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As lead counsel on five amicus briefs for the New York City Bar advocating recognition of same-sex relationships, I do not, to put it mildly, agree with the House of Representatives’s position advocating the constitutionality of the Defense of Marriage Act (DOMA). But law firm King and Spalding’s decision to withdraw from representing the House under pressure from the gay lobbying group Human Rights Campaign is more than a disgrace. It undermines the American system of equal rights under law.

Economic pressure on lawyers representing unpopular clients is nothing new—John Adams lost half of his law practice in retaliation for his defense of British troops accused of the Boston Massacre in 1770. Gay former Clinton bigwig Richard Socarides, who orchestrated the attacks on King and Spalding partner and former George W. Bush Solicitor General Paul Clement for taking the case, eloquently, if inadvertently, revealed the threat: “This is not merely an unpopular cause, this is an un-American cause.” Once fixers like Socarides gain the power to determine who is “un-American” and unentitled to legal representation, we are on the road to Russia and China, where lawyers whose clients upset the authorities can be jailed, beaten, confined at home, or killed.

Attorney General Eric Holder noted that gay advocates’ attacks on King and Spalding and Clement were as improper as attacks that the Right had made on Department of Justice lawyers who had previously represented Guantanamo detainees. Clement, who has resigned from King and Spalding and moved to another firm, Bancroft, put it best: “A representation should not be abandoned because a client’s legal position is extremely unpopular in certain quarters . . . Having undertaken the representation, I believe there is no honorable course for me but to complete it.”

Jay Weiser is associate professor of law and real estate at Zicklin School of Business, Baruch College.

Green Socialism for the Rich

By Jay Weiser

April 4, 2011, 8:24 am

Russell Gold’s “Solar gains traction, thanks to subsidies,” (WSJ, March 31) lists a budget-busting array of residential solar energy subsidies, but actually understates their perverseness. Mr. Shiels and Ms. Kiely, the couple profiled in the article, have a “sprawling ranch house” in Glendale, Arizona (average daily high temperature June-August : 103 degrees), with an annual electric bill that has topped $5,000. Two government incentives for owning such an expensive-to-cool house: income tax deductions for mortgage interest and property taxes.

Having subsidized excessive electricity consumption, the government decides the problem is that it’s the wrong kind of electricity consumption, so Shiels and Kiely eliminate their annual electricity bill by installing $80,000 of solar panels, of which all but $27,200 is paid by subsidies. Assuming a $5,000 annual electric bill and a 30-year useful life claimed by advocates, that’s about a 5 percent return on investment to produce power at twice the cost of fossil fuels — a poor return on a capital improvement. (AEI’s Kenneth Green observes in the article that subsidizing solar makes no economic sense.) This estimate is generous: as Cal State-Dominguez Hills Chemistry Professor Emeritus Oliver Seely notes, performance drops unless the panels are properly positioned to catch the sun, regularly washed, and protected from the encroaching shade of growing trees. Few homeowners will be this fastidious. Even with good maintenance, performance drops over decades.

Worse, the Glendale utility’s solar subsidies are funded by an average $4.05 charge on all customers’ bills. So lower-income customers, who, unlike the subsidy-sucking couple, don’t have $27,200 out-of-pocket cash to buy solar panels, pay higher electricity rates. This is green socialism for the rich.

Jay Weiser is associate professor of law and real estate at Zicklin School of Business, Baruch College.

The High Cost of Gravy Trains

By Jay Weiser

February 14, 2011, 1:17 pm

Notwithstanding his proposal to spend $53 billion on an upgraded national passenger rail system, Vice President Joseph Biden is the problem, not the solution. Each weekday, 30 Amtrak Acela express trains stop in Wilmington, Delaware, despite a 2006 population of only 72,826, perhaps because it used to shave 14 minutes off Biden’s commute from Washington, D.C. as a senator, compared to the Northeast Regional. The more stops, the longer the trip, and the less attractive the train is, compared to other transportation modes.

