some action? The Wizard suspects that this is probably not all that much, indeed the usual case is that developers are to pay for permits and inspections out of their own pockets. Yet miraculously, the City seems to find plenty of resources to harass the populace for all kinds of other petty issues, but somehow we're being told a story that the City cannot find resources for enforcing detention?
The Wizard shares the view of Ed Browne, who has stated that Houstonians need to tell the City to quit giving variances to detention requirements or simply letting detention slide by on development after the fact, before interest groups simply throw their hands up in the air and cry that they need more money for drainage. It would also help if the Harris County Toll Road Authority, as well as TX-DOT were to fully abide by City of Houston floodplain regulations.
CM Costello has pointed out that the City has three primary resources for funding streets - the Capital Improvement Plan (CIP), the SNAP (Super Neighborhood Action Plan), and via neighborhood petition. The City gets money from the ad valorem property tax, state and federal sources, as well as money from Metro. The Wizard recently stated that Metro owes the City $130 million, but some sleuthing from Tom Bazan recently has hinted that Metro actually owes the City some $390 million.
Addendum: The Wizard has received word that a newspaper here in Houston will be running a story about the City of Houston's unbilled commitments to Metro sometime this week.
The Politics of Renew Houston
The Renew Houston charter amendment was put into play after the November 2009 City of Houston elections. The issue of the state of Houston's infrastructure was not discussed at all by any of the 4 major candidates during the 2009 Mayor's race, nor was it much of an issue in any of the Council races. Obviously, CM Stephen Costello, who is a hydrologist by trade and whose firm has about two percent of its business with the City, has been the primary face of the amendment by carrying water for the engineering constituency. Those gentle readers who are Republicans and see the world through the lens of Republicans = good, Democrats = bad, need to remember this come November 2011.
Mayor Parker has given her endorsement to the amendment, but the Wizard has heard CM Costello state that there are to be no exemptions to the drainage levy, not for non-profits, charities, churches, school districts, or any other organization. The underlined article notes that
[Mayor] Parker also said she opposes exempting any property owners from the drainage fee.
"I don't believe anybody should be exempted. Drainage affects everybody," she said. "If there's an exemption for one category, automatically, someone else is going to have to pick it up. ... I'm going to lay it all out for council and then we'll walk through it."
In other words, it is highly likely that there are interest groups already lobbying for exemptions from the Renew Houston levy, and yes Houston has seen its City Council give price discriminatory preferences to certain interest groups with regards to water related issues, and it is highly unlikely that the adoption of the charter amendment will result in any let up of lobbying efforts by various interest groups for relief from the levy.
CM Costello has stated on stump speeches that it is the intention of amendment backers that there is to be a website that will detail all of the projects that are to be implemented with amendment monies. The intention is to divide the City into roughly 50 zones, with projects to be ranked for priority in each and every zone. At an Houston Property Rights Association luncheon on June 3rd, 2010, on member of HPRA asked CM Costello who would be the ones determining what projects get done, and Costello stated that it would be Public Works and Engineering that would be making the call. Another asked whether Costello could name 10 possible projects that would do the most to alleviate drainage in the City, and Costello said he couldn't answer that question. So far, no website has been produced for this $8+ billion project, and even if one were, there is no doubt that political pressures will come into play with regards to deciding which projects were to be implemented.
The charter amendment also throws in a provision to assess a direct payment for infrastructure from real estate developers on all new development that occurs within the City, over and above the initial $125 million revenue floor that is to be generated by the drainage fee. In practice some developers already do this (the Buckhead developers of Ashby Highrise threw in $500,000 in infrastructure improvements as part of their development), but the charter amendment institutionalizes this. The Wizard shares Tory's view that the assessment on new development will slowly have knock on effects over time, but isn't so certain about whether the City can arbitrarily whack new development with outrageous impact fees. Provisions in Chapter 395 of the Texas Local Government Code and due process could temper that.
