Tag Archives: infrastructure

There Never Was Any Plan: The Story of the entire Orange Blossom Administration

Return with us now to those days of yesterday, if not exactly yesterday, when the Trump declared his health care plan would be wonderful — “No one will lose coverage. There will be insurance for everybody. Healthcare will be a “lot less expensive” for everyone — the government, consumers, providers.”  [Politico]  That was March 13 2017.  Well now, some people have lost coverage, it isn’t going to be any less expensive to get health insurance. In fact, health insurance premiums are expected to increase in California, Connecticut, and Pennsylvania, and it is just as bad elsewhere:

Rate filings to date show that many insurers are requesting large premium increases for 2019. The average requested rate increase was 30.2 percent in Maryland and 24 percent in New York state. Most insurers have specifically cited the repeal of the individual mandate in their actuarial memorandums. In New York, insurers attributed about half their large requested increases to mandate repeal. Even in states with small rate increases or overall decreases, insurer filings state that premiums next year would be significantly lower in the absence of federal sabotage. For example, BlueCross BlueShield of Vermontrequested a relatively small 7.5 percent increase for 2019 but said that its request would have been 2.2 percentage points lower if not for mandate repeal. Peter V. Lee, the director of Covered California, said that his state’s average rate increase of 9 percent “could—and should—have been much lower.” [CAP]

Let’s be serious here. There wasn’t a health care plan, not one with any specifics. There was a ton of “repeal and replace” rhetoric.  Trumpian campaign slogans never translated into much more than the continual erosion of Affordable Care Act provisions in favor of the insurance industry.  There never was a comprehensive plan to deal with market problems, industry sector issues, and the health care needs of some 330 million people in this country.  This administration doesn’t PLAN.

But wait, wasn’t there an “infrastructure plan?”  It would seem there should be since we keep having infrastructure weeks?   On February 11, 2018 the administration rolled out its grand infrastructure proposal [CNN] albeit without any suggestion about how this would be paid for;

“At the Conference of Mayors in January, Gribbin explained that the Trump administration would not be proposing a specific funding mechanism for the infrastructure plan, saying that will be a conversation with Congress. But that discussion just got a lot harder following the passage of a tax plan that is expected to expand the deficit by over a trillion dollars over ten years.” [MoneyCnn]

So, we got “conversations with Congress” about how to implement the “infrastructure plan,” but no infrastructure plan with much of anything except sops to for profit job training centers, lowered work rule and environmental permitting standards, and precious little else.  There never was a real, a comprehensive, plan in place such that the negotiations (or conversations) with Congress would ever be on a firm foundation. Surprised? We shouldn’t be.

Perhaps we should have been impressed with the trade plan?  After all, isn’t this supposed to put America First?  However, our friends and trading partners have been reduced to using color coded cue cards to explain high school level trade concepts to an American president [Marketwatch] and he doesn’t give any appearance he understands  fundamental concepts.  Reason sums up one area of dissonance:

“As Veronique de Rugy noted here a couple of weeks ago, “This is one policy area where he’s been remarkably consistent over the years.” Even when Trump pays lip service to free markets, she observed, it’s with the aim of increasing exports and reducing imports so as to bring down the number he thinks crystallizes our failure and lack of resolve. Trump is not talking like a mercantilist in service of free trade; he is talking like a free trader in service of mercantilism.” [Reason]

Let’s just operate on the simpler assumption — he doesn’t understand the subject; he doesn’t really have a plan; and, all the “motion” that passes for “action” in this administration’s trade policy is tantamount to economic and monetary plate juggling.  As long as he can make grand announcements about vague promises to eventually do something, and none of the plates fall, he’s all good.  Witness the EU deal:  “In reality, the Europeans gave up little except their prior refusal to negotiate under threat. Juncker’s pledge that the E.U. would import more U.S.-grown soybeans, for instance, formalized something that was likely to happen anyway.” [NewYorker]  Always assume: There is NO Plan.

And, about that Immigration enforcement policy which was supposed to have a plan to reunite children with their parents?   As of June 22, 2018 the Trump Mis-administration had to admit it had NO PLAN to reunite all children with their parents. [NYMag]  Really?  Well, not really completely opaque since the policy was all about punishing people who had the temerity to appeal for asylum in the United States who happened to be people with slightly darker skin than their Caucasian cohorts.   Thus if the policy didn’t meet the needs of the children and their parents, then the children could be conveniently re-categorized as “ineligible”  meaning the mis-administration might side step any accountability for their plight. [MSNBC]

Pick a topic, any topic.  Speak of environmental protections, clean drinking water, the protection of wildlife, or the protection of consumers from banking institution predation.  Speak of plans to provide better housing for married members of the US Armed Forces? Speak of plans to offer better, more efficient educational, medical, or dental services to Veterans?  Speak of plans to insure more cities are not plagued with lead in their water supplies?  Speak of how to provide long term assistance to American ranchers and farmers, and to promote the global trade in the crops and animals they raise for sale? Speak of how to research, study, and restrain the levels of gun violence in this country so that we are a safer place for ourselves and our children?  Speak of how we address matters of election security? To address Russian infiltration and attacks on our political institutions?  Pick a topic. Any topic.  Then rest unassured, this administration HAS NO PLAN.