Biden wasn’t the worst offender, since Wilmington is a significant business center. The late Senator Robert Byrd required Amtrak to maintain passenger service to ten West Virginia towns, including Thurmond (with a population of seven last census; $43 for a 7.5-hour trip from Washington, D.C.). Amtrak also stops in Harper’s Ferry (a 2000 population of 307; $14 from Washington), where John Brown led his raid, giving rise to the Civil War song:

John Brown’s body lies a-mouldering in the grave,
His soul’s marching on!

Senator Byrd’s pork is marching on.

Pew Subsidyscope measured Amtrak’s loss per passenger at $32 in 2008, though Acela made a $41 per passenger profit. The Sunset Limited (New Orleans to Los Angeles) lost a whopping $462 per passenger. And, ominously, given the Obama administration’s West Coast high-speed rail plans, the Coast Starlight (Los Angeles to Seattle) loses $136 per passenger.

Even in the heavily traveled Northeast Corridor, true high-speed rail (which involves dedicated high-tech tracks and rolling stock) would draw only 3.7 million additional passengers by 2030 compared to an upgraded Acela, according to Amtrak. After 2030, Amtrak claims that the benefits of an upgraded Acela will max out, and that by 2040 high-speed rail would draw 10.3 million additional passengers.

The problem is the cost. Using Amtrak’s own projections, the $117 billion (2010 dollars) in infrastructure spending needed for true Northeast Corridor high-speed rail would produce an annual $900 million operating surplus (a princely 0.77 percent annual return). Applying Amtrak’s 7 percent discount rate, true high-speed rail would barely pay for itself (a 1.05 benefit-cost ratio), even though Amtrak includes in the benefits hard-to-measure positive externalities such as travel time savings, energy benefits, commuter network benefits, air system impacts, and market productivity benefits.

Sounds (slightly) good so far. But Amtrak apparently doesn’t include financing costs in its capital cost estimate, which over a 40-year period would be huge. Large public construction projects typically have minimum cost overruns of 30 percent as well as long delays (witness Boston’s Big Dig). The eminent domain litigation for new rights of way across nine states and the District of Columbia would take at least a decade. It often results in vastly higher payments to property-owners than projected, as in New York City’s Times Square project. And if political pressure requires every high-speed rail train to stop in Wilmington and other small cities, many of high-speed rail’s time-saving benefits will evaporate.

Given the risk of eminent domain,  construction overruns, ridership, and positive externality overestimates, a 7 percent discount rate appears wildly optimistic. Since costs are frontloaded and benefits only become significant after 2030, a higher, more realistic discount rate would turn the project into a deficit black hole—even before including financing costs. That’s why the public shouldn’t back expensive, risky projects unless the projected benefit-cost ratio going in, using a discount rate applicable to a risky private development project, is at least 2.5.

Biden did not call for a rationalization of Amtrak’s routes, according to the press reports. He apparently didn’t even invite his son, lobbyist and former Amtrak Board of Directors Vice Chairman Hunter Biden, to participate in his announcement. The $53 billion could pay for nonstop high-speed rail shuttle service between Washington, D.C., and Wilmington every 10 minutes, but that doesn’t make it a good investment.

Image by Slideshow Bruce.

Denunciations of media vitriol in the wake of the Tucson shootings look back to an age of civil media discourse. That golden age existed in living memory: the 1960s and 1970s, when the mainstream media almost universally hewed to a belief in professional, objective, neutral journalism. The news industry could enforce this line, since it was more oligopolistic than at any time before or since. Most cities had only a few dominant newspapers. Television penetrated about 90 percent of American homes by the late 1950s, and the classic era of network television news began in September 1963, when the Huntley-Brinkley Report on NBC and the CBS Evening News with Walter Cronkite expanded from 15 minutes to 30 minutes. These newscasts rapidly became the primary news source for most Americans. No cable news, no Internet.

The result? Two decades of assassinations and assassination attempts against major political figures, starting with JFK just two months after the 30-minute newscasts started, and continuing through Martin Luther King Jr., Robert F. Kennedy, George Wallace, and Gerald Ford, until culminating with the Ronald Reagan assassination attempt in 1981. The no-vitriol news age featured widespread civil unrest, often politically motivated, including Southern white violence against African-Americans during the civil rights era, African-American riots destroying neighborhoods in major cities, and leftist political violence including future Barack Obama associate Bill Ayers’s Weather Underground bombing campaign.

