Reason Magazine - Contributors

Electrifying Possibilities

info@reason.com (Ed Carson) — Sun, 01 Jun 1997 00:00:00 EDT

Natural gas, long distance phone service, airline, trucking, and rail have more in common with each other than one might suspect. All five are network industries, "producing some kind of product that must move along some form of infrastructure," says Jerry Ellig, an economist with the Center for Market Processes. And all were deregulated in the late 1970s and 1980s, resulting in substantial price reductions.

A new study by Ellig and Robert Crandall of the Brookings Institution estimates that opening up these sheltered industries to competition saves customers close to $60 billion annually. Airfares fell by nearly a third in real terms between 1977 and 1987. Rail rates fell by 44 percent in the 10 years after deregulation.

And these price drops occurred without any reduction in the quality of service. Instead the authors found that the deregulated industries expanded consumer choices and encouraged innovation, such as the hub-and-spoke airline system.

The success of these earlier deregulatory measures holds lessons for another network industry--the retail electricity market. "Policymakers concerned about consumers should open electric service to competition, deregulate rates, and promote consumer choice as quickly as possible," the authors conclude.

A Pound of Flesh?

info@reason.com (Ed Carson) — Thu, 01 May 1997 00:00:00 EDT

Many Americans feel that paying taxes costs an arm and a leg. Now the federal government is asking for a little more-hearts, livers, and other assorted organs. The Internal Revenue Service is sending 70 million households organ donor cards along with their tax returns. The feds hope to increase the supply of donated organs, which falls well below the de- mand. (See "Hey Buddy, Can You Spare a Liver?," Citings, February.) Nearly 4,000 Americans died in 1996 while on a waiting list for a transplant. About 50,000 are on waiting lists. The federal government prohibits any compensation to organ donors.

Deficit Deception

info@reason.com (Ed Carson) — Thu, 01 May 1997 00:00:00 EDT

It's an article of faith among Democrats that President Reagan was responsible for the doubling of the national debt during the 1980s. Not so, say Stephen Moore, director of fiscal policy studies at the Cato Institute, and investment analyst Michael A. Byrd in a new Institute for Policy Innovation report, "Whose Free Lunch?: The Truth About the 'Reagan Deficits.'" Like so many others before them, Moore and Byrd rebut claims that tax cuts drained the federal Treasury. They point out that tax revenues increased 24.1 percent between 1982 and 1989, virtually identical to the 24.4 percent rise from 1974 to 1981, and higher than the 19.3 percent growth projected for 1990-1997, after the Bush and Clinton tax hikes.

But former Senate Majority Leader Robert C. Byrd maintains that if Congress had approved Reagan's appropriations requests, the deficit would have been even higher. True and false, say the report's authors. Reagan did request about $90 billion more for defense appropriations. But Byrd's claim leaves out entitlement programs, which make up over half the federal budget. If all of Reagan's requests had been approved, spending would have been $209 billion lower.

And when Democrats controlled both houses in 1987-1988, congressional spending exceeded the president's requests by an average of $51 billion, far above the $20 billion average when Republicans controlled the Senate from 1981 to 1986.

Moore and Byrd don't absolve Reagan for the deficits during the 1980s, noting that he exercised his veto power sparingly and never submitted a balanced budget. They simply state that Congress, particularly Democrat members, deserves more of the responsibility.

First, Expose All the Lawyers

info@reason.com (Ed Carson) — Thu, 01 May 1997 00:00:00 EDT

The American Bar Association recently generated a lot of press when it declared its opposition to the death penalty. The media coverage suggested that this was an extraordinary decision for the nation's largest lawyers' organization to take. But as many critics point out-and the mainstream media did not-it is not unusual for the ABA to take decidedly left-of-center positions on controversial issues. They include:

Tort reform. The ABA opposes virtually all legal reform measures-loser pays, caps on product liability damages, eliminating joint-and-several liability.
Affirmative action. It endorses "legal remedies and voluntary actions that take into account...race, national origin, or gender."
Gun control. The ABA supported the "assault weapons" ban and generally endorses gun control measures.
Abortion. The group lobbied the last Congress in favor of continued federal funding of abortions.
Universal health care. It supports "universal coverage for all through a common public or public/private mechanism through which all contribute."

The ABA also backs the Family and Medical Leave Act, funding the National Endowment for the Arts, and increasing spending on child care. The organization also advises the U.S. Senate in the judicial selection process. Critics charge that the ABA is strongly biased against conservative nominees, most famously when several members of the selection committee declared Judge Robert Bork "not qualified" for the Supreme Court, despite his standing as an eminent legal scholar.

That special role may be coming to an end. Senate Judiciary Committee Chairman Orrin Hatch is a long-time ABA critic. Though he has taken no official position, a recent Judiciary Committee press release stated, "The ABA should henceforth play no official, quasi-constitutional role in the Senate's confirmation process."

Stop the Madness

info@reason.com (Ed Carson) — Thu, 01 May 1997 00:00:00 EDT

In an effort to head off "cyber tax chaos," Rep. Christopher Cox (R-Calif.) and Sen. Ron Wyden (D-Ore.) are introducing a bill that would place a moratorium on new Internet taxes. The bill, which had not been finalized at press time, would prevent state or local governments from passing any new Internet taxes, including sales and telecommunications taxes. It would apply retroactively, probably to January 1, 1997.

Sales on the Internet totaled $500 million in 1996, but could grow to tens of billions by 2000. States and local governments see the Internet as a potentially huge source of revenue. But there are a number of unresolved practical, legal, and constitutional issues (See Citings, January and March). The U.S. Constitution prohibits states and local governments from taxing interstate commerce, unless the company has a substantial physical presence within their jurisdiction. But due to the decentralized nature of the Internet, several states could claim a taxable nexus on any given electronic sale. Even if the nexus is clear, collecting taxes won't be easy.

"Before these fundamental questions are answered," Cox says, "states and localities are rushing to tax the goose that lays golden eggs."

To help answer these questions, the bill would require the Clinton administration to submit a comprehensive plan regarding electronic commerce taxes within two years. One solution that's been proposed is to create a national sales tax, but a recent Treasury Department white paper put the kibosh on that idea.

Another provision in the bill prohibits the Federal Communications Commission from levying access charges -currently limited to telephone companies-on Internet service providers.