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Filed under Health Care, health insurance, Immigration, Infrastructure, Politics, trade deficit

The Republican Money Pits

money whirlpool So, how many ways can the House GOP find to waste taxpayer money? Let’s start with the House Oversight Committee which wasn’t pleased with the FBI’s conclusions on their manufactured outrage narrative concerning Secretary Clinton’s emails – now they want to haul the FBI director in for a grilling. [TPM]  However, this is only the latest.

Meanwhile, it’s estimated by the Department of Agriculture that 15.3 million children in the United States under the age of 18 live in homes where they don’t have consist access to enough nutritious food to sustain a health life. [FA.org]

It was reported yesterday that House leadership was meeting to discuss whether to launch a formal investigation into the sit-in staged by House Democrats over the failure of the leadership to bring a gun safety bill to the House floor. [TPM]

Meanwhile,  every day 7 children in the United States die in gun violence, and another 41 survive being shot in assaults (31), suicide attempts (1), and accidental shootings (8). [BC.org]

Representative Marsha Blackburn (R-TN) continues to pump for more investigations into … Planned Parenthood. Who would have guessed? Not that the committee hasn’t soaked up some 80% of the supplemental funds for the House Administration Committee, that would be $790,000.  [Esq]

Meanwhile,  the CDC reports that between 2011-2014 the prevalence of children with obesity aged 2-5 yrs. was 8.9%, 17.5% among children between the ages of 6 and 11; and, 20.5% among adolescents aged 12 to 19. [CDC pdf]

The House Republicans racked up approximately $7,000,000 in expenses for its interminable Benghazi hearings.  [BBN]  The State Department spent about $14,000,000 trying to process and present information requested by the Committee, the Pentagon reported about $2 million in expenses associated with the “investigations.”

Meanwhile,  when the FAST Act expires at the end of FY 2020, the Congressional Budget Office projects the average annual shortfall to the federal Highway Trust Fund will grow to $16 billion, [TRIP scrib] and we have a backlog of pavement projects of about $59 billion, and another $30 billion needed to improve and maintain bridges.  This isn’t even county the $100 billion we need for highway system expansion and enhancement. [TRIP scrib]

Is it not reasonable to conclude that the House GOP is far more interested in political scandal mongering than it is in … investigating why 15.3 million children aren’t getting enough nutritious food to eat? Or, why 20% of our teenagers are suffering the health effects of obesity? Or, why we’re losing 7 children every day to gun violence?  Or, why we’re only spending 61% of what we should be allocating to the repair and maintenance of our national highway system?

Is there to be no investigation into why there isn’t adequate affordable housing in one single county in the entire United States? [Fortune]  Why aren’t members of the Congressional leadership interested in hearing why the gender pay gap is the widest for blue collar women? [Detroit News]

Instead, the House GOP seems entangled in the past, engaged in corybantic fits of furor over all but imaginary “threats” while veritably ignoring the very real economic, health, educational, infrastructure, and commercial interests of this country.  A person can reside in the past only so long as the future doesn’t catch up.

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Filed under Gun Issues, Health Care, Infrastructure, Republicans, youth

Distracted to Distraction?

carnival barker What are there? Some 412 days until the next general election, and the broadcast media is behaving like that is going to happen any moment? Perhaps we might call the campaign thus far, as presented by the beltway media and associated punditry, “The Click Bait Campaign?”  There are as many explanations for why the campaign appearances and speeches by Democratic candidates (Clinton, Sanders, etc.) aren’t getting the press coverage garnered by the Republican Clown Car as there are Punditatti to express them.  But while the press-gangs muse about whether Secretary Clinton is seen as “reliable,” or if Senator Sanders is perceived as “electable,” of if candidate Fiorina is “crisp and effective”… or if candidate Trump is “serious”… we’re missing some issues that deserve far more attention than the National ADHD click bait coverage is giving us.  Here’s what I’m waiting to hear more about.

The national economy.  The candidate who can convince me that he or she understands the shape of the American economy is probably the one who will get my vote.  Surely someone can clarify and amplify the changes in the U.S. economy in the past forty years:

“Previously, income grew more or less in step with household wealth. From 1962 to 1966, a period of low inflation and robust economic growth, real private sector wages rose 27.5 percent while real net worth increased 23.6 percent, according to Bloomberg News calculations based on government data. In the five-year period ending in 1996, real net worth gained 15.6 percent while private wages grew 11.3 percent. More recently, the gap between household net worth and wage growth has widened. From 2001 to 2005, the value of household assets minus liabilities rose 16.6 percent after inflation. Private sector wages rose just 2.7 percent.” [Bloomberg 2006]

Thus we  have an hour-glass economy, [Salmon, Reuters] one in which the wealth is concentrated at the upper end of the scale, and more occupations continue fall into the low-income levels. [Salon]  Senator Sanders has made continuous reference to the Income Inequality Gap, [Sanders] and Secretary Clinton has made this topic part of her repertoire on the campaign trail. [WSJ]

By February 2015 someone on the Republican side of the aisle noticed the Income Inequality gap (hour glass economy) [NYT] and Senator Marco Rubio attempted to slot into the issue by suggesting expanding the Child Tax Credit and cutting the tax brackets from seven to two (15% and 35%) unfortunately there’s no suggestion as to how to pay for this. Nor does he specify how to pay for expanding tax credits to childless adults; put simply, his arithmetic doesn’t work.  [NYT]  And, then there’s the rather tired Republican “promise” to create “flex funds” – another way of expressing the block grant anti-poverty programs proposal which lends itself nicely to eventual (and predictable) cuts to the grants by Congress.  In short, there’s nothing much new here: Credit Card Conservatism, and cuts to anti-poverty programs.  Meanwhile, we have the Limping Middle Class.

