A Suggested Tea Party Agenda

December 27, 2010 by · 5 Comments
Filed under: The Right Answer 

So the Tea Party Republicans are looking for places to save money.  Excellent.  I have a few suggestions that will not only save money for the nation as a whole but also a bundle for the transit community.

While our current federal budget provides a target-rich environment for budget cutters, here are my favorites:

Davis-Bacon Act– A depression era act (1931) which didn’t have a whole lot to do with the depression, the act was primarily designed to keep outside interlopers from swooping in and undercutting local contractors for local construction projects (and, oh, by the way, keeping minorities from taking advantage of employment opportunities).  It stayed on the books and became a huge friend of the labor unions as it required federal construction projects to pay “prevailing wages”.  Prevailing wages are determined by the Department of Labor and basically equal the local union wage scale.  If even if a small percentage of a project is funded by the federal government, this requirement is invoked, resulting in the kiss of death for any number of potential projects across the nation that would depend on federal funds to successfully get off the ground.  It has been estimated that this act, by inflating labor wage rates, costs American taxpayers $8 billion annually (and a $100 million in administrative costs) Not exactly chicken feed.  Repeal this act and, presto, we’ve saved a pot full.  Keep in mind the legendary Senator Everett Dirksen’s (R-IL) quip that “A billion here, a billion there, and pretty soon you talking real money.”

Project Labor Agreement– Allow me to introduce the Project Labor Agreement, or PLA.  When a Democratic Administration comes into power, an executive order is quickly issued putting PLAs into effect.  When a Republican Administration is ushered in, the E.O. is just as speedily rescinded.  What exactly is a PLA?  Well, for federal construction projects using $25 million or more in federal funds, it requires contractors to sign a pre-hire agreement recognizing unions as the sole and exclusive bargaining representatives for the project, and requires employees to either join the union or pay union dues if they elect not to join.  Contractors are required to hire from union hiring halls. In return, all labor unions on the project pledge not to strike during the duration of the project.  A sweet deal?  You betcha.  Requiring a union shop effectively precludes non-union contractors.  PLAs are promulgated under the guise of introducing stability and predictability in large, complex federal construction projects.  In actuality, they impose union labor rates, restrictive union work rules and unnecessarily increase the costs of the project.

13(c) Labor Protections– The enabling legislation establishing the Urban Mass Transportation Administration (now the Federal Transit Administration) in 1964 contained a provision requiring union sign-off on every grant the agency makes.  Without the sign-off, no grant can legally be made.  It may have made sense in 1964 when the act went into affect and the industry was transitioning from the private to the public sector.  The provision was designed to protect existing labor – management agreements when private transit companies were acquired by public authorities (private transit operations hit the bottom in 1963, when transit in the aggregate became unprofitable, the result of decades of massive government highway spending).   The original transit legislation provided funds for these acquisitions, preserving failing transit operations across the country.  Although its original purpose has long since been made obsolete, the provision endures on the books (under 49 U.S.C., section 5333(b)) and is used as a hammer when needed by the transit unions to pressure balky transit authorities to accept the union view on labor issues.  No other transportation program has such a provision.  It is certainly nothing the federal highway program has to worry about.

Tea Party Republicans could do worse.   Although I abhor litmus tests, perhaps action (or no action) on these issues would signal how serious our new budget cutters are about tackling the federal deficit.  Sacred cows must be corralled.  Do I hear mooing?

[To our readers: Merry Christmas, Happy Holidays and a Happy, Bountiful New Year in 2011!!]

The Right Way to Raise the Gas Tax

December 15, 2010 by · 7 Comments
Filed under: Car Stop 

There is, or ought to be, little question that we need to raise the gas tax.  The Highway Trust Fund has become dependent on infusions of general revenue, which is not sustainable.  If we refuse to raise the gas tax, we will have to cut spending on transportation infrastructure to whatever level the current gas tax will support.  That would accelerate the deterioration of what is already a decayed system.

How we raise the gas tax is as important as how much we raise it.  My proposal is that we announce that the price of gasoline  –  –  not the tax  –  –  will go up by a set amount annually.  For the purposes of illustration, let’s say that figure is 25¢.  If the price of oil remains steady, the tax would rise 25¢ per gallon of gas.  If the market price of oil falls from its present level, the tax would rise more than 25¢ per gallon, to meet the desired gas price.  Conversely, if the price of oil rises, the tax would be cut, again to create the announced price of gasoline.

The purpose here is to give the public predictability.  If they know the price of gas will rise 25¢ annually, they can plan.  When they need a new car, they can factor the price of gas into their decision on what car to buy.  If they are moving, they can factor it into what kind of housing they want, including proximity to public transit.  If their household is on a budget, they can know how much to allocate for fuel for their car(s).

Predictability is a conservative virtue.  Most of us don’t like surprises.  Neither do lots of people who aren’t conservatives, when the surprise is an expense they did not anticipate.  As we saw when gas hit $4 per gallon, lower-income households are hit especially hard.

