The Services should just acknowledge the reality of contracting anything in the seven-figure realm, and change initial award announcements to read: “The Initial Conditional Award of Contract XYZ is to Defense Conglomerate 1369. Work will commence after all Congressional Outraged Publicity-Seeking Posturing is exhausted and Butthurt Losing Contractor Challenges are adjudicated. We hope to run both those actions concurrently, and anticipate work will commence a minimum of 3-5 years behind schedule and costs grow at an exponential rate during this period, hence the budget supplemental is already in draft form for Newsies, Think Tanks, and Outraged Congresspersons to grind axes with.” Added caveat for this particular contract: “Additionally, a website has been established to collect all the comments from .40/.45 cal and steel-frame fanboyz to rant about How Stupid This Choice Is.”
John Donovan, posting to Facebook, 2017-02-28.
March 11, 2017
March 10, 2017
In The Federalist, Eric Peters describes the ways Elon Musk and his SpaceX crew manage to profit from government subsidies in the process of putting their Falcon rockets into space:
Today, the National Aeronautics and Space Administration specializes in putting taxpayer dollars into the pockets of crony capitalist chieftains such as Elon Musk, whose SpaceX operation manages to get NASA to pay him to use its launch pads and other infrastructure — all provided at taxpayer expense. He also doesn’t cut NASA in when he uses its facilities — our facilities — to launch rockets carrying private cargo, meaning he effectively gets paid for it twice.
That’s once in the check he gets from the private business whose cargo his rocket is carrying; then again in the de facto subsidy he gets for the free use of NASA’s equipment at the Kennedy Space Center in Florida. Why isn’t Elon paying the freight, as opposed to blowing it up?
Incidentally, that happens a lot. Over the past five years alone, SpaceX has lost the same number of rockets as NASA did space shuttles over the 30 years it operated them. And the shuttle wasn’t a money-making machine for politically connected crony capitalists such as Musk. Taxpayers funded it, but no private citizens got a check from taxpayers.
The shuttle even made some money for taxpayers. Private businesses paid NASA to carry satellites into orbit, recovering some of the cost of building that infrastructure. The shuttle also did things useful for the public, like put the Hubble telescope in orbit. It has given humanity an unprecedented view of the universe, and not on pay-per-view.
I read a biography of Elon Musk soon after it was published … and it did a good job of pushing a more sympathetic view of its subject than the linked article above.
February 19, 2017
January 14, 2017
Conservative leadership candidate Maxime Bernier gets an unusually even-handed profile from the CBC:
Bernier’s life is a moveable banquet of rubber chicken, and shaking grimy, anonymous hands, and pretending great interest in everyone, trying all the while to turn the discussion to Maxime Bernier. And perhaps asking for some money while he’s at it.
Actually, that’s unfair. What Bernier mostly turns the discussion to is his ideas.
He’s libertarian, to the extent that it’s possible to be a libertarian and seek high office in a country that was built on protectionism and entitlement and government being the answer to everything.
He advocates the end of quotas and supply management for dairy, poultry and eggs. Oh, and maple syrup. Most Canadian politicians — let alone MPs representing rural Canada like Bernier — prefer to leave such topics undiscussed.
He wants to abolish interprovincial trade barriers. Stopping companies from growing into other Canadian jurisdictions, or stopping workers from travelling between provinces, he characterizes as “foolish,” “doubly foolish” and “ridiculous.”
Go ahead and argue with that.
Bernier wants an end to what he calls “corporate welfare,” his term for governments using tax money to pick winners, such as Bombardier and General Motors, and letting losers struggle with market forces.
If you’ve been reading the blog for a while, it’ll come as no surprise that Bernier is far and away my preferred choice for Tory leader.
December 13, 2016
The two big Canadian railway corporations have taken full advantage of the weak internal financial controls at Metrolinx:
For much of the past two decades Canadian National Railway Co. has been credited with revolutionizing the North American railroad industry.
The company’s former chief executive E. Hunter Harrison’s theory of “precision railroading” — a data-driven focus on charging customers a premium for superior on-time performance — made him an industry icon and his shareholders very happy.