The Renew Houston charter amendment will go through the process of adoption that every charter amendment does - at the ballot box. City of Houston voters, or at least those who feel motivated enough to bother to show up on election day in November, will vote via the democratic process whether to increase fees (or taxes - more about that later) on each other. The Renew Houston amendment does have a sunset provision in section C, that if the amendment is adopted that the charter amendment can be only terminated after 20 years have passed, after public hearings have been held, and only at the vote of two-thirds of City Council members. Next year the City Council is set to expand to 17 members, ergo it will take 12 members to vote to sunset the amendment.
Defenders of Renew Houston's arrangements for voting the levy into existence while only allowing possible undoing of the levy through Council action once every 20 years may try to defend their actions by pointing to the Proposition 2 revenue cap charter amendment, but Prop 2 stated that Council could exceed revenue growth through inflation and population growth - the Council merely had to go to voters. But given that the City has fought this battle in the courts and that Bruce Hotze, who is the plaintiff in the case, has told the Wizard that the City doesn't bother to abide by Proposition 1 (which limits property tax increases) anyway, so any comparison between Renew Houston and the earlier revenue limiting propositions really doesn't apply.
What this really means as a matter of practical politics is that future City Councils will be granted the authority to consider once every twenty years whether to vote to give up this funding, something that at the current time will be amounting to roughly one sixth of current City of Houston property tax collections. Folks, no one person or group is ever going to be able to muster enough political muscle or pressure to get two thirds of future City Councils to vote to repeal this amendment, unless the levy is set so high that political pressure becomes insurmountable. If Renew Houston backers want voters to impose a new levy on their fellow citizens via the ballot box, then they should have incorporated a sunset provision that would have allowed for voters to sunset the charter amendment, and not leave that decision in the hands of City Council.
Otherwise, for all practical purposes, voters are being told to vote a levy on themselves on all land in the City of Houston, one that will go on in perpetuity, for a mega-project whose scope is not defined. And mega-projects have a habit of spiraling out of control.
The finances and legalities of Renew Houston
Houstonians need to understand that Renew Houston has a specific revenue floor provision in the amendment, which at first is meant to raise at least $125 million from drainage fees alone in it first year of implementation. Amendment backers have been telling the public that the rate of the new drainage fee levy will be $5 per month on a 2,500 square foot house that sits on a 5,000 square foot lot (about $520 per acre per year for residential property), while commercial properties are to be levied at $90 per month. However, the charter amendment language does not have any language in it setting rates for any class of property, whether improved or not, nor are there provisions that set the levy for any fixed length of time. Again - the language stipulates a revenue floor that is to be generated by the drainage levy. This is in fact a wide open levy. There is nothing stopping Council from making this levy $10 per month on households, $20 or $30 per month, other than political pressure, nor is there anything stopping council from practicing price discriminatory behavior on this scheme.
Strictly speaking, the Renew Houston levy can be looked upon as either a property tax or a fee. The key here is that the levy falls on the amount of square footage of property, as well as the amount of permeable area on the land parcel. It is not an ad valorem tax because the levy is not dependent upon the value of property, nor any improvements on property. The initiative has a provision that Proposition 1 ad valorem tax increases do not apply to the initiative. At the first public meeting that was held on Renew Houston in the Heights back in May 2010, the Wizard asked CM Costello directly whether the charter amendment conflicted with Proposition 1 or 2? Costello pointed his finger at me and told me that it did not, and no, Renew Houston was not a tax!
Harris County Tax Assessor candidate Don Sumners has provided a table that indicates that the levy is the equivalent of a 13 percent tax increase, were the levy to be done as a property tax increase. The numbers can be quibbled with slightly, but the general analysis is still valid. In other words, were the Renew Houston levy to be done by equivalent increase in property taxes, the property tax rate in the City of Houston would immediately rise from 63.875 cents per $100 of taxable property to roughly 72 cents per $100, with possibly higher rates to follow.