Perhaps we need a What To Watch For List?

  • Which candidates are speaking of a taxation system which rewards work and not just wealth?
  • Which candidates are addressing the decline in middle class income jobs in this country?
  • Which candidates are advocating equal pay for equal work? And/or an increase in funding for child care?
  • Which candidates are proposing an increase in the federal minimum wage?
  • Which candidates are suggesting we need to address the restoration of the manufacturing sector in this country?
  • Which candidates are supportive of workers’ rights to organize and form unions to bring more balance with multi-national corporations?
  • Which candidates are advocating funding for the improvement and maintenance of our national infrastructure?

It may be difficult to listen for these points since the media seems intent on speculating about the “electoral” effect of what candidates are proposing instead of explaining or clarifying the implications of their policy positions.  Meanwhile the media focuses on “Abortion!” or the “Planned Parenthood” hoax videos – the “Email,” the “Islamists!” the Whatever Will Get The Clicks of the Day.  A little over 412 days from now Americans will vote, and we’ll probably cast ballots based on the issue that is and remains the top American concern: It’s the Economy Stupid. Or, It’s the Stupid Economy.

Recommended: Robert Reich, “The Limping Middle Class,” New York Times, 9/03/11.  Danny Vinik, “Marco Rubio…”, New Republic, 1/14/15. Brendan Nyham, “Why Republicans are suddenly talking about economic inequality,” New York Times, 2/13/15.  Andrew Leonard, “The Hour Glass Economy,” Salon, 9/13/15.  Future of Jobs, “In an Hourglass Economy,” transcript, Marketplace.org, 8/2011. Bernard Starr, “Corporations Plan for a Post Middle Class America,” Business, Huffington Post, 4/6/12.  Mollie Reilly, “Thomas Piketty calls out Republican hypocrisy on income inequality,” Huffington Post, 3/11/15.

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Filed under Economy, elections

Infrastructure Spending: Saving Pennies Costs Dollars

Infrastructure Spending

The Hill reported on the appropriations bill for transportation and housing last week:

“The House late Tuesday passed the fifth of a dozen spending bills for fiscal 2016 to fund transportation and housing projects.

Lawmakers approved the $55.3 billion measure by a razor-thin margin, 216-210, after rejecting amendments from Democrats that would have increased funding for Amtrak and the D.C. Metro, as well as doing away with a provision restricting travel to Cuba.

All but three Democrats voted against the bill, while all but 31 Republicans voted in favor. Lawmakers could be seen gazing up at the gallery displaying their votes as the bill appeared close to failing.”

Yet the meager spending for infrastructure needs was entirely too much for Heritage Action, the ultra-conservative lobby arm of the Heritage Foundation.  True to its corporate oriented interests, if anyone in the gallery was representing Heritage Action, they were looking for: the closing of the Federal Transit Administration; the elimination of all operating and debt service grants to Amtrak; the elimination of the Maritime Administration; the privatization of the Saint Lawrence Seaway Development Corporation; the elimination of the Transportation Investment Generating Economic Recovery (TIGER) grant program; eliminating the Essential Air Service Program; privatizing the FAA; shuttering the Appalachian Regional Commission; and eliminating subsidies for the D.C. Metro.  Heritage Action must be smiling at Representative Mo Brooks:

“Rep. Mo Brooks (R-Ala.) offered two amendments to slash Amtrak funding further. His first proposal, rejected 143-283 with 99 Republicans in opposition, would eliminate all $288.5 million for Amtrak operating grants. The other amendment, defeated 139-286, would strike the entire $850 million allocation for Amtrak capital and debt service grants.” [TheHill]

At least someone recognized that approximately 840,000 people commute to work on rail lines every work day. [Cap] Nevada Representatives Heck, Hardy, and Amodei voted in favor of the funding bill.  [HR 2577 rc 329]  Representative Titus voted against this measure to further diminish investment in our national infrastructure.

Pie in the Sky Meets Rubber on the Road

Perhaps there’s something about buzz words (Freedom and Free Market for example) which tend to obscure the obvious – that the failure to invest – as a nation – in our infrastructure has a negative effect on our economy.

Let’s stay with the rail line topic for a moment. The need is readily apparent in the Northeast Corridor,  which is:

“The most heavily traveled portion of the national passenger rail system is the Northeast Corridor, or NEC, which stretches from Washington, D.C., to Boston, Massachusetts. The Northeast mega-region is home to one in every seven Americans, or more than 50 million people. All told, the region accounts for $1 out of every $5 of economic productivity.” [Cap] (emphasis added)

One region accounts for 20% of our total economic productivity.  So, how do people get to work (to be productive) in this region?