A legitimate question is, “What if the market price for oil rises so high that the price of gasoline will be more than what was planned, even if the gas tax is zero?”  In that case, there would be no way to avoid an unpleasant surprise; a broke federal government cannot afford to subsidize gas.  However, such dramatic spikes in the price of oil have so far proved of short duration.  So long as that remains the case, the system should work most of the time.

Another valid question is, “If under some market circumstances we have to cut the gas tax, how can we know it will produce enough revenue?”  The answer should be that we will average revenue and expenditure projections over several years.  We should be able to borrow from general revenues if we have to in years when the gas tax falls, repaying the loan when it rises above the planned level.  We could, of course, get our projections so wrong that we ran a steady deficit.  In that case, we would have to raise the targeted level for the price of gasoline, and with it the tax.

One objection has no answer: we should have done this decades ago, after the 1973 fuel crisis, or at the latest after the 1979 repeat.  If only we had, our transportation system would be in far better shape today.  Not only would we have had more revenue to build and maintain the infrastructure, we would have avoided our short-sighted binge on pick-up trucks and SUVs, which get poor gas mileage.   In turn, our dangerous dependence on imported oil might have shrunk rather than grown.  Sadly, I have no time machine…and if I did, I would have other priorities, like pushing a young Henry Ford in front of a speeding interurban.

Some other conservatives may howl, “No new taxes!”  (Presumably they are also shouting, “No new potholes!”).  When my old friend and colleague the late Paul Weyrich, whose conservative credentials were beyond question, was on the National Surface Transportation Commission, he voted to raise the gas tax.  Conservatives traditionally believe government expenses should be met with tax revenue, not borrowing.  Borrowing not only raises taxes on future generations, it often results in the cruelest tax of all, inflation, which taxes not only income or consumption but savings.

While we are raising the gas tax, we should introduce another needed reform.  The Highway Trust Fund should become the Infrastructure Trust Fund.  It is not only our highways that are crumbling; so is our whole national infrastructure.  Infrastructure has always been a government responsibility, at least in part; the first Act passed by the First Congress was an infrastructure bill, to build a lighthouse for coastal shipping.  Trade and commerce, which conservatives value, require a sound infrastructure.  Increasing the gas tax, and doing it the right way, is the first step toward getting the infrastructure of our house in order.

How to Fund Transit Operations in a Recession

December 10, 2010 by · 7 Comments
Filed under: Car Stop 

The great recession brought a repeat of a problem built into the way transit operations are currently funded.  All federal funding is for capital costs, not operations (federal funds for operations, begun in 1975, were phased out in the late 1990’s for larger metropolitan areas).  Operations are dependent on local taxes; sales taxes, property taxes, income taxes or some mix.  In a recession, receipts from all those taxes drop in most urban areas.  So do funds for transit operations.

However, a recession simultaneously increases the importance of transit to the public.  People lose jobs and need transit to take them to new ones.  As household incomes drop, people can afford to keep fewer cars (keeping one car for one year costs on average $8,500).  But just as the need for transit rises, transit has to cut service to meet its new, lower operating budget.  That extends and deepens the recession, because it means that people cannot get to jobs.

An obvious but wrong solution to this conundrum is to reinstate permanent federal operating subsidies.  That was proposed in Congress during this recession.  Rightly, APTA opposed it.  Why?  Because if a new flow of funds is permanent, the unions will demand it all be handed over to them in wage and benefit hikes.

In effect, they will say to management, “Pass the money to us or we will make your life a living hell.”  Thanks to ill-conceived federal legislation, the unions must sign off on any transit system’s request for federal capital funds.  With that hand on their throat, management will reply, “Well, it’s not really our money, since it comes from the feds, and we don’t want endless trouble.  So, OK, it’s yours.”  The public will benefit not one bit, and transit service will still have to be cut in a recession.

But there is a way to solve this problem.  When a recession is declared (after two quarters of negative growth), transit systems should be allowed to substitute federal capital dollars they are already receiving for lost operating funds, on a one-to-one basis.  This would prevent operating budgets from dropping just as service becomes more of a necessity to the public.  The substitution should be allowed for several quarters after the recession is declared over, because local tax receipts usually take a while to recover.

The unions would find it hard to grab this money, because it is temporary.  To demand that a new contract include wage and benefit increases from money that will go away would be resisted by management, because those increases would eventually come out of the transit system’s hide.

Similarly, the fact that the federal operating subsidies would be temporary would prevent management from instituting new services that they could not afford.  Nor would they permit management to continue a level of service too high for an urban area whose economy and population are shrinking on a long-term basis.

Let’s hope someone in DOT or Congress picks up this idea before the next recession hits.  While they are at it, they might want to repeal the dumb rule that requires unions approve any request for capital funds.  Most unions’ view of public benefit is the same as Mr. Vanderbilt’s:  “The public be damned.”