On July 8th 2010, the Houston Chronicle ran a story on Renew Houston that mentioned that engineer Allen Watson, who is a board member of the Metropolitan Transit Authority, was active in promoting Renew Houston. Given this is the case, it is reasonable to infer that if a board member of Metro was actively involved in trying to get this amendment passed that Mr. Watson in fact speaks for the agency as a whole.
And why would Metro be interested in seeing this pass? Because the agency is supposed to be handing over 25 percent of its sales tax revenues to its member Cities, but if the interest groups promoting Renew Houston were to succeed in getting the petition passed, then the City will be in a much stronger position to waive its portion (73 percent) of the sales tax that gets allocated to the City, effectively allowing the City to rebate that back to Metro - not that the City has been collecting all its monies anyway. Doing that would put Metro in a much better position to be able to float billions of dollars in bonds to build light rail lines. In theory, none of this is supposed to be happening, but money is fungible. As a practical matter citizens have no real control - or ability to enforce - whether politicians or governments collect monies for one stated reason, but in fact allocate them for other purposes, and there's no reason to expect otherwise that the City will in fact use all monies brought in by the new levy from Renew Houston in the manner that amendment backers are advertising. Reaffirmed State law confirms the fact that the City of Houston can in fact transfer monies collected by this new drainage levy to the City's general fund, so any talk about monies collected by the levy going into a "lock box" is bunk. Politicians always make such claims, and they transfer monies at every level of government.
Opposition to Renew Houston
There will be a campaign launched to oppose Renew Houston. The opposition will be bi-partisan, as the Wizard has been privy to communication within both the Democratic Party and amongst Republicans opposing the measure. The levy is regressive, open ended, and its means of implementation was designed to attempt to avoid political accountability by dumping the question of the levy increase directly onto the voters, rather than have politicians have to face the political consequences of arguing for and imposing a tax increase directly. Once implemented, the levy will politically be very hard to repeal or sunset.
But as one friend of the Wizard stated to me recently, the backers of Renew Houston have been tone deaf, politically, on pushing this through on Houston residents in a slow economy. The Wizard could be tempted in voting for Renew Houston, if in exchange the Houston City Council were to come up with a viable reform plan for curbing the real problem the City faces - that of pension liabilities to former and current employees. Absent that, the Wizard has decided to oppose the amendment and tell the backers of Renew Houston, no thank you, I'm voting NO to Proposition 1.
Wizard
Addendum: Last week the Wizard promised to start publishing on a regular Sunday schedule. I did in fact work on this entry over the weekend, but time and length of this post caused me to miss my self imposed deadline. The Wizard will be back on schedule next weekend!
Addendum #2 (September 28,2010): This is the ballot language for Proposition 1, at least according to the Harris Votes website. Note that there is no mention of the new levy, nor of the fact that voters will not be allowed to vote to repeal the measure in 20 years:
City of Houston, PROPOSITION NO. 1
CHARTER AMENDMENT PROPOSITION
Relating to the Creation of a Dedicated Funding Source to Enhance, Improve and Renew Drainage Systems and Streets.
Shall the City Charter of the City of Houston be amended to provide for the enhancement, improvement and ongoing renewal of Houston's drainage and streets by creating a Dedicated Pay-As-You-Go Fund for Drainage and Streets?
FOR
AGAINST
Addendum #3 (October 26, 2010): The Houston Chronicle has reported that the City of Houston's general revenues (from taxes and fees) have increased from $1.4 billion in 2004 to $2.1 billion in 2010, while the overall budget (which includes the enterprise funds such as the airports) has gone up from $2.6 billion in 2004 to $4.05 billion in 2010. So why does the City need another major revenue stream when it's revenues have gone up by 50 percent (non-inflation adjusted) over the past six years?
On Friday, August 6th 2010, the Houston Property Rights Association welcomed Judith McGeary, director of the Farm and Ranch Freedom Alliance (FARFA) as our guest speaker. Mrs. McCreary drove all the way in to Houston from the Austin hill country area, where she and her husband own and operate a small farm. You can read her biography here.