“As highway congestion within the region has grown, so has Amtrak’s role as an efficient alternative to driving. In 2001, Amtrak provided 37 percent of combined air and passenger rail trips between Washington, D.C., and New York City. By 2011, its share of combined service had risen to 75 percent. The mode share growth for the segment from New York to Boston is also impressive. In 2001, Amtrak provided just 20 percent of combined rail and air trips. This share grew to 54 percent by 2011.” [Cap]

And, it’s not just congestion on the highways that is a problem, airlines are experiencing it as well.  The Bureau of Transportation Statistics reported on May 14, 2015 that:

“Load factor in February (84.2) was higher than in any month since the peaks in January and February 2014. The February 2015 load factor was the third highest all-time, just below the first two months of 2014 (Table 2). Load factors have generally increased since the recession because passenger travel has increased at a faster pace than capacity. In February, RPMs (revenue per mile) were at the second highest level, down from the all-time high set in December but exceeding January, the third highest month. The last 10 months, starting with May 2014 through February 2015 are the 10 all-time highest months for RPMs (Table 4).

“Capacity declined in February from December, the highest all-time level, and from January, the eighth highest month, revised from last month’s Air Traffic press release. November, December and January are the only post-recession months among the top 10 for capacity, showing that after six years, capacity has returned to pre-recession levels (Table 6). Systemwide enplanements in February were the highest since the recession. February international enplanements were the fifth highest all-time. Domestic enplanements have been rising slowly but remain below pre-recession levels. Domestic enplanements in February were at the highest level since March 2008 (Tables 8, 10, 12).” [BTS]

Translation: Loads are up, capacity is down, and we’re all trying to fly at rates not seen since the Recession of 2007-2008.   There’s always the family wagon?  In 1980 we had 9,215 miles of interstate highways, and another 6,774 miles of “other freeways and expressways,” by 2013 these numbers grew to 17,866 interstate miles and another 11,602 in the “other” category [FHWA] And we can jam them up on any given rush hour and holiday weekend. These numbers actually don’t mean all that much until we take into account our attempts to maintain this system with a Highway Trust Fund which has a closing balance down 17.8% from last year. [FHWA]

It’s all well and good to offer Pie In The Sky privatization schemes and other “market driven” fantasies, however what our economy needs is a nationwide transportation system which gets people to work and products to market.

“Highway bottlenecks affecting freight are a problem today because they delay large numbers of truck freight shipments. They will become increasingly problematic in the future as the U.S. economy grows and generates more demand for truck freight shipments. If the U.S. economy grows at a conservative annual rate of 2.5 to 3 percent over the next 20 years, domestic freight tonnage will almost double and the volume of freight moving through the largest international gateways may triple or quadruple.” [FHWA]

The following map from FHWA shows where these bottlenecks are at present, not that we couldn’t guess:

Highway bottlenecks Every time a freight load is delayed in these interchange bottlenecks it costs money, and there are other kinds of bottlenecks as well. Steep grade bottlenecks costs in 2006 (12% of total truck hours of delay) were  about $32.15 per hour.  Signal bottlenecks can also cost approximately $32.15 per hour.   If we believe in a “market based” economy then perhaps we ought to think of the market inefficiency created by various and sundry bottlenecks which are costing us $32.15 per hour for Nothing.  Now, think of a truck load of goods experiencing an interchange bottleneck, a signal bottleneck, and a steep grade bottleneck?

We could be working on these bottlenecks, and on the maintenance of our highway system – but that would cost money, including money from the TIGER grants from the Department of Transportation.  (TIGER = Transportation Investment Generating Economic Recovery) So, what did the House do?

“The overwhelmingly popular TIGER program would shrink from $500 million to $100 million. In addition, the size of grants would be far smaller, within a range of $2-15 million, down from last year’s range of $10-200 million. This year’s T-HUD also reduces the share that the federal government will cover for TIGER projects, from 60 percent to 50 percent, requiring more local or state money to be brought to the table.” [T4Am]

Remember, the idea of a national transportation system in a modern economy is to get goods to a nationwide market.  Across the rails, over the highways, or via air freight, none of which the House of Representatives thought worthy of increased appropriations – in the “interest” of fiscal austerity.  It’s penny wise and pound foolish, as the old saw goes, and worse still it places the seamless transportation of both workers and the products they make increasingly at the mercy of state and local governments which are unable to raise the funds to complete the necessary maintenance and improvement projects.

It’s obvious what outdated and uninspected components can do to a transportation system – train wrecks, highway deaths, delayed freight, air accidents.  It’s not so obvious when the drain is hidden from view – hours wasted in any one of the three types of bottlenecks measured by the Federal Highway Administration, hours and money wasted in unnecessarily long commutes, congestion delays at airports and railway freight terminals … Time is money and we’re wasting both commodities.

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Filed under Infrastructure

The Wreck of the Penn Central: Conservatives want to replicate another financial debacle?