But in railroading, as in life, how you get there matters.
Acting on a tip, the Southern Investigative Reporting Foundation began investigating Canadian National in the fall of 2014. Here’s what our reporting uncovered:
- For over 15 years Canadian National earned hundreds of millions of dollars in profit by marking up rail construction costs up more than 900 percent to a public-sector client.
- Canadian National regularly engaged in questionable business practices like charging internal capital maintenance and expansion projects to the same taxpayer-funded client and billing millions of dollars for work that was never done.
- A just-released auditor general investigation suggested a series of reforms that will reduce these profits.
- For years, train yard personnel, under intense pressure from management, have intentionally misreported on-time performance, helping it boost revenues by hundreds of millions of dollars.
Long before the Ontario auditor general’s office began its investigation, Canadian National was using Metrolinx as an automated teller machine, albeit one with no deposits required. Over 15 years executive teams have come and gone at Canadian National but the one constant has been the river of profit that its Toronto construction unit has been able to reliably wring from Metrolinx.
Determining how much Canadian National has billed Metrolinx over the past two decades is difficult but since 2010, adding up four separate land sales, the Lakeshore West construction discussed below and ongoing maintenance contracts it’s at least $1.1 billion, the majority of which likely went straight to operating income. In other words, Metrolinx’s long-running failure to properly scrutinize Canadian National emboldened it to charge prices so high that many of the construction and maintenance contracts amounted to almost pure profit.
The most audacious episode occurred from 2004 to 2008 when Canadian National’s construction managers developed a billing scheme that reaped hundreds of millions of dollars in profits and benefits by wildly inflating the cost of construction, according to documents obtained by the Southern Investigative Reporting Foundation and attached to ongoing litigation.
The project involved a track expansion project that Canadian National performed for Metrolinx’s Lakeshore West line, on a route that stretched about 40 miles from Hamilton, Ontario, to Toronto’s Union Station. The work was completed in 2012.
Windfall profits and bonus payouts weren’t the half of it. In numerous instances Canadian National billed Metrolinx for work that Canadian National did for its own capital maintenance and expansion projects, saving itself many millions of dollars in expenses.
From 2004 to 2008, Canadian National did track construction work for Metrolinx on a 4.5-mile stretch between the Burlington and Hamilton stations, referred to by Canadian National as Lakeshore West/West. On a separate stretch of the same track in late 2009, crews began adding track to the 9.1-mile stretch from the Port Credit station to Kerr Street, or the Lakeshore West/East line. (The Ontario auditor general’s annual report discussed an unnamed 9-mile track extension that cost $95 million to construct “on the Lakeshore West corridor” but did not identify the project’s location or its date of completion.)
The Lakeshore West/West project’s cost is unclear.
Based on this email, Metrolinx had originally approved a construction price tag of $45 million, but in short order the project’s chief engineer Daryl Barnett, in a bid to reduce costs, noted the price tag had quickly ballooned past $70 million. Metrolinx’s spokeswoman Aikins did not answer repeated questions on the matter but the Southern Investigative Reporting Foundation obtained an April 2015 internal audit Metrolinx conducted at the auditor general’s request that put the final tab for Canadian National’s 2004 to 2008 work on that stretch at “over $200 million.”
December 3, 2016
Jay Currie was woken up at an ungodly early hour to talk on a radio show about the leaked portions of the Canada Marijuana Task Force Report. It’s apparently not good news for consumers but really great news for the existing favoured “legal” producers:
The leak itself is interesting and more than a little outrageous. The Report clearly favours Health Canada Licenced Medical Marijuana growers and many of those corporate grow shows are publically traded companies. Allowing the report to come out in dribs and drabs (because “translation”) could cause deep uncertainty in the public markets. The government should release the report, in toto, immediately.
Substantively, the Report apparently recommends that legalization efforts be directed at “getting rid of the $7-billion-a year black market. Sources familiar with the report, which is expected to be made public Dec. 21, say all the other recommendations flow from that guiding principle.”
It is not clear whether that “black market” includes the grey market of dispensaries and pot shops which has grown up in Canada and which continues to expand.