Mrs. McGeary's presentation was amazing. She did not have a laptop or other projection materials. Instead she simply gave a talk, and she unleashed a fire hose of information about a multifaceted subject.
McGeary started off by saying that U.S. federal regulations on food production tilt the playing field towards and favor industrial farming. She said that Congress has been aiming at enacting a national animal identification system, which was to be incorporated as part of U.S. Senate bill 510. This legislation was largely sold to the U.S.D.A via large industrial corporate interests.
The property rights aspect of this legislation (and of companion bills in the House of Representatives) is that anyone who owns livestock would be required to register their property - i.e. livestock - into a database. Farmers and ranchers would be required to tag their animals, via RFID, and all animal movements would have to be reported. So, if some of your livestock gets attacked and carried away by hawks, for example, that's tough. A farmer or rancher have to account for it somehow.
Mrs. McGeary then recounted the history of her activism on this issue. She started fighting new federal legislative initiatives around 2005-2006. She told HPRA a familiar litany, of attending public meetings that were tightly controlled by the sponsoring agency (in this case the U.S.D.A). People were only allowed to speak for 2-3 minutes; comments and arguments by those lobbying for more statism were accepted, but arguments advanced by defenders of liberty were either whitewashed or blown away with simple one line replies. However she did state that the U.S.D.A started losing control of some public meetings and eventually the agency stopped holding them. In February 2010, Mrs. McGeary said that the federal government had decided to drop the new registration requirements and instead adopted a pared back program where only animals that crossed state lines had to be registered. However, a new regulatory working group was formed, was charged with coming up with a new policy, and the new group proceeded to adopt the old regulatory and legislative plans.
So, what are the real reasons for pushing for a new legislative and regulatory framework involving food production and consumption? Mrs. McGeary told HPRA that a big reason is that the real money to be made in farming and ranching is in importing and exporting food across borders. Tyson and Cargill are the interests that want animal identification, and the underlying motive of large corporations would be to move towards one international standard for animal identification. Mrs. McGeary stated that this would mean inserting RFID in nearly 100,000,000 million head of cattle in America alone. She said that the databases for animal registry would be privately run, but what the corporate interests keep coming back to is the concept of registration of property, while the U.S.D.A keeps pushing for what its calls traceability. But what was interesting is that she told the audience that one federal official was caught stating that traceability was ultimately a premises about food safety.
Besides S.B. 510, the other primary bill that has been in Congress for years is H.R. 2749, the Food Safety Enhancement Act of 2009, which passed by a margin of 283-142 in a roll call vote.
Mrs. McGeary told HPRA that data does not support the supposition that America has the safest food in the world, indeed the New York Times noted that American food safety does not seem to be improving. She said that nearly all the recent problems with outbreaks are due to a consolidation of the food supply - citing the outbreaks of peanut butter (from Salmonella) in 2009, the tomato outbreak of June 2008 (again from Salmonella), the jalapeno outbreak (yet again from Salmonella!), and spinach outbreaks from 2006. Mrs. McCreary noted that three meat packers now control 80-90 percent of all meat packing in the United States - an assertion supported by the U.S.D.A., which has also noted the vertical integration of the industry.
The Wizard was somewhat concerned about those issues, but then McGeary stated that the F.D.A. was pushing to micromanage and regulate how farmers were growing and harvesting their crops. The F.D.A. would regulate water utilization, what you can pick, they were wanting farmers to implement 30 foot buffer zones, and require that farmer and ranchers trace frog and deer tracks - really!
Mrs. McGeary then addressed the issue that the F.D.A. has gone through with several dozen raids of food clubs and co-operatives around the country over the past year, breaking into people's homes with search warrants and guns drawn. She noted that federal judges have been handing out the warrants rather freely, without entirely realizing the scope and entirety of the issue. She stated that many of these food clubs, which are private, were often set up to get around government regulations, but the real issue at stake is whether Americans have the right to decide put what they want to into their mouths.