Rail logos Two days ago Fox News was happily promoting the privatization of Amtrak. [C&L]

“Gasparino went on to promote privatization. He said that the northeast corridor, between Washington and Boston, is a “very profitable service” and “there is no rationale why that service cannot be privatized. …If you put private management in there, it would probably be even more profitable and they could pay for even more upgrades.” “I’m not saying privatize the whole thing, at least not at first,” Gasparino said. But he insisted that privatization would make for “a Jet Blue of rail traffic.”

I admit to having “senior moments,” but I haven’t forgotten the fact that the reason Amtrak was created in 1971 was because of the FAILURE of private corporations to run the railroads.

A Bit of History

Once upon a time there was the Penn Central Transportation Company.

“The Penn Central merger was consummated on February 1, 1968, between the Pennsylvania Railroad and the New York Central Railroad. At the end of 1968, the New York New Haven & Hartford Railroad was merged into PC by order of the Interstate Commerce Commission.

Financial problems plagued the PC during its first couple years. Even though the merger had been planned for 10 years (on and off) before its inception, many problems faced the combined companies, such as incompatible computer systems and signaling systems.

Penn Central also invested in other companies, such as real estate, pipelines, and other ventures. The idea was to create a conglomerate corporation, with the railroad as one part of it. This diversification program, even 20 years later, is a point of debate over the fall of the PC, as some people say funds that were invested in other companies could have been used to run the railroad.” [PCRRHS]

Take a measure of mergers/acquisitions, add “diversification,” and … the world watched as the newly formed company created “dismal numbers.”  Enter the investment bankers. There were warnings.  One warning came before the big merger, in which it was noted that Penn Central had more than $1 billion in debt which would mature by 1982. When Penn Central finally went into bankruptcy it’s long term indebtedness, including obligations due in one year was an eye-popping $2.6 billion. $1 billion was due in five years; $228 million fell due in 1970; $156 million was due in 1971; $172 million came due in 1972; $270 million due in 1973, with another $160 million due in 1974. [Wreck of PCentral]

How this happened should sound eerily familiar:

“…economist Henry Kaufman says of this period in the late 1960s, “I watched with growing alarm as sources of corporate borrowers – in an effort to circumvent regulatory lending constraints – piled into the commercial market as issuers. The trend continued, and culminated in the collapse of the Penn Central Railroad.” [BuyHold]

And collapse it did, into the largest bankruptcy the nation had experienced up to that point, but not before:

“Penn Central’s subsidiaries were stripped of their treasuries in order to prop up PC’s own earnings. For example, New York Central Transport, a trucking subsidiary, had profits of only $4.2 million and yet paid $14.5 million in dividends to the parent. Despite this kind of maneuvering, the dividend on Penn Central common was slashed from $2.40 to $1.80 in 1969. Chairman Saunders vowed to hike it back up, soon. [It was later learned, however, that insiders at PC were unloading their company stock and bonds while all of this was going on.” [BuyHold]

We had a batch of corporate borrowers trying to get around regulations on lending, combined with a company fiddling the books trying to prop up its earnings reports, and taking on massive amounts of debt.  What could possibly go wrong?   The answer, of course, was “everything.”  June 21, 1970 the company declared bankruptcy.  What of the passengers?

“October, 1970, in an attempt to revive passenger rail service, congress passed the Rail Passenger Service Act. That Act created Amtrak, a private company which, on May 1, 1971 began managing a nation-wide rail system dedicated to passenger service.” [Amtrak]

Where was Wall Street?  Again, Wall Street didn’t appear to be all that helpful, except perhaps to themselves.  Goldman Sachs won “the opportunity” to underwrite Penn Central’s commercial paper in 1968.  We can almost guess what happened next:

“For large fees, Goldman sold the paper to its clients, including big companies such as American Express and Disney, and smaller ones such as Welch’s Foods, the grape-juice maker, and Younkers, a Des Moines retailer. Welch’s and Younkers, particularly, counted on the fact that Goldman told them that the Penn Central paper was safe and could be easily redeemed. Welch’s invested $1 million — some of it payroll cash — and Younkers invested $500,000, both at Goldman’s recommendation.” [TribLive]

After the Penn Central’s bankruptcy filing the SEC conducted an investigation.  This, too, is a bit too common for comfort:

After Penn Central filed for bankruptcy, an SEC investigation discovered that Goldman continued to sell the railroad’s debt to its clients at 100 cents on the dollar — even though, by the end of 1969, the firm knew that Penn Central’s finances were deteriorating rapidly.Not only was Goldman privy to Penn Central’s internal numbers, it also heard repeatedly from the railroad’s executives that it was rapidly running out of cash. [TribLive]

By February 1970 Goldman had about $10 million in Penn Central commercial paper on its books.  On February 5, 1970 Goldman Sachs demanded that the railroad buy back that $10 million inventory at 100 cents on the dollar even though it obviously wasn’t worth that much at that point. Goldman Sachs didn’t tell any of its clients about the offer, nor did it tell the customers that it had already taken care of its own interests before theirs.  Plus ca change, plus c’est la meme chose? [see also: WaPo 2102]

It doesn’t take too much imagination to see how (1) a boom in commercial paper – indebtedness; combined with (2) underlying debts incurred in operations, mergers, and acquisitions; abetted by (3) investors seeking ways around regulations; and (4) investment banking more interested in self preservation than best business practices combined to create a blockbuster bankruptcy. 