Cox and Wyden, who teamed up two years ago to promote an ultimately unsuccessful anti- regulatory alternative to the Communications Decency Act, hope to move the legislation through Congress quickly, before the appropriations bills make their way to the floor.

Road Hogs

info@reason.com (Ed Carson) — Thu, 01 May 1997 00:00:00 EDT

The House Committee on Transportation and Infrastructure recently expanded from 67 to 73 members, making it "the largest [congressional] committee in history,"according to its chairman, Rep. Bud Shuster (R-Pa.).

What warrants placing one in six House members on a single committee? Except for a few intra-city projects, the Interstate highway system is finished. Transportation spending makes up no more than 2 percent of the $1.6 trillion federal budget. But that doesn't measure transportation's political importance. Entitlement programs eat up more and more of the budget, but they essentially run on autopilot. (They may be flying into a cliff, but it is on autopilot.) And representatives can't exactly promise to bring home more Medicare to their districts. Transportation is one of the last areas where individual congressmen can personally deliver federal dollars to constituents in a literally concrete way. Or as Rep. John Linder (R-Ga.) says, the Transportation Committee is the "last place for pork."

It takes on added significance this year because the Intermodal Surface Transportation Efficiency Act of 1991 is up for reauthorization. ISTEA (pronounced "ice tea") provides the money--$155 billion between 1992 and 1997--to state and local governments for transportation projects, with the feds typically picking up 80 percent of project costs. ISTEA is funded by a 14-cents-per-gallon federal gas tax (an additional 4.3 cents goes to general revenues) and taxes on diesel fuel and truck tires.

First, Congress takes care of its own. Right off the top come members' demonstration projects--"high-priority"projects, insists House Transportation Committee aide Jeff Nelligan. ISTEA contained 538 projects costing $6.2 billion. And what "high-priority" needs do these projects meet? Well, Shuster's hometown of Altoona, Pennsylvania, once got a $30 million motorized sidewalk. Residents may not be getting too much use out of it, however, because they're too busy driving down the $286 million Bud Shuster Highway. And that was when he was only the ranking minority member on the Transportation Committee. As chairman, Shuster wants to build support for the overall bill. So earlier this year he sent a memo to his fellow House members reminding them to submit requests for demo projects in their districts.

Most ISTEA funds are distributed using a formula that takes into account a number of technical criteria, such as vehicle miles traveled, diesel fuel purchased, and state population. It sounds scientific, but Sen. John Warner (R-Va.) calls the formula for the 1991 ISTEA a "witch's brew."Among other things, the formula relied on the 1980 census for population estimates rather than the 1990 census, because the older data favored Northeastern states.

Debate over the formula in this year's transportation bill will be fierce. Shuster has predicted there will be "blood on the floor, I'm sure, over the formula before we're done." There are three major proposals, each with decidedly different priorities:

"ISTEA Works."Governors and representatives from many states, primarily in the Northeast, think the current program doesn't need a lot of changes. That's not surprising, because their states get back more money under ISTEA than they pay in. Cities like ISTEA because it gives municipal planning organizations more control over where federal money can be spent. Cities and many environmental groups also like ISTEA's dedicated funds for the Congestion Mitigation/Air Quality program and for "enhancements,"which include bikeways, walkways, and other transportation-related projects. Their connection to transportation can be distant: One city used enhancement funds to build a day care center at a transit station.
"STEP-21." The Streamlined Transportation Efficiency Program for the 21st Century is the mainstream alternative to the current system. STEP-21 guarantees states will get back at least 95 percent of the transportation dollars they put in. Majority Whip Tom DeLay (R- Tex.) and Gary Condit (D-Calif.) introduced the plan in the House, and Warner, chairman of the Environment and Public Works Transportation Subcommittee, which has jurisdiction over highways, is leading the Senate fight. STEP-21 is endorsed by representatives and governors from states that are big losers under ISTEA.

STEP-21 would provide states with more flexibility about where they could spend transportation funds, allocating 60 percent as a block grant. DeLay and seven House committee chairmen told Shuster in a letter that STEP-21 would address what they see as ISTEA's two central flaws: "An inequitable funding distribution system that fails to allocate funds based on prioritized needs; and an inefficient, inflexible program structure that erodes the transportation purchasing power of every state."

Critics of STEP-21 argue that funding should be allocated based on state needs, not contributions. "These are projects of national significance,"says Maryland Gov. Parris Glendening. "Under a system that simply returns money to the states, they would not be properly funded."He says highways in the Northeast are more costly to maintain because they're older, used by more out-of-state drivers, and hit with colder weather. Cities are skeptical of block grants, because dedicated funding for enhancements, congestion, and air quality would be eliminated; states and local governments could, however, use general transportation funds for those purposes.

"Turnback." The third and most dramatic proposal, sponsored by House Budget

Chairman John Kasich (R-Ohio) and Sen. Connie Mack (R-Fla.), would keep two cents of the federal gas tax for maintaining the Interstate system and "turn back"the other 12 cents to the states. (The 4.3 cents going to general revenues would not be affected under the Kasich-Mack bill.) Kasich and Mack argue that since the Interstate system is complete, a federal role is no longer necessary or desirable. "If you let us keep our money, and get rid of all the federal bureaucracy and all the federal rules, we'll actually be able to have more highway construction. We'll be able to deal more effectively with the transportation needs in our own states,"Kasich told the House Surface Transportation Subcommittee.

Devolution would end federal demo projects and the need to pay the federal highway bureaucracy. The Kasich-Mack bill would also eliminate the federal reviews, regulations, and mandates that come with ISTEA funds. A Reason Foundation study estimates that when these federal costs are taken into account, 33 states get back less than they put in, including big states such as Illinois, New Jersey, New York, Pennsylvania, and Virginia.

Turnback advocates also say that states would do a better job of choosing cost-effective projects if they have to come up with all the money. "It's no secret that 90 percent federal funding makes for some pretty screwy decisions,"says David Luberoff, assistant director of the Taubman Center for State and Local Government at Harvard's Kennedy School of Government. Would Massachusetts have gone forward with the $10 billion, 1.5 mile underground highway under construction in Boston if it had to pick up the tab?

Critics of devolution made many of the same arguments used against STEP-21, but with greater force. Shuster says the proposal "makes no sense."He says the Interstate system is inherently a federal, not a state, responsibility. Or as Eric Federing, a Democratic staffer for the Transportation Committee puts it, "Highways don't end at the state line."