You could even argue that the golden-age mainstream media made violence more likely by shutting out marginal voices; but it’s more likely that the tone of the media has little to do with the violent actions of radicals and crazies.

Jay Weiser is associate professor of law and real estate, Zicklin School of Business, Baruch College.

Michael Barone, in “The Enduring Character of Democrats and Republicans,” identifies contested groups—fulcrums, as he calls them—around which U.S. national politics pivoted for decades in the 20th century. Barone observes that we are currently in a fulcrum-free period. Nonetheless, there are candidates for the fulcrum states of coming decades.

Barone’s electoral regularities over the last century were driven by new groups and the response to them:

• Jewish voters, who by 1900, two decades after the start of their wave of immigration, formed a significant proportion of the New York electorate. At their peak, they were 15 percent of voters in that 47-electoral-vote swing state. Through the 1960s, this pushed politicians of both parties left.

• The re-entry of African-American voters as a significant bloc after World War II, first through the Great Migration in the North (starting during World War I), then in the South following the 1965 Voting Rights Act. African-Americans never became a fulcrum group: the New Deal rapidly shifted them from the Republican to the Democratic column. Instead, after the Voting Rights Act (and mirroring pre-Jim Crow political patterns), moderate Southern whites became the fulcrum. They migrated toward Republicans, except when presented with moderate/Blue Dog Democrats. While presidents Jimmy Carter and Bill Clinton are the recent templates, Missourian Harry Truman, whose forebears had fought for the Confederacy, pioneered. In 1948, Truman tacked Left by advocating African-American civil rights, but retained enough border state bona fides to carry the Upper South, losing the Deep South to Strom Thurmond.

Each of these groups lost their fulcrum role after completing their political migration: Jews became solid Democrats, Southern whites became solid Republicans. While Barone suggests that no current group is geographically concentrated enough to be a long-term fulcrum group, the 2009 American Community Survey estimates show a high Latino concentration in four big states:

• Texas (37 percent);
• California (37 percent);
• Florida (22 percent); and

• New York (17 percent).

In the next few decades, Latino immigrants and their children will be eligible to vote in increasingly large numbers. Latinos aren’t monolithic—Florida’s ethnic Cubans are not California’s ethnic Mexicans, demographically or culturally. Despite their diversity, Latinos are disproportionately working-class and socially conservative, with a significant trend towards evangelical Protestantism or Mormonism.

This makes them potentially sympathetic to Republicans, yet many feel threatened by what Barone calls the Republican “in-group” flavor, a fear fed by immigration controversies. Democrats cater to Barone’s out-groups, but by using the Davis-Bacon Act to funnel jobs to segregated white construction unions, they disadvantage Latinos, who have a disproportionate presence in the hard-hit construction industry.

Of the four big Latino states, California and New York look reliably blue; New York Latinos are also too multiethnic to easily form a bloc. Florida is already a swing state, though its middle-class (and, by now, more assimilated) Cuban community will have a core reason for its Republican allegiance to disappear when the Castro regime does.

Texas, which may grow to 37 electoral votes in 2012, could become the fulcrum. Its Latino population is relatively homogeneous—heavily Mexican in ethnic origin. According to the William C. Velásquez Institute, the Latino share of Texas voter turnout rose from 11.62 percent in 1980 to 20.12 percent in 2008. The Texas Latino vote has been predominantly Democratic, but George W. Bush was able to draw as much as 49 percent in his 2004 presidential race. His gubernatorial successor Rick Perry drew about 25 percent in his victorious 2006 race, with this year’s polls giving him between 24 percent and 30 percent.

As the Texas Latino vote rises, Democrats and Republicans might increasingly compete for the swing portion. But there could be a variation on the post-Civil Rights Era scenario. If the Texas Latino share of total turnout grows to 30 percent in coming decades and remains around 30 percent Republican, then, with African-American total turnout share remaining around 12 percent and voting 10 percent Republican, Republicans would need at least 67 percent of the white vote to win statewide.