But yet, we have the Cato Institute, the bastion of conservative economic imagination pontificating:

“Budgetarily, Amtrak has become a runaway train, consuming huge subsidies and providing little or no return. Four decades of subsidies to passenger trains that are many times greater than subsidies to airlines and highways have failed to significantly alter American travel habits. Simple justice to Amtrak’s competitors as well as to taxpayers demands an end to those subsidies. The only real solution for Amtrak is privatization.”

The conservatives are missing several points.  The point may not be to “alter” travel habits – but to maintain services which people were already using for their commute to work, especially in the Northeast Corridor.  The rationale for the act included stabilizing services for passengers, the general public, and shippers. [RRA]

Going to Court

Amtrak is a private corporation, albeit one with some very special features.   If we want to get technical about  it, the official name is the National Railroad Passenger Corporation.  In fact, the point was driven home in a legal case two years ago in which the private nature of the NRP Corporation was pivotal:

“A three-judge panel of the U.S. Court of Appeals in Washington today said Congress had improperly delegated to Amtrak, a private corporation, the power to draft performance standards that affected companies whose tracks the passenger carrier uses. Amtrak trains have legal priority over freight.

“Though the federal government’s involvement in Amtrak is considerable, Congress has both designated it a private corporation and instructed that it be managed so as to maximize profit,” U.S. Circuit Judge Janice Rogers Brown said in the ruling.” [Skift]

The case got the attention of the U.S. Supreme Court. [FRAdvisor] Enter the “fish or fowl” phase.  Roger’s decision was “vacated and remanded” on a 9-0 decision.  Could Amtrak “metrics and standards” be set aside because the Congress unconstitutionally delegated power to a private corporation? And the Court said:

“No. Justice Anthony M. Kennedy delivered the opinion for the majority. The Court held that, for purposes of determining the validity of the metrics and standards, Amtrak is a governmental entity. The members of Amtrak’s Board of Directors are appointed by the President and confirmed by the Senate, and Amtrak is required by statute to pursue broad public objectives. Because of Amtrak’s significant ties to the government, Amtrak is not a private enterprise, and therefore, treating Amtrak as a governmental entity is consistent with the constitutional separation of powers.” [Oyez]

Therefore, what the Cato Institute and its allies are arguing is that the decision in DOT vs. Association of American Railroads (49 USC 24301) should be overturned and the railways should exist without any “regulations” imposed by Amtrak which would be applicable to freight haulers.   Extrapolating the Cato’s position to absurdity, under their reasoning we could revert to the wonderful old days of differing track gauges. 

Riding the Thin Rail

However, perhaps the most crucial point the conservatives are missing isn’t about the legislative and legal nature of the National Railroad Passenger Corporation, but why this entity was established in the first place.  Although a person might think we’d have learned something from the financial debacle of 2007-2008, the calls to privatize Amtrak have a remarkably familiar ring.

In a financial atmosphere in which commercial debt is treated as fodder for the creation of derivative financial products, and trading is barely regulated in the face of financialist opposition, and mergers and acquisitions generate incentives for corporate mismanagement, and there isn’t an old school investment bank left on the American landscape because of the casino mentality of Wall Street during the Housing Bubble, are we truly going to believe that privatization is the panacea for all that ails the passenger rail system in the United States?

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Filed under Economy, financial regulation, Infrastructure, public transportation

It’s A Train Wreck?

Amtrack wreck Reno The cable news networks are off on their usual “Who’s To Blame?” penchant in reporting tragic news, and in the midst of the palaver over the Pennsylvania Amtrack wreck there’s the usual lack of context.

For example, has the media told us there were 220 derailments in 2012, 191 in 2013, and 228 in 2014? [FRA]  Or, when looking at accident or incident causation we have the following information at hand? [FRA]

Cause 2012 2013 2014 2015
Track 112 91 87 101
Human 98 96 132 112
Equipment 39 33 47 44
Signal 12 9 8 6

What is interesting about this abbreviated table is the the track and human failure seems to predominate, while equipment and signal failures account for substantially less than the  first two factors.  (Miscellaneous factors are not included in this summation.)

There’s another way to observe train accidents, by state, and we find the following among the states with the highest number of accidents:

State 2012 2013 2014 2015
California 17 20 13 18
Illinois 24 33 50 38
Minnesota 10 9 4 3
North Dakota 5 4 6 4
Nebraska 13 7 8 11
Ohio 14 10 15 14
Texas 35 22 31 37

*This summary doesn’t include crossing accidents.

The Federal Railroad Administration also keeps records of fatalities and injuries, and this is what garners most attention from the news media. Again, we can look at the record over the last four years, noting that those numbers for 2015 are preliminary.