True, but states can and do work together to solve common transportation interests. The Port of New York�New Jersey has run smoothly for decades without federal intervention. Just recently five Northeastern states agreed on a common standard for electronic toll collection.

Carl Williams, deputy secretary of California's Business, Transportation, and Housing Agency, points out that over half the states have raised their gas tax in the past five years. He believes most states would have little difficulty convincing voters to replace the federal tax with the state tax. The Kasich-Mack plan also would lift the ban on tolls on Interstate highways. That could help states no longer subsidized by the rest of the country maintain their transportation networks and allow congested states like California to expand their highways.

State constitutions present another problem: Many state constitutions prohibit gas taxes from being used on anything but highways. Texas's constitution requires 25 percent of all revenues to be used for education, so the state would have to raise its gas tax (or other taxes) well above what it required for transportation. The Kasich-Mack bill gradually phases the federal gas tax out over a number of years to give states time to deal with the political and constitutional hurdles.

Republican governors from four states--Pete Wilson (Calif.), John Engler (Mich.), George Voinovich (Ohio), and David Beasley (S.C.)--have endorsed devolution. Kasich and Mack had hoped more lawmakers from donor states would swing over to their camp. That hasn't happened, perhaps because though turnback might be better for many states, those states' members of Congress would no longer get the credit from bringing home highway projects. Whatever the reason, Kasich concedes devolution is unlikely to pass this year.

The other major battle centers on how much Congress will allocate. The federal government currently spends about $20 billion on highways, with another $2 billion to $3 billion going for transit, congestion and air quality projects, and enhancements. Transportation boosters are looking for much more, which is why Shuster is eyeing the highway trust fund. The trust fund is supposed to be used only for transportation purposes, but it has built up to nearly $24 billion and is used to mask the size of the budget deficit.

Shuster wants to take the trust fund off-budget. "Americans pay steep transportation taxes and expect the money...to be used for critical infrastructure improvements, not to be hidden in some budgetary shell game,"Shuster says. There is a strong philosophical argument that dedicated funds should be used only for the intended purpose, but taking the trust fund off- budget would make balancing the budget even more difficult. (The Clinton balanced budget plan calls for transportation spending to decline slightly in nominal dollars. No one appears to be taking this plan seriously--not even the Department of Transportation.) And turning de facto control of the trust fund over to Shuster would be a "license to steal,"according to one transportation analyst.

Last Congress, the House passed Shuster's bill 284-143 over Kasich's strong objections, but the measure stalled in the Senate. The same scenario is likely to occur this year, so the issue won't be settled until it reaches the conference committee. Warner opposes putting the trust fund off-budget, but he and 58 other senators have asked Senate Budget Committee Chairman Pete Domenici (R-N.M.) to produce a budget plan that increases highway spending to $26 billion a year. New York Sens. Daniel Patrick Moynihan (D) and Al D'Amato (R) have asked Domenici for $5 billion for transit.

That would require drawing down the trust fund significantly, unless, of course, the 4.3 cents of the gas tax that currently go to general revenues are put into the trust fund. Shuster, a highway man to the core, has suggested dedicating a half cent to Amtrak-- which, after 25 years and $13 billion in taxpayer subsidies, was finally scheduled to be zeroed out by 2002--in exchange for having the remaining 3.8 cents go to the trust fund. Shuster hopes the offer will gain the support of Senate Finance Committee Chairman Bill Roth (R-Del.), a big Amtrak backer.

At this stage it's unclear how reauthorization will shake out, but most observers believe that the trust fund will not be taken off-budget and STEP-21 ultimately will be the basis for the final formula. If highway spending rises to around $26 billion, it will be relatively easy to make the formula more equitable for donor states without hurting donees. But if Kasich and other deficit hawks are successful in holding transportation spending to current levels, it becomes extremely difficult to achieve a consensus. In that scenario, it's possible turnback would suddenly gain support as a way to get more transportation bang for limited bucks. But more likely, devolution will serve the purpose of making STEP-21 look like a moderate reform.

On one level, STEP-21 doesn't represent fundamental change. It simply reworks the funding formula, this time to reflect the growing power of donor states. But while it maintains the federal role in transportation, STEP-21 may help undermine support for all federal programs.

"At the very crux of our union is the concept that resources are gathered, then distributed on need,"said Rep. Susan Molinari (R-N.Y.) at a news conference endorsing the current system. It's an unusual historical perspective on our nation's founding principles--life, liberty, and the redistribution of wealth?--but it carries an important contemporary point. New York and other Northeastern states receive more transportation funding than they contribute, but overall they pay more federal taxes than they receive in federal benefits. If states get back roughly what they pay for transportation, Molinari warns, "New York and the other states represented here will demand the money back that we contribute for other programs."

If federal taxes were returned to states on a 1-to-1 basis, why include the middleman? Who would have thought that the common sense prin ciple, you get what you pay for, could shake the federal government to its foundations?

Ticks Are For Kids?

info@reason.com (Ed Carson) — Tue, 01 Apr 1997 00:00:00 EST

Behold the Tick, a dimwitted but nigh-indestructible superhero with his own cartoon show. He delivers long-winded, metaphor-twisting speeches; his fellow postmodern "superheroes" include Die Fledermaus and the Civically Minded Five (Carpeted Man among them); and the villains he fights suffer serious personality disorders. The Tick is not one show but two, though they consist of the same program, a trick made possible by TV- choice technology and niche programming. It is a self-contained lesson in the New Media. The show started in 1995 as a Saturday morning kid-TV series. While its plots featured adventures that children enjoy, its scripts were filled with references and situations better appreciated by media-savvy adults. Once, Mental Man created the illusion that he was a baby; his pursuers set their holographic projectors on "Dingo," referencing a Meryl Streep movie that exploited a lurid news story. The Tick quickly developed an adult following. So this season, an episode airs first on Saturday morning on Fox as a kids' show, then it does a semiotic quick-change and runs a week later on Comedy Central as self-referential satire. Elites bemoan niche programming; what we gain in entertainment, they say, we lose in common culture. The Tick addresses relative cultural experiences in ways they never dreamed of.

