Monday, February 25, 2008

Who to build, how to build, where to build? 

As we continue the discussion of the transportation budget today -- liveblogging going on at Let Freedom Ring and Ladies Logic capturing everyone's attention (UPDATE: The override passes) -- it's worth pondering some points that have bothered me. I find as I go through this debate to find confusion on the terms public provision and public financing, about transportation versus transit, and over whether some people have plans. Let's pose this as a series of directed questions.
  1. Does Minnesota need more money spent on transportation? Now it is popular for many to focus on where the money we already budgeted was spent: "MVST was supposed to be a fix, but it isn't." "The Legislative Auditor tells us we built too many new roads and maintained too few existing ones." "Our bridges are falling down." "You should have spent less on bike trails." None of these points is now relevant. They are sunk costs. The question before us is simply, should we budget for building new roads and bridges? Since Gov. Pawlenty proposed bonding for bridges, he certainly wants more spent. The House caucus has repeatedly said there's a compromise available, which surely means more to be spent. So the argument isn't over whether to build more roads and bridges. That's been agreed to by all parties. You want to punish for past decisions on bike trails or MVST? There's an election for that. As Mitch pointed out, you had a chance last time.
  2. Are we buying the right roads, bridges, etc., or is this another transit boondoggle? The MnGOP has been labeling this the transit tax. Probably so, but how many of the legislators live in the seven county area? If you wanted to stop the transit boondoggle, the only way would be to stop awarding Senate seats by population, and switch to one vote per county or some other geographic division. The next apportionment in 2010 will probably move more legislative districts into the second ring suburbs -- what do you suppose that does to demand for rail projects? So my point is that outstate will always be in the minority on transit; the governor's veto only requires the Legislature to hold party ranks together and to bribe a few legislators -- which they've done. That's not extortion or coercion, that's plain old logrolling. Some payment is already in HF 2800, and others will be forthcoming in the bonding bill that the Legislature will now re-write; after all, there's money to spend!
  3. No, but really, are they in the right place? But that doesn't mean we bought the package of roads and bridges that we should have bought. The problem with government provision of public services is that it provides goods in return for political support, not for places where benefits exceed costs. If you want the latter, don't expect government to do it for you. Governments have no profit motive and thus no assurance that what they spend will have the value provided for. Jim Fedako writes at the Mises blog:
    The difference between government and business is the chain of taxation versus the dollar vote. The public school district taxes regardless of value produced. Once the bond issue passes the voters, the bill must be paid, to be enforced by the long, strong arm of government. On the other hand, the entrepreneur must face the consumer every day, product in hand, hoping to make a sale. The consumer can as easily bypass as enter his store, based on a whim if he so chooses. The taxpayer? Well, just try to hide.
    Did we build bike trails that provide too few benefits for their cost? Are we paying for trains that have low ridership? When private firms do this, they fail. Government passes another tax.
  4. How would we prefer to pay? Public finance students are given a set of lectures on the benefit versus ability-to-pay principle. I have argued before that since many people will use the roads a generation from now it made sense via the benefit principle to bond for those roads and bridges. The Legislature, seeing the bonding bill as an opportunity for other transfers of public money to political constituencies, chose instead to use something closer to a current benefit principle rather than future benefit. The gas tax is preferred by some for roads because people who buy gas use roads, so they are the ones benefiting from their construction. But when goods are shipped to us in Minnesota we now either pay for transporting them from out-of-state or we get fewer goods. And sales and excise taxes are usually seen as being regressive both on firms and on households (any wonder why the big hitters in the Chamber of Commerce like this bill? It's anti-competitive.) Indeed, the three most regressive taxes in Minnesota are the cigarette tax, the gambling tax, and the motor fuels excise tax. At least one might make the argument for the first two as reducing bad behavior. Does the DFL think driving is a bad?
The argument was not about past decisions. It was not about whether to build roads, and it was not really even about transit versus roads and bridges. Those decisions were already baked in the cake. The decision was over who will pay. Now we know. The question will be whether anyone has enough votes to demonstrate this was not the politically optimal solution.

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