Fatalities 2012 2013 2014 2015
California 19 12 18 25
Florida 4 8 7 4
Georgia 6 4 5 3
Louisiana 3 2 1 6
New York 4 7 1 12
N. Carolina 4 8 5 5
Ohio 7 3 5 4
Pennsylvania 3 4 3 3
Massachusetts 3 1 0 0
Texas 11 7 4 18

*PA will add 8, those fatalities in the Amtrak accident near Philadelphia, May, 2015.

What we might expect to find are a higher number of fatalities in the Northeast Corridor, where ridership includes commuting,  but the reports indicate higher numbers generally in California and Texas.  If the accident numbers (in terms of passenger travel) appear to be increasing, so is the ridership, as shown from BTS (interactive) figures from 2000 to 2015.  The light blue line doesn’t include seasonal adjustment.

Rail passenger miles

The general trend shown by the unadjusted and adjusted numbers indicates more people using rail transportation since 2000. In calendar year 2006 the FRA reported 602,280,892 passengers transported; the number of passengers transported as of the end of calendar year 2014 was 694,507,965.

FRA regions map And, where is the ridership?  Where we would expect it.  Region 1 reported 369,467,363 transported, Region 2 reported another  83,444,579.  Region 7 reported 99,512,195; Region 6 reported 56,260,844.  Region 4 reported 41,748,653. Region 5 reported 32,943,327.  Region 3 reported 5,938, 814; and, Region 8 reported the lowest passenger traffic at 5,149,686.

What Use Can We Make Of The Numbers?

First, if we take a look at the ridership numbers (which don’t include local transit services) and the reported fatalities,  it’s reasonably clear that passenger travel is remarkably safe. Certainly safer than travel by private automobile.

Secondly, we can question the popular opinion offered to explain the political inaction on public transportation funding – like for Amtrack – that low funding is because most of the country isn’t using passenger rail service.  Granted that Regions One and Two (Northeast Corridor) are reporting the highest usage, but quite obviously Region Seven (California) and Region Four (the upper Mid West) are contributing significant ridership numbers.  The assertion that low ridership may equate to low support could only true for the Southeast and the Northwest.

Third, if we look at accident causation, it’s worth repeating that track issues and human error are the most common.  Therefore, while it’s useful to speak of new and better gadgets for passenger train safety – and we should be applying the best technology we can devise for passenger safety – it’s also true that suggestions like putting a second person in the cab, or promoting better track maintenance should be part of the larger conversation.

Fourth, if we focus down on the human error factor, we should note the 2006 FRA study of the fatigue factor:

“As part of the study, researchers analyzed the 30-day work-schedule histories of locomotive crews preceding approximately 1,400 train accidents and found a strong statistical correlation between the crew’s estimated level of alertness and the likelihood that they would be involved in an accident caused by human factors, FRA said.”

We can delve into the details to substantiate this conclusion:

The risk of human factors accidents was elevated at any effectiveness score below 90 and increased progressively with reduced effectiveness. At an effectiveness score ≤ 50, human factors accidents were 65 percent more likely than chance. Human factors accident risk increases reliably when effectiveness goes below 70, a value that is the rough equivalent of a 0.08 blood alcohol level or being awake for 21 hour following an 8-hour sleep period the previous night. Below an effectiveness score of 70, accident cause codes indicated the kinds of operator errors consistent with fatigue, confirming that the relationship between accident risk and effectiveness was meaningful. [FRA]

If preventing the next accident is our major concern then addressing the fatigue factor is crucial, and yet we have a situation in which railroad employees and management are at odds over the safety rules. For example, SEPTA (the Southeastern Pennsylvania Transportation Authority) wanted to relax fatigue abatement rules in 2014:

“Regional Rail engineers have asked federal regulators to require SEPTA to follow a safety rule designed to limit fatigue. SEPTA wants the Federal Railroad Administration to renew a waiver that the transit agency has had from the work rule for two years. The Brotherhood of Locomotive Engineers and Trainmen asked the federal agency to deny SEPTA’s request and hold a public hearing on the issue, citing accidents at other railroads caused by fatigued engineers.” [Phl.com]

And the reason for the waiver request?  That can be safely predicted:

“SEPTA said the waiver was “in the best interests of the riding public from both a service (more employees available for duty to address service demands) and economic standpoint (reduced labor costs by eliminating a potential need to hire additional employees).”

“Maintaining tight controls on labor expenses and operating expenses is one way SEPTA manages to fulfill that obligation [to operate efficiently],” SEPTA said in its request for the waiver extension.

“SEPTA estimates one additional crew costs approximately $150,000 annually, so even one new employee could cost SEPTA hundreds of thousands of dollars in labor expenses in a relatively short period of time.”[Phl.com]

In short, to address demands for service it was deemed better (from an economic standpoint) to have fewer workers working longer hours, in spite of the FRA report eight years before demonstrating the decline in the probability of passenger safety.  Is the “mission” of SEPTA to function “efficiently” or “safely?”

Fifth, returning to the gadget fixation there’s an abiding American proclivity to believe that we can apply tools to fix human problems.  It’s one of our basic strengths – we have a problem, we invent a tool to mitigate or solve it.  The news media has been abuzz about the Positive Control Train System, but while we have this tool in the box it’s not been applied universally.  The recent wreck provides a case to the point:

“In 2008, Congress ordered the installation of what are known as positive train control systems, which can detect an out-of-control, speeding train and automatically slow it down. But because lawmakers failed to provide the railroads access to the wireless frequencies required to make the system work, Amtrak was forced to negotiate for airwaves owned by private companies that are often used in mobile broadband.