The Wizard remembers a man from his childhood, who lived in his suburban Houston neighborhood and was an amateur apiculturalist. He and his wife used to hand out samples of honey and bee gum, which were a lot of fun to eat and were highly addictive. The Wizard wonders whether or not his backyard hobby would end up being shutdown under today's legal and regulatory climate. A hint: This man's wife went on years later to serve on as a City Council member.
Mrs. McGeary told the audience that FARFA has been working at the federal level with Senator Jon Tester (a Democrat BTW), who is an organic farmer by trade. Senator Testa inserted an amendment to S.B. 510 to exempt farms that gross under $500,000 from the most burdensome of new federal regulations.
She told of stories where she gets into debates all the time with consumer groups who argue that, "we need to regulations because our food needs to be safe!" But she has to point out to them that food safety and regulation by the F.D.A or U.S.D.A is not the same. What this really is about is expansion of federal power over the food we eat.
McGeary then fielded questions from HPRA members. One asked about RFID's being inserted into cattle, and McCreary noted that animals that have RFID's inserted into them experience higher incidence rates of cancer tumors. Another HPRA member asked what was the push amongst the big food processors for RFID's and the new legal measures? Mrs. McGeary's response was that she believes that the new legal regime will cause big food processors to incur large infrastructure costs, that will run into the many hundreds of millions, perhaps billions of dollars. She thinks that the big corporate players want for the federal government to pay for all this.
One HPRA member asked, what if you are a land owner and lease your land to a farmer or rancher. Then who would be responsible for food problems or for paying for regulatory measures? Mrs. McGeary said that everyone was - the landowner and the lease holders.
One person asked about Mad Cow disease. Mrs. McGeary said that Mad Cow takes a decade to develop and that the federal government tests less than 1 in 1,000 head of cattle for Mad Cow. She also said that several years ago the U.S.D.A blocked the private testing of cattle by one meat packer, which would have tested ALL cattle for Mad Cow Disease. Now why would the U.S.D.A do that, the Wizard wonders?
More to the point, what about the idea of using the common law and torts to help protect America's food supply, rather than an ever growing pile of statist regulations whose effectiveness can be shown to be in doubt? Mrs. McGeary pointed out that word gets out about food problems and farms and ranchers who produce bad food go out of business. John Stossel pointed out several weeks ago at a talk he gave in Houston that scams and bad product issues rarely are national issues, mostly because of the same reason - word gets out.
When Mrs. McGeary speaks to President Obama supporters, she told HPRA that she runs into the mindset of, "well, all those problems happened under George W. Bush! The F.D.A. and U.S.D.A will all be better because Mr. Obama is wonderful!" Well maybe. That's the Paul Krugman mindset. The real battle here, such as the raw milk debate, the raids of food co-ops, genetically modified food crops, and state regulations, is whether Americans have the right to put what you want into your mouth and where you buy your food from, or is America going to continue its drift into the controlled, soft despotism of a nanny state where Americans can only get food, milk, and drink from organizations that are authorized by the state? The statists, as always, will claim that all their power grabs are being done in the name of protecting the public, but make no mistake about this: In the end it's just another power grab by the state and means of treating Americans like children. It also is another version of the countless ways in which the state tries to shut out private methods and means of dealing with social problems - in other words, it's another way of shutting out the competition.
So, what can be done? Mrs. McGeary says to bug your Senators, which in Texas means Senator Cornyn and Kay Bailey. The Senate S.B. 510 bill is very different from the House bill, and even if S.B. 510 were to somehow pass, then it is certain that there will be major problems consolidating differences in conference committee.
Addendum: The Wizard intends to start a regular publishing schedule, preferably on Sundays. It takes quite a while to compose many of my blog entries, as the Wizard tends to write in depth reports and not make thousands of trivial Off the Kuff remarks on everything under the Sun that aren't worth reading.