Republicans and Democrats might then make the fulcrum the Texas white moderate vote, particularly in the growing urban areas. Austin already resembles a Big 10 college city with better music and 1.5 million bats. Houston and Dallas-Fort Worth, with their gentrifying center-city neighborhoods and attendant amenities (no art lover should miss Houston’s Menil Collection, Dallas’s Nasher Sculpture Center, or Fort Worth’s Kimbell Art Museum) are also becoming more like major cities in other regions.

If Texas is the coming fulcrum state, then George W. Bush, running for Texas governor and then president as an education reformer and compassionate conservative, may have created the template for success.

weiser-constructionMy previous post, “Why the Public Sector Can No Longer Build,” suggested that, given the constraints that make public construction projects enormously costly and slow, the private sector might be able to build them more efficiently on a for-profit basis. Recently, the Wall Street Journal reported that private equity funds have raised $17 billion this year to do just that, even coming up with project ideas on their own and pitching them unsolicited (“Private Investors Push Public Projects”; subscription may be required).

Since they need to generate an equity return for their investors, private projects will have an incentive to screen out inefficient projects that won’t pay for themselves. (In the WSJ article, Mayor of Norfolk Paul Fraim complains that a proposed toll-funded expansion of the Hampton Roads Bridge-Tunnel is vastly inferior to a free tunnel picked up by taxpayers.) With road revenues generating profits, investors will have better maintenance incentives than the public sector. Several infrastructure privatizations, including the Chicago Skyway, were done before the financial crisis stopped the trend.

While this kind of arrangement goes back to the early days of U.S. railroads, it has hazards, as Daniel Walker Howe discussed in What Hath God Wrought: The Transformation of America, 1815-1848. Private equity pay-to-play artists like Steven Rattner may try to induce politicians into sweetheart deals. (This could be the plot arc for a 3-D sequel to Chooch,  Rattner’s foray into the straight-to-DVD world.) And politicians will try to divert proceeds for current spending, as in Robert Poole’s report of a 2006 proposed New Jersey Turnpike sale to cover pension deficits. Still, the risk should be less for new than for existing infrastructure, because if the project doesn’t pay off, investors will take the hit.

Image by flickr user biljacobus1.

New Jersey Governor Chris Christie recently killed a needed trans-Hudson commuter rail tunnel because of cost. He was right. Boston’s infamous Big Dig, originally estimated at $2.5 billion, took almost 20 years to build at a cost of $22 billion, according to the New York Times. The Obama administration pushed through a $230 billion infrastructure package as part of its stimulus plan in early 2009, but the Wall Street Journal reports that as of August 2010, only $66 billion had been paid out (subscription may be required).

The public sector can no longer build. It has tied itself in knots with regulations and interest group special deals, such as the Davis-Bacon sop to construction unions and an astonishing array of environmental assessments, payment rules, appeal rights for rejected contractors, and preference programs for minority-owned firms and small businesses, requiring an army of compliance personnel to administer. Dubious high-speed rail plans are another example: the United States will never be a major market because service would be cost-effective on only a few routes, but instead of buying trains cheaply from a high-volume foreign producer with economies of scale, the Obama administration’s stimulus funding has a 100% Buy American requirement (subscription may be required).

Even worse, the public sector has burned up its borrowing power to build pyramids for political pharaohs rather than economically vital projects. Nationwide, these Wonders of the Modern World have included tomblike, government-funded stadiums worthy of ancient Giza. The New York area is building its own mausoleum: rather than serving its infrastructure-building mission, the Port Authority of New York and New Jersey is spending $3.3 billion—double the per-square-foot cost of new commercially built New York skyscrapers—on the remote, bunker-like, money-burning Ground Zero Freedom Tower.

In the 19th and early 20th centuries, private enterprise, interested in making a profit rather than appeasing interest groups, created a quality rail and mass transit infrastructure funded by user fees. We need to return to that approach.


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