Power Politics

info@reason.com (Ed Carson) — Tue, 01 Apr 1997 00:00:00 EST

"We knew we'd face resistance, but we expected early victories to come easier," says Rep. Scott Klug (R-Wisc.), picked by Newt Gingrich to lead federal privatization efforts when Republicans took control of Congress in 1994. Klug and other privatization supporters knew they had an ambitious agenda, but they thought it was a reasonable one. They didn't set out on a quest for the Holy Grail of privatization, the U.S. Postal Service. Instead, they targeted less-sacred federal relics: the helium reserve, the air traffic control system, and the centerpiece of their agenda, the power marketing administrations.

The five PMAs produce about 6 percent of the nation's electricity, generated from 129 federal hydropower facilities. By law, they are required to sell their wholesale power at below market rates to public municipal utilities and rural cooperatives, which in turn provide electricity to about 25 percent of the nation's retail consumers. Dating as far back as the New Deal, the PMAs were built to provide cheap power to poor, rural areas in the South and West. Today, however, they help electrify Vail, Colorado, Los Angeles, and the true city of lights, Las Vegas. Unlike investor-owned utilities, PMAs don't pay taxes -- nor do municipal utilities and most co-cops. They also receive low-interest loans from the federal government -- at about 3.5 percent interest, less than what the federal government pays on its debt, so taxpayers eat the difference -- and carry an unusually heavy debt burden.

Klug and others thought the PMAs would be an easy sell in Congress. After all, Republicans had the majority and the Clinton administration supported privatizing four of the five PMAs. They were wrong. Their proposal never went anywhere in the Senate -- 64 senators voted for a non-binding resolution opposing PMA privatization. Supporters in the House made some progress, but in the end Gingrich, bowing to the inevitable, killed it. Privatization supporters had to lower their sights and revise their timetables. But they learned some important lessons that will make future privatization efforts more likely to succeed.

It's pork, not policy. With every federal program, there are interest groups which are accustomed to their government largesse and will resist any changes to the status quo. The problem with the PMAs is that their beneficiaries are numerous, easily identified, and concentrated in specific regions of the country. Sale proponents were expecting a fight over policy. Instead, they faced special-interest regional politics. The co-op and public power lobbies, the National Rural Electric Association (NRECA) and the American Public Power Association (APPA), organized a letter-writing campaign. Their ratepayers swamped many congressional offices with mail, putting intense political pressure on any wavering members. Even the supposedly free market, revolutionary freshman Republicans put aside petty ideological differences and joined Democrats to fight for cheap juice.

"Republicans from districts with co-ops and munis [municipal utilities] that got power from PMAs fought side by side with Democrats on the issue," says Jerry Taylor, director of natural resource studies at the Cato Institute. "Those socialist bastards in the Clinton administration were more friendly to [privatizing PMAs] than many of the Republicans."

Do your homework. When the Reagan administration first suggested selling off the PMAs in the 1980s, Congress responded by prohibiting federal agencies from even studying the idea. So when the co-ops and munis testified that the PMAs were well-managed and didn't receive subsidies from the federal government, privatization supporters had trouble refuting them. "Many members were predisposed to believe that these programs were run inefficiently, but they didn't have any ammunition," says Bill Marson of the Alliance for Power Privatization, a coalition of investor-owned utilities, independent power producers, and investment bankers.

During 1996, Rep. John Doolittle (R-Calif.), chairman of the House Subcommittee on Water Power and Resources, began laying the groundwork for future PMA legislation by holding hearings and directing the General Accounting Office to investigate PMA operations. In a subsequent report, the GAO reported that the Western Area Power Administration (WAPA) had failed to recover nearly $500 million in costs. Another GAO report found that 11 of the 23 hydroelectric projects in the Southeastern Power Administration (SEPA) had experienced outages ranging from 30 days to over three years from 1986 through 1995, limiting power production and raising electricity prices.

What's for sale? Current proposals call for selling off only the power-generating facilities of the hydroelectric plants. Sale proponents learned the hard way not to mess with the voters' love of fishing.

For various administrative and financial reasons, in the last Congress the House Resources Committee decided to include the dams, reservoirs, locks, and surrounding federal property in its SEPA proposal. No one really knew how the dams' other uses -- drinking water, irrigation, flood control, navigation, fishing, recreation -- would be affected, but the opposition gave the public some ideas. Ads aired during Kentucky's gubernatorial race implied that GOP plans to privatize SEPA threatened ordinary folks' right to fish on the river. That didn't go over well with voters. The issue became so heated that GOP candidate Larry Forgy pleaded with Gingrich to pull the bill, which he did in October 1995.

Buy off the opposition. "If buying off customers is necessary to compensate for the transition into the market, we shouldn't let getting the maximum price get in the way," says Robert W. Poole Jr., president of the Reason Foundation.

In other words, forget about auctioning off the PMAs. Yes, it would bring the most revenue to the Treasury -- $8 billion to $10 billion for the three midsized authorities -- but the NRECA and APPA are adamantly opposed and would mobilize their ratepayers again. (Most residential consumers of PMA power would pay only a few cents more each month because they receive just a small percentage of their electricity from PMA sources, but that point tends to get lost in the lobbying.) Getting the federal government out of the electricity business now is more important than holding out for every last dollar.

The Clinton administration proposed selling four of the PMAs to their current customers at a far lower price, between $4 billion and $5 billion. The NRECA and APPA preferred the status quo, but they grudgingly endorsed the administration's plan as a fallback position. The Alaska Power Administration is being sold in this manner with relative ease. It helped that there has been little interest from private utilities, and that it is by far the smallest of the five PMAs -- one Clinton administration official described it as "a couple of dinky dams." But the real difference was that instead of opposing privatization, the local public utilities and co-ops are buying APA's two hydroelectric projects.

Rep. John Shadegg (R-Ariz.), picked by House Budget Committee Chairman John Kasich (R-Ohio) to lead the fight for PMA privatization this year, proposes skipping the co-op and public utility middlemen and compensating individual ratepayers directly. Under his "Popular Privatization" bill, modeled after successful privatiza-tions in the Czech Republic, residential and business customers of the three midsized PMAs would be given warrants allowing them to buy their PMA's stock at a discounted price.

These customers could choose to buy shares, but presumably most would sell their warrants to competing companies trying to obtain a controlling interest in the privatized PMA. The average residential ratepayer in WAPA could expect to make $156, Southwestern Power Administration customers, $402. SWPA's average industrial customer would gain over $39,000. All told, ratepayers would profit $3.5 billion, and the feds would clear around $4.5 billion from the sale -- and $1 billion in taxes every year.