Also, the Wizard is in the process of migrating to an updated version of Movable Type, and hopes to be able to allow readers to start making comments. This blog was started six years ago, and is composed on an old version of MT. The Wizard initially allowed comments, but then found that the spam bots were leaving advertisements for Viagra and Cialis, so he turned them off. Hopefully updated software will take care of this problem.
Wizard
Second addendum: The Wizard received the following email from Mrs. McGeary.
One correction: The NAIS and the food safety bills (S.510 and HR 2749)
share a lot of the same problems & themes, but are separate. The food
safety bills only address foods under FDA's jurisdiction, namely produce
and processed foods, and do not include NAIS. (You probably merged them
because of the way we went back and forth between the two topics ... and
it's one of the perils of speaking without a powerpoint where I can put
up a clear outline :))
I grew up poor. I rode the bus until I was 24 years old. Once I got my first car, I never looked back.
Houston City Council member at-large, Jolanda Jones, at a Bill King speech, July 29th, 2010.
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Things flew fast and heavy this past week on the Metro Rail front. This past week, the Wizard attended two public talks on Metro Rail. The first was put on at the headquarters of the Harris County Democratic Party on Tuesday night, July 27th. The second meeting was a presentation put on by former Houston mayoral candidate Bill King, held at a Galleria area restaurant. While the Wizard attended both events, the Wizard did not bother to stand up and ask any questions at either event. Mostly the Wizard took notes and let the speakers have their say.
Before going any further describing what was talked about at both events, the Wizard is simply going to outline for gentle readers what the overall situation is with Metro and the agency's desires to built light rail.
As things stand now with Metro Rail
1) The five rail lines envisioned, totaling 30-31 miles, will probably end up costing roughly $4 billion plus to build.
According to Paul Magaziner, Metro currently has about $100 million in cash - that's it. The State of Texas requires that Metro maintain at least $60 million in cash on hand. If Metro intends to issue more bonds, then those bonds will have to be certified by Texas Attorney General Greg Abbott's office, and that's not assured.
2) At the meeting with Harris County Democrats, Metro chairman Gilbert Garcia told the audience that Metro had spent $640 million on light rail since the November 2003 election. He did not go into details or breakdown for the audience on how that money had been spent. However one thing is obvious: Despite having spent all that money, Metro still hasn't laid down one yard of rail track on any of the rail lines.
3) Tom Bazan has been religiously capturing sales tax data for both the City of Houston and Metro since 2001. His latest spreadsheet, which he updates monthly, can be downloaded here. Tom Bazan's data shows that Metro is on a path to collect roughly $490 million. In contrast, Metro forecast in it's 2008 SFEIS for the Southeast Corridor rail alignment that it would collect $592 million in sales taxes for 2010, a shortfall of 17 percent.
Metro's entire financial analysis is extremely aggressive. For example, the spreadsheet offered states that Metro would collect $804.8 million in sales taxes in 2015.
4) Metro owes the City of Houston some $130 million in general mobility funds, debts that had accumulated during former Mayor Bill White's term in office.
5) Even if Metro manages to get all federal grants, Metro will have to cough up at least another $2 billion in local funding to complete this project.
Bill King's speech - July 29th 2010
Mr. King's presentation can be viewed online here. Several highlights include that Metro stated in its financial analysis that the agency would not be obligated to turn over 25 percent of its sales tax monies for general mobility street construction purposes to member cities after 2015, which is rather presumptuous since an election has to be held on this issue in 2014 according to the 2003 referendum. The agency admitted in its environmental impact statements that making turns with its trains along the Richmond / Wheeler University rail route would result in high levels of noise. The aforementioned sales tax and farebox recovery figures are wildly optimistic, with farebox recovery rising from $60 million in 2010 to $132 million in 2015, and $167 million in 2020. Mr. King reiterated his call for lowered or eliminating fares on Metro's buses. King's analysis is that 20 percent of all trips taken in the Houston area are for work trips, and Metro can only hope to attract a few percent of those work trips. King expressed concern that the agency board has already tied itself with contracts over the project.
