Essential Economics for Politicians

When the State Partners with Business, the Devil's in the Details
Demand risk partnerships are good because user fees ensure that projects are worthwhile and costs do not get out of control.

https://fee.org/articles/when-the-state-partners-with-business-the-devils-in-the-details/

President Trump has reportedly expressed reservations about public-private partnerships, but White House economic advisor Gary Cohn is still enthusiastic about building the administration’s fabled infrastructure plan around them. Not everyone realizes, however, that there are two very distinct kinds of public-private partnerships, which I call the good kind and the bad kind. I’d like to believe that it is the bad kind that worries Trump while it is the good kind that encourages Cohn.

Two Kinds of Partnerships

The good kind of public-private partnership is more formally known as a demand risk partnership. In this case, the public partner essentially gives the private partner a franchise to build a road or some other infrastructure. The private partner is allowed to collect tolls or other revenues from the infrastructure for a fixed period of time, usually three or four decades, after which ownership and management of the infrastructure are turned over to the public partner (who may contract it out again). The key is that the private partner accepts the risk that revenues may not cover the costs. For example, the I-495 Capital Beltway express lanes are a demand risk partnership.
 
The bad kind of public-private partnership is more formally known as an availability payment partnership. As with the good kind, the public partner designs the project while the private partner builds and, usually, operates it. Unlike the good kind, the private partner takes no risk that the project might not pay its way. Instead, the public partner contracts to pay the private partner enough money over several decades to completely repay the private partner’s costs regardless of whether anyone is actually using the infrastructure.

Availability payment partnerships might make sense in the case of infrastructures that no one expects to earn user fees, such as common schools. But, in most cases, such partnerships are formed mainly to allow the public partner to sidestep legal debt limits. For example, euro nations are supposed to limit their debts to a fixed percentage of GDP. Some nations, such as Italy, have built high-speed rail and other infrastructures using availability payment partnerships so that the debts appear on the books of the private partners, not the government.

For the same reason, Denver’s Regional Transit District (RTD) formed a public-private partnership to build a billion-dollar rail line to the airport. Voters had approved a sales tax increase for the rail line but set a debt limit. When cost overruns made it impossible to build the line without exceeding the debt limit, RTD entered into an availability payment partnership so the debt wouldn’t appear on its books. Of course, it was still contractually obligated to pay the private partner enough to repay its debt.
 
FROM THE MAGAZINE
If You Build It . . .
Myths and realities about America’s infrastructure spending

Edward L. Glaeser
Summer 2016

Economics teaches two basic truths: people make wise choices when they are forced to weigh benefits against costs; and competition produces good results. Large-scale federal involvement in transportation means that the people who benefit aren’t the people who pay the costs. The result is too many white-elephant projects and too little innovation and maintenance.

No one denies that the United States suffers gaping infrastructure deficiencies, including potholed roads, unsafe bridges, and awful airports. But we also have a dreary history of federally supported infrastructure boondoggles. America spends too much time arguing about whether to spend more money or less on infrastructure—including as a jobs program—and far too little time on how to construct and maintain infrastructure wisely. Treating transportation infrastructure as yet another public-works program ensures the mediocrity that we see all around us. A wise approach means, contrary to Bernie Sanders, a much diminished federal role and a lot more transportation initiatives that look like private industry, with users paying for the services they receive.
 
Bruddah IZ said:
FROM THE MAGAZINE
If You Build It . . .
Myths and realities about America’s infrastructure spending

Edward L. Glaeser
Summer 2016

Economics teaches two basic truths: people make wise choices when they are forced to weigh benefits against costs; and competition produces good results. Large-scale federal involvement in transportation means that the people who benefit aren’t the people who pay the costs. The result is too many white-elephant projects and too little innovation and maintenance.

No one denies that the United States suffers gaping infrastructure deficiencies, including potholed roads, unsafe bridges, and awful airports. But we also have a dreary history of federally supported infrastructure boondoggles. America spends too much time arguing about whether to spend more money or less on infrastructure—including as a jobs program—and far too little time on how to construct and maintain infrastructure wisely. Treating transportation infrastructure as yet another public-works program ensures the mediocrity that we see all around us. A wise approach means, contrary to Bernie Sanders, a much diminished federal role and a lot more transportation initiatives that look like private industry, with users paying for the services they receive.
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You've obviously not ridden the National Rail System in London and vicinity. Or bullet trains in Japan.
 
xav10 said:
You've obviously not ridden the National Rail System in London and vicinity. Or bullet trains in Japan.
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I have not. But I did ride the regular trains in Japan for 3 years when I was stationed there from 1987-1990. I set my watch by them too. Great system. We didn't worry about crime or bombs at the stations either. Definitely not a shit hole country. You see any differences between the U.S. and those two countries?
 