Shadegg's plan also would transfer federal facilities, dam maintenance, and water management to river associations, composed of farmers, riverfront landowners, environmentalists, fishing associations, and other "stakeholders." Associations would operate on fees paid by the privatized PMA, based on what the federal government required for dam operations. But an association could increase revenue by permitting the power producer to increase water flow through the turbines or increase water flow at peak times. Alternatively, it could buy a reduction in water flow to help salmon runs or to improve water rafting.

Business relationships matter. Some of the most vocal opposition to PMAs in Congress has come from liberal Democrats and moderate Republicans. Why? Because they hail from districts in the Northeast or industrial Midwest that don't receive PMA power. And these parts of the country have energy prices far above the national average. "It's hard to convince energy-intensive businesses to stay in the Northeast or Midwest when they can pack up and move to the South or West and pay much lower energy bills," says Rep. Bob Franks (R-N.J.), co-chairman of the Northeast-Midwest Congressional Coalition. Indeed, thanks to the Bonneville Power Administration, the largest of the PMAs, the Pacific Northwest has attracted much of the energy-intensive aluminum industry.

Klug says he wants more formal ties with the business community, rather than the "ad hoc coalitions" he relied on in the last Congress. A number of investor-owned utilities are eager to buy a stake in the PMA projects. But the industry's priority is to end the government subsidy, particularly as electricity deregulation builds momentum. In the regulated environment, utilities didn't really compete with one another, so PMAs weren't a major issue. But following deregulation of the wholesale power market in 1992 and with California beginning the early stages of retail competition in 1998, investor-owned utilities are more concerned. "You can't have an open market where some are subsidized and some aren't," says the Alliance for Power Privatization's Bill Marson.

At the same time, deregulation is reducing the PMAs' price advantage, which means that privatization would have an even smaller impact on customers' rates. Competitive prices also could affect the PMAs' ability to repay their large outstanding loans, according to a 1995 GAO report. Bonneville, burdened with a disastrous investment in nuclear energy, already has had to lower its rates to keep several of its major customers from leaving.

It's going to take time. "We thought it was going to be a sprint, but it turns out it's more like a marathon," says Klug. Yet time is on their side. Republicans are confident that they'll hold the House for at least the next four years, and conditions for privatization are likely to improve over that time. In the short term, working on a balanced budget agreement and dealing with entitlement spending may suck up all the political oxygen. (The House Budget Committee may include Shadegg's plan in its budget proposal, but the administration's budget probably will not include any PMA proposals this time, and the Senate remains hostile territory.) But as the deadline for eliminating the deficit approaches, Congress -- which presumably will delay serious spending cuts until 2000 or later -- will be scrambling to find any sources of revenue. "The budget numbers get so tough that eventually we'll have to sell them off," Klug says.

Critics may chafe at the slow pace of change, but they need to remember that the federal government has had little experience with asset sales. PMA sales will serve as a guide for future privatization efforts. So when privatization proponents move on to the air traffic control system, the Tennessee Valley Authority, or even the post office, they may be able to avoid the political landmines and minimize resistance from the entrenched special interests.

Big Country?

info@reason.com (Ed Carson) — Tue, 01 Apr 1997 00:00:00 EST

Since the Industrial Revolution, people have been concentrating in urban areas. But that may be changing. From 1990 to 1995, population in rural U.S. counties increased by an estimated 5.1 percent, according to a new study by demographers Kenneth Johnson of Loyola University and Calvin Beale of the U.S. Agriculture Department. During the entire 1980s, rural population grew by 1.3 million, but in the first half of this decade it jumped by 2.6 million. Metropolitan population rose faster, at 5.8 percent, due to immigration, higher birth rates, and lower death rates. But internal migration resulted in a net shift of 1.3 million people moving from urban to nonurban parts of the country.

Why this is happening now is unclear. But jobs are easier to come by outside the city. Unemployment in rural areas was atypically lower than urban unemployment during the economic slowdown of the early '90s. And technological changes are allowing more people to work at home and more businesses to move outside city centers.

People don't appear to be moving to the true country, however. Nearly one-quarter of the nation's 2,304 rural counties, primarily those dependent on farming or mining, had declining populations. The bulk of "rural" population growth occurred in counties near metropolitan areas, beyond the established suburban sprawl, but which may be classified as metro in the near future.

Mixed Choice

info@reason.com (Ed Carson) — Tue, 01 Apr 1997 00:00:00 EST

Another study evaluating Milwaukee's school choice program, which provides scholarships for approximately 1,300 low-income students to attend secular private schools, gives the program mixed grades. In the study, Cecilia Elena Rouse, assistant professor of economics and public policy at Princeton University, finds that the program has produced "quite large" improvements in students' math test scores. However, she finds no statistically significant improvement in reading scores.

Previously, a University of Wisconsin study had concluded that Milwaukee's program had no effect on math or reading test scores. That finding was contradicted last summer by researchers from Harvard University and the University of Houston who found that the choice program had improved both math and reading test scores. (See "Choice Cuts," Dec.)

All three studies relied on the same data, so how did they come to different conclusions? The data are "messy," says Rouse. They cover only a small number of students over a brief period of time, and much of the information is missing. So seemingly trivial differences in interpretation and methodology have a big impact on the final results.

One example: Researchers must infer students' grade levels from test scores. If a student misses a test one year, researchers must "impute" the student's grade level by looking forward to future test scores, or back to previous tests. But the direction from which researchers impute can determine whether the findings show students improved by a statistically significant amount, or not at all.

Nevertheless, Rouse concludes that the program appears to be a qualified success: "I find that the Milwaukee Parental Choice Program and the participating private schools likely increased math scores by 1.5 to two percentage points a year....When I total the math and reading scores, I estimate that private students gained approximately 1.3 percentage points a year."

Corporate Welfare Reform

info@reason.com (Ed Carson) — Sat, 01 Mar 1997 00:00:00 EST

Another "strange bedfellows" coalition that includes House Budget Committee Chairman John Kasich (R-Ohio) and socialist Bernie Sanders (I-Vt.) has banded together to kill a high-profile example of corporate welfare.