King stated that there were several things that Metro could do to gain efficiency. One was to sign long term contracts for natural gas as a fuel source.
As an aside, a number of people who were in the audience were from Metro, which is standard operating procedure for the agency. Metro usually sends employees to public meetings on Metro Rail, both to keep an eye out on the public mood and to pack meetings with "supporters" of their plans.
The HCDP event - July 27th 2010
Metro's new chairman, Gilbert Garcia, was joined by the new CEO, former City controller George Greanias, and long time Metro executive John Sedlak, at the HCDP event. The three men took turns at the microphone speaking, at which was their constituency.
Gilbert Garcia was chairman of Mayor Annise Parker's 2009 campaign. He's an investment banker, affiliated with Henry Cisneros's money management fund. He told the audience that he cut his teeth in politics working for Walter Mondale's Presidency bid in 1984 in New Jersey and Texas. Mr. Garcia is a Yale graduate, making him a member of what Angelo Codevilla calls the ruling class
Garcia went on to tell the audience on how he was in Atlanta, where instead of a $75 cab drive, he took a MARTA train for $2, ending with a rhetorical "if Atlanta can do it, then why can't Houston?" Garcia reported that morale was low at Metro when he first started. He introduced himself to an employee, who told him, "I've never met a board member, much less the chairman." Garcia stated that agency leadership was eating, sleeping, going all out to get the $900 million in federal grant money. Garcia stated the current board's intention to complete all five rail lines, and asserted that Houston was limiting its future by not doing so.
Actually, the Wizard thinks that Houston is not limiting itself by not building light rail. It is the political classes and those who are politically connected to the City and to Metro whose futures are being limited by not building light rail.
George Greanias then got up to speak. Greanias told the audience that he had not been active in the 2009 Mayor's race, and had not endorsed anyone. A few criticized that Greanias had no transit background, but Greanias himself said that was a good thing.
Greanias stated that "nothing will shape Houston like Metro, with the exception of HISD." He told the audience that 30 percent of work trips into downtown were ferried by Metro, and 20 percent of work trips to the Medical Center were via Metro. Metro now has GPS installed on all buses, and the agency washes all buses every night with recycled water. Greanias took the occasion to announce (in advance) of a letter Metro received from the Harris County District Attorney's office that allegations from former City controller Lloyd Kelley had been cleared, as well as that Metro had received a Record of Decision from the US-FTA for the Wheeler / Richmond University rail line. Nothing was said about a recent story by Texas Watchdog about an HISD study comparing efficiencies of HISD's bus fleet verses Metro's.
Greanias said that when he came to office that Metro employees did not feel connected to management, and that he vowed that Metro would keep promises it made to the public. Grenias asserted that "we have to build this rail system!"
Greanias said that "we've made it more convenient for people not to use transit than to use transit", in reference to Metro's surrendering of sales tax monies for general mobility funding. John Sedlak reiterated this remark later. It became clear to me that there is a mindset amongst the Metro brass that they don't seem to count the fact that streets that are fixed up with Metro's sales tax dollars are also used by Metro's buses. Greanias asserted that Metro Rail on Main Street replaced 11 Metro bus routes, something the Wizard knows to be false. There used to be four bus routes directly running on Main Street that were truncated after the rail line was put into place.
John Sedlak, Metro VP took to the podium. The Wizard had not seen Mr. Sedlak in two years, and it appeared that Mr. Sedlak's age is starting to show a bit. He has to be pushing 60 by now.