Using “legalization” as a weapon against the “black market” is pretty much the level of restrictive thinking I expected from the Task Force. Rather than seeing legalization as an opportunity to regularize the marijuana market, the language suggests a resumption of the war on drugs by other means.
The Task Force is apparently suggesting that the 40 Health Canada approved licencees remain the only legal source of marijuana and proposes that recreational pot, like medicinal pot, continue to be delivered by Canada Post. A nostalgic bow to the mail and a suggestion pretty certain to keep dispensaries and “Bob on the corner” in business for the foreseeable future. Here is a free clue for the Liberal government: recreational pot users are impulse buyers. As I say in my book, “The most common triggers for the decision is that, by their lights, a customer is running low on pot, has run out of pot or has been out of pot for some time but only now has the money to buy more pot.” In short, not likely to wait a week for Canada Post to deliver.
September 8, 2016
… even when uttered by the First Lady of the American Screen, any blather about the constellations leaves me as cold as Neptune. Yes, as a teenager, I obediently watched Cosmos like everyone else. But neither Carl Sagan’s corduroy charisma nor those glossy special effects fired up my heart and brain, any more than all those NASA expeditions to vacant rocks in the sky that had punctuated my childhood (and interrupted my cartoons).
The space program was a spectacular waste of extorted tax dollars, a WPA for engineers instead of artists. Watching nerdy small-government libertarians swoon in pathetic conformity over Apollo and SpaceX proves once again that Conquest’s Laws are bunk: Everyone is, in fact, a raving liberal when it comes to his pet passion. Elon Musk is a welfare queen.
Bores insist that the space program has spun off a host of indispensable inventions, but these they can rarely name, and besides, such wonders, if truly crucial, would have been developed anyhow — perhaps even faster, and more cheaply, had the government left trillions in stolen cash in the hands of private enterprise.
Perhaps some readers will find my opinions more palatable if phrased this way: “Federally funded spaceflight is the quintessential neoconservative project: a giant, wasteful crusade designed to fill Americans’ supposedly empty lives with meaning.”
Kathy Shaidle, “The Lovers, the Dreamers, Not Me”, Taki’s Magazine, 2016-08-23.
August 10, 2016
In popular discourse, America is said to be more “pro-business” than is France. When people use this term “pro-business” they typically have in mind some vague notion of a government policy made up of low-ish taxes and not a great deal of government regulation. That is, “pro-business” is commonly used to mean a free, or free-ish, market.
But such language is mistaken.
A true free market is at its core pro-consumer. In a genuinely free-market economy, businesses are valued only insofar as they serve consumers. The performance of a genuinely free-market economy is assessed by how well it satisfies, over time, the demands of consumers spending their own money and not by how well it satisfies the demands of business owners and managers.
Obviously, because businesses are a useful – indeed, practically indispensable – means of abundantly satisfying consumers’ demands, government policies that obstruct the smooth operation of these means are undesirable. But such policies that obstruct or discourage business operations are economically undesirable not because they harm businesses but, rather, because they harm consumers.
Anyway, for all of its faults, American culture and policy are actually much less pro-business than are the culture and policy of France. If you’re really looking for a government that is deeply pro-business – one that regards the protection of existing businesses as a worthy end in and of itself – one that forcibly transfers resources from taxpayers, consumers, and other non-businesses in order to promote the material interests of existing businesses – look at France. You’ll find there what you seek. In France you’ll find one of the most business-friendly policy regimes on the face of the earth. (HT Chris Meisenzahl)
Pity the French.
Don Boudreaux, “Pity the French Consumer and Worker”, Café Hayek, 2016-06-27.
December 3, 2015
In Forbes, James Conca wraps up the latest IPCC Working Group reports’ comments on the viability of biofuel production from corn:
OK, can we please stop pretending biofuel made from corn is helping the planet and the environment? The United Nations Intergovernmental Panel on Climate Change released two of its Working Group reports at the end of last month (WGI and WGIII), and their short discussion of biofuels has ignited a fierce debate as to whether they’re of any environmental benefit at all.