Their target is the Overseas Private Investment Corporation, which gives loans and "political risk insurance" to U.S. businesses that invest in potentially unstable countries. Its beneficiaries include such large companies as Coca-Cola, McDonald's, and US West. Congressional opponents believe the federal government has no business promoting major corporations overseas. Free market critics say these activities should be left up to the private sector. If private companies won't insure or make loans for some of the investments that OPIC currently backs, then perhaps those ventures were too risky to begin with. Sanders and others on the left argue that OPIC is, in effect, exporting jobs.

OPIC's supporters tell a different story. They say OPIC expands trade and creates jobs for Americans. And, far from being a burden to taxpayers, they assert, the program boasted a profit of $209 million last year, money that helps shrink the deficit. But critics say backing corporate investments in Third World countries with the full faith and credit of the U.S. government is not only corporate welfare, but a serious potential liability. If, say, Russia's economy or political system imploded, taxpayers could be out billions of dollars. "Taxpayers are being exposed, much like the S&L crisis," says Tom Sheehy, a staffer with Rep. Ed Royce (R-Calif.).

Another Hill staffer notes that two-thirds of OPIC's "profit" is actually interest payments from the Treasury. And when Congress authorizes a spending figure for discretionary spending, OPIC's income is included as a negative spending item. "The net effect [of OPIC] is higher discretionary spending, not lower deficits," says the staffer. Both sides predict a big battle this year over renewing OPIC's authorization, which expires in June. Opponents won a major victory last September, when the House voted down 260-157 a proposal to double OPIC's insurance authority to $25 billion and its financing authority to $20 billion. However, they admit that they caught OPIC's backers napping--something that won't happen again.

Mail It In

info@reason.com (Ed Carson) — Sat, 01 Feb 1997 00:00:00 EST

Once again, Americans set a record low for voter turnout in November. And thanks to high absentee voting, dozens of key races were left in limbo for days or weeks after the election. But there's a solution: vote-by-mail.

In many Oregon elections, there are no polling places. Instead, all registered voters receive ballots in advance and have three weeks to mail them back. Unlike absentee ballots, vote-by-mail returns are counted on election night.

Mail-in voting reverses the much-lamented trend of falling voter turnout--an astonishing 68 percent of registered voters participated in Oregon's special U.S. Senate election last January. Past special elections were lucky to get half that number.

"Oregonians like it because it's convenient and lets them take time to go over these megaballots," says Oregon Secretary of State Phil Keisling, a strong supporter of vote-by-mail. Vote-by-mail has other advantages. Keisling estimates that the state could have saved $1.2 million if the vote had been entirely by mail, nearly $1.00 per vote. The reform also gives the public some relief from the barrage of campaign TV ads. As election day nears, most folks have already mailed in their ballots, so TV ads aren't cost-effective. Instead, campaigns each day ask the county clerks who hasn't voted, then use phone banks or mailings for direct appeals.

But vote-by-mail wasn't an option this November. Gov. John Kitzhaber vetoed a bill that would have expanded the new system to all elections. So voters did the next best thing and voted absentee. A record 650,000 Oregonians cast absentee ballots this election, just under half of all votes cast in the state. Kitzhaber now says he will probably sign the bill, if he gets another opportunity.

Campaign Chutzpah

info@reason.com (Ed Carson) — Sat, 01 Feb 1997 00:00:00 EST

Do as we mandate, not as we do. That apparently is the unofficial credo of the backers of the successful California Proposition 208, which sets strict new limits on campaign contributions. Following the election, the California Common Cause led coalition invited lobbyists, most of whom opposed the measure, to a seminar explaining how Prop. 208 will actually work. The seminar costs $200--and the group is counting the fee as a campaign contribution.

Hey Buddy, Can You Spare a Liver?

info@reason.com (Ed Carson) — Sat, 01 Feb 1997 00:00:00 EST

People with chronic liver disease, often caused by heavy drinking, will no longer be at the front of the line for a new liver. Not that they aren't in desperate need of a replacement, but the Richmond, Virginia based United Network for Organ Sharing has decided that recipients who have a better chance of surviving deserve higher priority.

UNOS says it had to do it: There are simply not enough donated livers, or other organs, to go around. And the problem is getting worse. At the end of 1988, 16,026 people were on the waiting list, with 12,786 organs donated. In 1995, 20,006 organs were donated, but the waiting list was 44,057 at the end of the year. It now stands at over 49,000. The tragic result: 3,448 Americans died in 1995 while on the waiting list. The actual number of deaths could be far higher, because transplant centers set increasingly stringent standards even to get on the waiting list. The National Organ Transplant Act of 1984 prohibits the purchase or sale of human organs. Without that law, paying organ donors (or their survivors) would encourage more organ donations and help close the deadly gap.

Not in Service

info@reason.com (Ed Carson) — Sat, 01 Feb 1997 00:00:00 EST

Just about everybody loves the convenience of automated teller machines. ATMs are fast, they're everywhere, and they're always open.

But Los Angeles City Councilman Mark Ridley-Thomas believes they are too dangerous to be open at night. Following three highly publicized murders at L.A.-area ATMs committed in a two- month period, Ridley-Thomas introduced a proposal that would impose a dusk-to-dawn curfew on all ATMs in the city.

L.A. City Attorney James Hahn has endorsed Ridley-Thomas's proposal, but several councilmen have been sharply critical of the idea. "It's asinine. We as a city can't dictate to people what they can and cannot do," says Councilman Richard Alatorre.

Not according to Ridley-Thomas. He says public safety takes precedence over public convenience: "Convenience can never be elevated to the status of a right."

But even from the standpoint of public safety, many critics say the ATM curfew is a bad idea. People could be left stranded with no way to get money for a taxi, or they might carry more cash than they need, just in case.

ATMs have never been a serious hazard, and are safer than ever before. According to a study by the California Bankers Association, crime at ATMs fell dramatically between 1992 to 1995, from a peak of 499 reported incidents in 1992 to 261. That's one attack for every 2.5 million transactions. In Los Angeles, ATM robberies have dropped even more precipitously, from 158 in 1993 to 63 through October 23, 1996.

Banks and police credit this decline largely to tighter security measures at ATM locations, such as cameras and better lighting, and to the rising number of ATMs in supermarkets.

Truth in Advertising

info@reason.com (Ed Carson) — Sat, 01 Feb 1997 00:00:00 EST

Some people forget that the A in BATF stands for Alcohol. The Bureau of Alcohol, Tobacco, and Firearms doesn't.