Sedlak told the audience that rail was easy to use, verses climbing up the steps of a bus. Strollers and bicycles could easily fit in rail cars. Advertising on buses and trains was a local policy issue and that Metro had to work with the City of Houston and Scenic Houston. There was a City ordinance in effect that prohibited advertising on City right of ways, and Metro's bus stops were located in those right of ways. Sedlak said Metro was not sure how much money could be raised, but Allen Kepler, Metro's first chairman, had decided long ago not to advertise on buses, as this was a branding issue. The agency had kept to that ever since.
One attendee asked about parking on the North Corridor rail alignment, stating that they were not sure where to park at Northline Mall. She asserted that if Metro wanted to encourage people to ride trains, then they needed to have lots of parking (really?!). Sedlak replied that Metro was looking at leasing parking space around the old mall area and was in talks with HCC about parking for the Main Street rail line, as well as the garage at the Ensemble Theater.
The issue of parking also came up with the Airport Express buses. Sedlak told the audience that Metro "loses a ton of money" running the Airport Express (but spending $640 million and not building any rail isn't?), but was looking at expanding the service to stop by nearby downtown hotels in an effort to pick up ridership. The same woman who asked about parking near Northline Mall stated that BART had problems with car parking and suggested that Metro build a better parking lot nearby the Airport Express staging lot.
One man asked the three speakers, "how will you defeat obstructionists like John Culberson?" The question drew some laughs from the audience. Greanias told the audience that Metro needed to persuade the rest of the community, and to convince the people around Culberson" on rail. Sedlak said that one key for Metro was "getting something done" on rail. In Dallas, he stated, they're asking "who gets it next?" Well, maybe. Garcia asked whether Metro should go to the airports, apparently not realizing that according to the 2003 bond election, Metro was going to the airports.
Another audience member, who happened to be a cyclist, mentioned that he could often beat buses when going from one place to another.
Cost overruns and media relations were addressed, and one audience member mentioned that HPRA President Barry Klein has been harping on cost overruns. Greanias told the audience that "if Barry wants buses, then what he'd really want were rickshaws". Greanias said that the new board is offensive when it comes to the media. FOIA requests are being handed out. Agency PR folks had spoken to Houston Press editor Margaret Downing, and noted that some recent articles by the Press had not been so snarky.
Greanias brought up the issue of ridership, which has been down for the past two years. Metro is starting to look at some of the edges of some routes to examine why patronage on some routes are low. Why? Greanias brought up the idea of issuing vouchers for taxis, rather than run a 45 foot bus along such routes. A lack of shelters along bus routes was cited, as colder weather affects ridership. Changing the fare box structure was acknowledged. Incidentally, Greanias told the audience that the FTA does not allow Metro to count riders ferried to the Houston Livestock Show and Rodeo for national statistics purposes.
HCDP chairman Garry Birnberg asked the Metro leadership what Democrats could do to help? One answer was to get ready for an eventual election on the general mobility fund. Another was to ask, "what's the other sides solution?", and that largely summed up the meeting.
Afterwards, Richmond Avenue merchant Daphne Scarbrough told the Wizard that she had run into former blogger and now Metro board member Christof Spieler at a Rice Design Alliance meeting. Ms. Scarbrough asked Christof about the orders for Spanish rail cars, which has gotten the agency in hot water with the FTA? Mr. Spieler told Ms. Scarbrough, "Daphne, we're doing everything the FTA tells us to do." No doubt about that. Sam Staley would be expecting nothing less.
The Wizard kept quiet during the HCDP meeting and simply took notes. What emerged from the HCDP talk was an agency leadership that is still fiercely ambitious. Yet it had also become clear that nobody at the agency really knows where they are going with this project. The agency "was looking" at parking at Northline Mall? The agency "is looking" at whether to complete building these rail lines to the airports? That is not what the agency said it would do back in November 2003 at the bond election.
And more to the point, Wendell Cox just wrote that what really matters if you are going to use state or agency power to build public infrastructure, that it is the outputs that matter, not the inputs. And we need to keep that in mind with everything we do.
Addendum: The Wizard is going to start publishing on a regular schedule - probably posting on Sunday evenings.