The IPCC was quite diplomatic in its discussion, saying “Biofuels have direct, fuel‐cycle GHG emissions that are typically 30-90% lower than those for gasoline or diesel fuels. However, since for some biofuels indirect emissions — including from land use change — can lead to greater total emissions than when using petroleum products, policy support needs to be considered on a case by case basis” (IPCC 2014 Chapter 8).
The summary in the new report also states, “Increasing bioenergy crop cultivation poses risks to ecosystems and biodiversity” (WGIII).
The report lists many potential negative risks of development, such as direct conflicts between land for fuels and land for food, other land-use changes, water scarcity, loss of biodiversity and nitrogen pollution through the excessive use of fertilizers (Scientific American).
The International Institute for Sustainable Development was not so diplomatic, and estimates that the CO2 and climate benefits from replacing petroleum fuels with biofuels like ethanol are basically zero (IISD). They claim that it would be almost 100 times more effective, and much less costly, to significantly reduce vehicle emissions through more stringent standards, and to increase CAFE standards on all cars and light trucks to over 40 miles per gallon as was done in Japan just a few years ago.
September 15, 2015
… every time the Ex-Im Bank gets involved in a deal, there are only two possibilities: The government is needlessly subsidizing something that would have happened anyway, giving away cheap money to a huge corporation. Or else it’s subsidizing a deal that wouldn’t have happened anyway, in which case we are defending the use of taxpayer dollars to sell cheap manufactured goods to foreigners. It’s not even as if we’re picking out especially needy foreigners, who may require a charitable contribution from the prosperous citizens of the United States; the subsidy is distributed on the basis of who is willing to, say, buy cut-rate U.S. airframes. And guess who benefits? U.S. corporations that export a lot.
This is not a good use of taxpayer dollars, and conservative ideologues, bless their hearts, are quite right to want to get rid of it. Their passion is a little out of proportion to the harm that this agency does, but even a small step in the right direction is better than none. The bank’s opponents concede that. For them, the appeal of taking on Ex-Im is that they might be able to take it down.
Against this impeccable economic and political logic, the bank’s supporters marshal a few arguments. First, they often claim (as Nocera implies) that the Ex-Im Bank generates a lot of money for the Treasury. Which is sort of true … except. First of all, it doesn’t account for the opportunity costs of the distortion; resources are diverted into production of certain goods, and away from others. And second of all, government accounting for loans is rather weird. According to the Congressional Budget Office, if we used a fair value accounting method, which would account for the risk of changing market conditions, the Ex-Im Bank’s six largest programs would be generating a deficit, not a surplus.
We are also told that Ex-Im is a vital matter of national security. I’m going out on a limb here, but I’m pretty sure that if the U.S. government needs to find some money to give foreigners as a vital matter of national security, they will manage to find it even if the Ex-Im Bank is shuttered and its silent halls hold only the lingering ghosts of departed exporters.
Megan McArdle, “Ex-Im Bank Is a Tiny But Tempting Target”, Bloomberg View, 2015-08-03.
September 1, 2015
June 30, 2015
Sean Noble says that the subsidies Elon Musk’s high-tech Tesla and Solar City firms are much higher than he implies:
Tesla, SpaceX, and Solar City head Elon Musk lashed out at the Los Angeles Times following an article that totaled up all the government support that his three-headed corporate-welfare monster receives. The number the Times reported was nearly $5 billion in combined support for his companies, including subsidies for those who purchase Musk’s products, such as the high-priced solar panels of Solar City and the supercars of Tesla.
Musk responded by arguing, “If I cared about subsidies, I would have entered the oil and gas industry.” He further asserted that his competitors in the oil-and-gas industry haul in 1,000 times more in subsidies in a single year than his companies have received in total. Such statements reveal that Musk seems to care as little for facts as he purports to care about the taxpayer dollars propping up his various businesses.
Earlier this year, the U.S. Energy Information Administration (EIA) released the most recent data available regarding energy subsidies provided by the federal government. The data, covering the year 2013, broke down total taxpayer subsidies across the different sectors of the energy industry. While fossil fuels did enjoy some government support through various direct expenditures, tax credits, and R&D programs, the data stands in sharp contrast to Musk’s claims.