Officials said Amtrak had made installation of the congressionally mandated safety system a priority and was ahead of most other railroads around the country. But the railroad struggled for four years to buy the rights to airwaves in the Northeast Corridor that would have allowed them to turn the system on.” [NYT]

This junction of private vs. public concerns was literally a wreck waiting to happen? Could Congress have made the wireless frequencies immediately available to the railroads? Probably yes. Would they buck the powerful lobbying interests of the mobile broadband providers? It doesn’t look as if they did.

Sixth, in the interests of not perpetually “fighting the last war,” or focusing too narrowly on factors associated with one instance of a rail system problem, we need to be cognizant of the other common factor in derailments and related accidents – the track inspections.  Perhaps it’s time for a report along the lines of the Deep Dive study conducted on the Metro North system, which called for Metro North to “create a plan for the use of advanced (track) inspection technology, ensure track is maintained to Metro North Track Standards, collaborate with labor unions to increase the availability of off hours maintenance time, improve training programs for track inspection and maintenance, and to analyze train schedules to determine whether there is sufficient time for inspection and maintenance of track.”

It’s not reassuring to find out that Minnesota has only one track inspector for its 4,500 mile of track. [MST]  Pennsylvania has 5,600 miles of track and “There are currently six PUC railroad inspectors who each focus on a specific discipline (track, operating practices, hazardous materials, grade crossing and motive power and equipment). PUC inspectors work in close coordination with FRA inspectors to ensure safe train movements throughout the entire state.” [PPUC]  Please tell me there are more than 6 people working on inspections!  The recent controversy over the Oil Trains moved New York to conduct an examination:

“Governor Andrew M. Cuomo today announced completion of the latest round of targeted crude oil tank car and rail inspections, which uncovered 100 defects, including eight critical safety defects that require immediate action. The inspections were the latest part of the Governor’s push to protect New Yorkers from the potential dangers associated with the transport of crude oil by freight rail companies. State and federal teams examined 704 crude oil tank cars and approximately 95 miles of track in these inspections.”  [Gov.NY]

Perhaps the Amtrack accident might move the states to engage in comprehensive reviews of track safety?

Finally, we need to address some philosophical and political problems.  What is the “mission” of our transportation system, especially with regard to our railroads?  As usual, there are more questions than answers.

Is the mission, to replicate the focus as illustrated by SEPTA  on “management efficiency,” or is the mission to provide safe, reliable, and modernized transportation for passengers and freight?  Have we down-sized employment levels of engineers and track inspectors to a point where we are being penny wise and pound foolish?  Are we requiring adherence to the best safety standards or simply accepting what is “economical” at the moment?

Have we placed impediments to modernization such as the implementation of Positive Control systems? Have we also jeopardized other safety considerations and systems by emphasizing privatization at the expense of public safety and the economic benefits of infrastructure improvement?

Are we perceiving our transportation system and infrastructure as essential to the economic well being and growth, or are we limiting our vision to the quotidian arguments between labor and management?

The national conversation about railway infrastructure and its management needs to be far broader than the current fixation on how to prevent wrecks.  That train left the station long ago.

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Heads Up Items: Infrastructure, ALEC, Social Security, Financial Reform

Jig Saw Puzzle

There are items which don’t lend themselves to a full blog post, but are of immediate interest. Here’s a sampling:

#1. ALEC may be down to nine big corporate sponsors, but that doesn’t mean it doesn’t have a full agenda for its 2015 legislative season.  Watch for bills, often crafted from ALEC ‘models,’ on pre-empting efforts to increase the minimum wage. depriving low wage workers of health insurance, deregulating electronic cigarettes, protesting global taxes on tobacco, regulating ride share companies, lowering certification standards for dental practitioners, limiting the ability of individuals or businesses to dispute a denied property insurance claim, and school privatization.

#2. We’d probably ought to be watching the state of pipeline infrastructure in this country.  The current pipelines are aging, and some were constructed during the 1950s when low frequency electric resistance welds were popular – these welds are failing.  There’s more information from Inside Climate News, and from the Department of Transportation’s Pipeline and Hazardous Materials Safety Administration reports.

#3.  There are inklings that the Republicans in Congress are planning to turn discussions of Social Security into an Annual Crisis – such as they’ve done with debates about the budget deficit and the national debt.  The process is almost an art form: Declare a CRISIS; mount a full-on publicity campaign complete with constant press releases, comments from members of Congress, and pundits on television; ignore factual refutation and information; then use the CRISIS to leverage concessions from the Democrats.

#4. Expect the Republicans in Congress to step up their attacks on the financial reform regulations enacted in the Dodd-Frank Act.  For some excellent background information see the conversation between Bill Moyers and Simon JohnsonSalon also has a piece on the same subject, and the New York Times weighs in as well.  If you missed these, it might be a good idea to have a click and read.

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Filed under Economy, financial regulation, Infrastructure, Social Security