For years the evidence that one or two drinks a day can be good for you has mounted. In 1996, the Federal Dietary Guidelines finally conceded that "moderate drinking is associated with a lower risk for coronary heart disease." But the BATF continues to bar beer, wine, and liquor companies from making truthful statements about the medical benefits of moderate alcohol consumption on labels and in advertisements.

So the Competitive Enterprise Institute and Consumer Alert have filed suit to force the agency to permit makers of alcoholic beverages to tell the truth. "Although the First Amendment doesn't mention ATF by name, we've got a hunch it applies to them as well," says CEI's General Counsel Sam Kazman.

But Kazman says the case is about more than upholding the First Amendment. Most Americans have no idea that alcohol can have health benefits. CEI conducted a poll of 1,000 registered voters in late October and learned that only 41.7 percent know wine has health benefits. Just one in 10 know this is true for beer and liquor as well.

Paradise Taxed

info@reason.com (Ed Carson) — Wed, 01 Jan 1997 00:00:00 EST

Taxes are apparently inevitable, even in cyberspace. Last spring the Florida Department of Revenue decided that companies doing business over the Internet are subject to the state's sales tax. Gov. Lawton Chiles has delayed enforcement until July 1, 1997, to study the issue of Internet taxation. But the Internet will be taxed--it's only a question of how and how much. Sales of tangible products on the Internet are still relatively small, roughly $500 million in 1996, but they are expected to explode in the next few years. Naturally, state and local governments want a piece of the action.

On the face of it, that seems like a difficult task. The U.S. Constitution prohibits states from taxing interstate commerce, so states can only levy a sales tax on companies that have a physical presence in the same state as the consumer. (This is why interstate mail-order sales are exempt.) But that physical presence can be almost ephemeral. If a Colorado company sells software to a Dallas resident, but the program is downloaded from a Texas-based server, the company has to collect taxes on the grounds that the software never physically left the state. States could also argue that Internet and on-line service providers such as CompuServe act, in effect, as independent agents of companies doing business on the Internet. Under this interpretation every company selling over the Internet would have a taxable telecommunications nexus in every state.

But CompuServe and other heavy hitters in the industry have their own ideas about how the tax system for cyberspace should be designed. A report by the Interactive Services Association, which represents major Internet and on-line companies, says taxes on on-line transactions should be levied on the purchaser, not on industry. The report also calls for uniform tax rates within states, and uniform standards and definitions throughout the country. Bruce Reid, director of excise and property taxes for Microsoft and the chairman of the ISA taskforce that developed the study, says, "Our underlying goal is uniformity throughout the 50 states--clear rules so that companies are able to comply and we know who's entitled to collect taxes."

Governments also have their reasons for making Internet taxes uniform. If local governments aggressively tax the Internet, they may find that their tax base disappears. The city of Tacoma, Washington, recently reversed a decision to subject on-line service providers to the city's 6 percent telecommunications tax because it was concerned about losing its business-friendly reputation. So industry and government priorities may shift Internet taxation to the feds, with a national sales tax. State and local governments would howl, but a national sales tax would face fewer constitutional and administrative problems, and it would be uniform throughout the country.

Drug War Bust

info@reason.com (Ed Carson) — Wed, 01 Jan 1997 00:00:00 EST

Republicans have used recent reports of increased teen drug use to accuse President Clinton of being soft on drugs. But according to the latest FBI Uniform Crime Report, an estimated 588,963 marijuana arrests were made by state and local law enforcement in 1995--an all-time high. That's one person busted for pot every 54 seconds. About 86 percent of the arrests were for simple possession. All told, law enforcement made 1.5 million drug arrests in 1995, also a record, and up 41 percent from 1991.

Healthy Living

info@reason.com (Ed Carson) — Wed, 01 Jan 1997 00:00:00 EST

In the 1973 Woody Allen film Sleeper, Allen's character wakes up in the future and is told in all seriousness that the key to a long and healthy life is drinking, smoking, and eating snack food. It's a memorable moment in the film because it's such a ridiculous idea, and everyone laughs. Or is it?

While it's hard to believe that the surgeon general will announce that tobacco is the path to clean living, new research is turning long-held health pronouncements on their heads. A new study of 500 Israeli elementary students published in the American Medical Association's Archives of Pediatrics and Adolescent Medicine found that children who eat sugary cereals perform better in school because of their higher blood-sugar level. Earlier this year, a study presented at a American Heart Association conference found evidence that some food preservatives and flavorings may be partly responsible for the decline in heart disease over the past 30 years, because they contain chemical cousins of aspirin, which is known to reduce the risk of heart attacks. And after years and years of evidence, health officials in the United States are reluctantly conceding that alcohol has health benefits in moderation.

Potato Correctness?

info@reason.com (Ed Carson) — Wed, 01 Jan 1997 00:00:00 EST

Remember the Irish--it's the law. In the state of New York, all public school children over 8 are required by law to study the Irish potato famine of the 1840s, which resulted in mass starvation and pressured a million Irish to emigrate to New York. This follows a 1994 law that requires New York public schools to teach students about slavery and genocide. In neighboring New Jersey, children must learn about the genocide of Armenians. "This business of each group getting its own victimization written into legislation is a very bizarre way of studying history," Eric Foner, history professor at Columbia University, told The Post Standard of Syracuse.

Race and Order

info@reason.com (Ed Carson) — Wed, 01 Jan 1997 00:00:00 EST

Do blacks get a fair shake from the courts? According to a study by Robert Lerner on behalf of the Center for Equal Opportunity, juries are more likely to acquit blacks than whites of serious crimes. Using data collected by the Bureau of Justice Statistics, Lerner examined 55,512 felony cases from America's 75 largest counties from May 1992.

In murder cases, juries acquitted African Americans 22 percent of the time, as opposed to zero percent for whites. For rape, 83 percent of blacks were found not guilty, but only 24 percent of whites were. Only for robberies (12 percent vs. 18 percent) and assaults (37 percent vs. 42 percent) were blacks acquitted less often than whites.

Jury acquittals only comprised 0.6 percent of all cases, but blacks also fared well by other measures. Including guilty pleas, plea bargains, dismissals, etc., blacks were less likely than whites to be convicted for 12 out of 14 types of felonies, the exceptions being felony traffic offenses and miscellaneous "other felonies."

The study doesn't address whether blacks are unfairly arrested and charged more frequently than whites, but it does suggest that when they reach the court system, blacks do not face longer odds than whites.