Data from the EIA report, combined with numbers from an anti-oil advocacy group regarding state-level government support, reveals that total state and federal support for the oil-and-gas industry is no more than $5.5 billion each year. As stated, Musk’s companies combine for $5 billion in subsidies, a number that he has yet to dispute. Clearly, the difference is much smaller than Musk’s outlandish 1,000-to-one claim.
May 24, 2015
Dan Mitchell clearly understands what modern western government is really all about:
May 23, 2015
There are many railfans who still believe, strongly and passionately, that General Motors was involved in a devious plot to kill off the streetcars across North America in order to sell more buses. At Vox.com, Joseph Stromberg explains that this wasn’t the case — in fact, the killer of the streetcar/interurban/radial railway systems was their willingness to lock in to long-term uneconomic agreements with local governments in exchange for monopoly privileges:
Back in the 1920s, most American city-dwellers took public transportation to work every day.
There were 17,000 miles of streetcar lines across the country, running through virtually every major American city. That included cities we don’t think of as hubs for mass transit today: Atlanta, Raleigh, and Los Angeles.
Nowadays, by contrast, just 5 percent or so of workers commute via public transit, and they’re disproportionately clustered in a handful of dense cities like New York, Boston, and Chicago. Just a handful of cities still have extensive streetcar systems — and several others are now spending millions trying to build new, smaller ones.
So whatever happened to all those streetcars?
“There’s this widespread conspiracy theory that the streetcars were bought up by a company National City Lines, which was effectively controlled by GM, so that they could be torn up and converted into bus lines,” says Peter Norton, a historian at the University of Virginia and author of Fighting Traffic: The Dawn of the Motor Age in the American City.
But that’s not actually the full story, he says. “By the time National City Lines was buying up these streetcar companies, they were already in bankruptcy.”
Surprisingly, though, streetcars didn’t solely go bankrupt because people chose cars over rail. The real reasons for the streetcar’s demise are much less nefarious than a GM-driven conspiracy — they include gridlock and city rules that kept fares artificially low — but they’re fascinating in their own right, and if you’re a transit fan, they’re even more frustrating.
This is one of the reasons I’m generally against new plans to re-introduce streetcars (or their modern incarnations generally grouped under the term “light rail”), because they fail to address one of the key reasons that the old street railway/interurban/radial systems died: they were sharing road space with private vehicles. Light rail can provide a useful urban transportation option if they have their own right-of-way, but not if they are merely adding to the gridlock of already overcrowded city streets.
And once again, I’m not anti-rail … I founded a railway historical society and I commute most work days on a heavy rail commuter network. I don’t hold this position due to some anti-rail animus. If anything, I regret the passing of railway systems more than most people do, but I recognize that they have to be self-supporting (or close to self-supporting) to have a chance to survive. Being both more expensive and less convenient than alternative transportation options is a sure-fire path to extinction.
April 28, 2015
Last week, Michael Geist pointed out that the tax credits and other inducements offered by state and provincial governments to attract TV and movie business are a bad deal for everyone except the media companies:
The widespread use of film and television production tax subsidies dates back more than two decades as states and provinces used them to lure productions with the promise of new jobs and increased economic activity. The proliferation of subsidies and tax credits created a race to the bottom, where ever-increasing incentives were required to distinguish one province or state from the other.
In recent years, governments have begun to rethink the strategy. States such as Arizona, Michigan, New Mexico, and Iowa suspended or capped their programs. Louisiana found that it lost $170 million in tax revenue in a single year. In Canada, the Quebec government’s taxation review committee recently admitted that its provincial film production tax credit was not profitable and that numerous studies find that there is little economic spinoff activity.
But the most notable Canadian study on the issue has never been publicly released and is rarely discussed. The Ontario government’s Ministry of Finance conducted a detailed review of the issue in 2011, delivering a sharply negative verdict on the benefits associated with spending hundreds of millions of dollars each year in tax credits. It recommended eliminating a 25 per cent tax credit for foreign and non-certified domestic productions that would have saved $155 million per year.