Tighty-Whitey Trade

info@reason.com (Ed Carson) — Wed, 01 Jan 1997 00:00:00 EST

In the face of stagnant wages, corporate downsizing, and economic anxiety in general, at least one question has been answered: The $12 trillion U.S. economy can indeed survive imports of underwear from Costa Rica. That's the conclusion of a preliminary report by the World Trade Organization. The report followed a 1995 decision by the United States to impose quotas on underwear imports from the Central American nation to protect the domestic textile industry. The report found that the United States failed to demonstrate that Costa Rican imports seriously hurt the industry. Washington still has time to cut a face-saving deal with Costa Rica before a final WTO decision. The United States also could choose to ignore the decision.

Licensed to Drink

info@reason.com (Ed Carson) — Sun, 01 Dec 1996 00:00:00 EST

Despite several studies showing that the age-21 drinking law has had no effect on binge drinking among college students, lowering the drinking age has not been a viable political option. But now Rod Park, chancellor of the University of Colorado at Boulder, is proposing that qualified underage college students receive drinking permits.

Modeled after driver's license learning permits, Park's "drinking permits" would allow college students under 21 to purchase alcohol in restaurants and bars, but not from liquor stores. Students would need to get parental consent and to pass an alcohol-education test. If a student committed an alcohol-related offense, the permit could be revoked.

Park believes issuing permits will have a more positive effect on drinking behavior than outright prohibition. "My understanding about how to make people responsible is to give them responsibility and hold them accountable," he says.

Michael Haines, coordinator for Health Enhancement Services at Northern Illinois University, believes the parallel to driving is especially apt. "Imagine if we told young people 'Just say no to automobiles' and then at 16 gave them a license and told them to go at it," says Haines, who has seen binge drinking among NIU students drop 34 percent since he introduced an ad campaign promoting responsible drinking in 1989. (See "Purging Bingeing," December 1995.) David Hanson, a professor of sociology at the State University of New York at Potsdam who has studied college drinking for more than 20 years, believes a learner's permit would promote drinking in more-controlled environments than fraternity functions and keg parties. Hanson has proposed his own drinking permit for high school graduates but says, "Park's plan may be politically more viable because it involves parental consent."

Park says his ideas can't be implemented unless Congress allows states to experiment. Gathering support will be an uphill battle, but Rep. Scott Klug (R-Wisc.) has introduced a bill that would return the drinking age back to the states.

One Hand for Federalism

info@reason.com (Ed Carson) — Fri, 01 Nov 1996 00:00:00 EST

It was supposed to be a simple consent decree between the federal government and chemical manufacturer Olin Corp. regarding cleanup of a Superfund site, but the presiding judge ended up declaring much of the Comprehensive Environmental Response, Compensation and Liability Act (a.k.a. Superfund) unconstitutional. In a May 20 decision, District Court Judge W. Brevard Hand ruled that the Environmental Protection Agency cannot apply the Superfund law retroactively. Hand based his decision on the Supreme Court's 1994 Landgraf decision, in which the Court ruled that Congress must expressly state that a law is retroactive.

Jerry Taylor, director of natural resources at Cato Institute, estimates that "80 percent of all federal environmental law" would be found unconstitutional by this decision's standards and federal authority would be significantly scaled back.

Potentially far more significant was the judge's ruling that the Superfund law exceeds federal authority under the Commerce Clause of the Constitution. Because the Olin case involved an Alabama company with Alabama waste at an Alabama site, Hand ruled that the federal government had no jurisdiction. Since the New Deal, the Commerce Clause has been interpreted by the courts as sanction for virtually any federal legislation, no matter how tenuous the link with interstate commerce. But in last year's U.S. v. Lopez, the Supreme Court struck down a federal gun-free school zone law on the grounds that the regulated activity did not "substantially" affect interstate commerce.

Federal officials and environmentalists say Hand's ruling is "an anomaly" that is unlikely to be upheld on appeal. "Lopez was an adjustment on the margins rather than a fundamental recasting of federal authority," says Karen Florini, senior attorney for the Environmental Defense Fund.

Cato's Taylor says Hand's ruling was based on "rock-solid reasoning." He believes Hand's reasoning on retroactivity may be upheld, but Hand's extension of Lopez is a different matter.

"If the Court meant what it said in Lopez, it will be upheld," Taylor says. But many Court observers believe Lopez was a trial balloon to see if the new, supposedly anti- government and anti-Washington Republican-led Congress would support a Court shift toward limiting federal power. And the GOP Congress has not been giving the Court positive signals. In the wake of media hype over church burnings in June, Congress unanimously passed the Church Arson Prevention Act of 1996--and claimed that the federal government can step in because church burnings affect interstate commerce. "The Court finally, tentatively, draws a line on the Commerce Clause. Then Congress says, 'Yes, we do have the power to do anything we want.' What's the Court going to make of it?" asks Taylor.

Measure by Measure

info@reason.com (Ed Carson) — Fri, 01 Nov 1996 00:00:00 EST

Most of the media coverage on the fall election has been on the presidential and congressional races. But voters also will be choosing among numerous state ballot initiatives. Here's an overview of the more important measures.

CCRI. The California Civil Rights Initiative would eliminate all race and gender preferences in government. Americans for Tax Reform's Kolt Z. Jones, who tracks initiatives, says, "CCRI is the most important initiative on the ballot in 15 or 20 years." If CCRI passes, other states will likely follow with their own versions as initiatives or legislation.
Taxes. Voters in Arizona, Florida, Nevada, and South Dakota will consider initiatives requiring either two-thirds voter approval for all taxes and fees or a two-thirds legislative supermajority.
Term Limits. Term limits supporters have qualified at least 10 initiatives for the ballot in November, but only one in North Dakota would actually limit terms in office. The rest would require states to note candidates' term-limits votes on the ballot.
Minimum Wage. California, Missouri, Montana, and Oregon voters will decide whether to raise the minimum wage in their states by varying amounts.
Campaign Finance. At least four initiatives in three states would impose new campaign finance or lobbying restrictions. Alaska's measure would lower contribution levels and require more disclosure.
School Choice. Washington state voters have two school choice initiatives on the ballot, one creating a voucher system, the other, charter schools.
Other. Maine will vote on an anti-clear cutting measure. And, for the first time in several election cycles, no anti-gay initiatives qualified for the ballot.