Why Tokyo's Privately Owned Rail Systems Work So Well
STEPHEN SMITH
OCT 31, 2011
Large cities with cash-strapped transit agencies would do well to study Japan's rail history

https://www.citylab.com/transportat...rivately-owned-rail-systems-work-so-well/389/

As the post-war years marched on, the private railways proved to be more efficient than those run by the state, which were hemorrhaging cash. It was understandable that lines outside the big cities might need subsidies, but there was no excuse for operating losses in the dense Tokaido megalopolis. So in 1987, the government privatized the Japanese National Railways (JNR), which operated every type of transit except trams and inner-city metros. JR East, JR Central, and JR West, the three spin-offs operating around Tokyo, Nagoya, and Osaka, respectively, emerged healthy and profitable. They were able to pay back their construction debt and make capital improvements to their networks, reversing the stagnation and decline that JNR had seen over the previous decade.

Privatization was later applied to Tokyo Metro, the largest subway network in the city. And according to Tatsuhiko Suga, who has been active in Japanese railways for decades and now leads Japan's Foundation for Transport Publications, the city's other metro network, Toei, may also be thrown into the mix by the time the process is complete. (Privatization in Japan has been nothing if not slow, a strategy which seems to have paid off.) All railways now strive to emulate the private firms, but metro systems outside of Tokyo have not attempted privatization.
 
Thomas Sowell: California’s high-speed rail example of getting nowhere fast

By THOMAS SOWELL |
February 2, 2012 at 8:42 am

California has a huge state debt and Washington has a huge national debt. But that does not discourage either Gov. Jerry Brown or President Barack Obama from wanting to launch a very costly high-speed rail system.

Most of us might be a little skittish about spending money if we were teetering on the brink of bankruptcy. But the beauty of politics is that it is all other people’s money, including among those other people of generations yet to be born.

The high-speed rail system proposed for California has been envisioned as a model for similar systems elsewhere in the United States. A recent story in the San Francisco Chronicle used the high-speed rail system in Spain as an analogy for California.

Spain is about the same size as California and has a similar population density — and population density is the key to the economic viability of mass transportation, from subways to high-speed rail.

It so happens that I have ridden on Spain’s high-speed rail system. It was very nice, especially since I did not have to pay the full costs, which were subsidized by Spanish taxpayers.

While the Spanish government has been subsidizing the passengers on its high-speed rail system, the European Union has been subsidizing the Spanish government. Someone once said that government is the illusion that we can all live off somebody else. Spain’s high-speed rail system is not even covering its operating costs, never mind the enormous costs of setting up the system in the first place. One reason is that half the seats are empty in the high-speed trains of Spain.

That is what happens when you don’t have the population density required for passengers to cover the operating costs. You would need the hordes of Genghis Khan riding the high-speed rail system to cover the additional costs of the rails and the trains.

An economics professor at the University of Barcelona says that Spain “has not recovered one single euro from the infrastructure investment.”

The most famous high-speed rail system is in Japan, one of the most densely populated countries in the world. The “bullet train” between Tokyo and Osaka has 130 million riders a year. Tokyo has more than three times the population of San Francisco and Los Angeles put together.
 
Bruddah IZ said:
I have not. But I did ride the regular trains in Japan for 3 years when I was stationed there from 1987-1990. I set my watch by them too. Great system. We didn't worry about crime or bombs at the stations either. Definitely not a shit hole country. You see any differences between the U.S. and those two countries?
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London is crowded and incredibly diverse and victimized by more terror attacks in the US. The public rail system is admirable. But I think for longer, intercity trips, it's Richard Branson's Virgin train service.
 
Surging shale production is poised to push U.S. oil output to more than 10 million barrels per day, toppling a record set in 1970 and crossing a threshold few people could have imagined even a decade ago.

And this new record, expected within days, likely won't last long. The U.S. government forecasts that the nation's production will climb to 11 million barrels a day by late 2019, a level that would rival Russia, the world's top producer.

The economic and political impacts of soaring U.S. output are breathtaking, cutting the nation's oil imports by a fifth over a decade, providing high-paying jobs in rural communities and lowering consumer prices for domestic gasoline by 37 percent from a 2008 peak.

Fears of dire energy shortages that gripped the country in the 1970s have been replaced by a presidential policy of global "energy dominance."
entire article:
http://www.msn.com/en-us/money/mark...-global-trade/ar-AAuLdxY?li=BBnb7Kz&ocid=iehp
 
By all means let's continue the cycle of the rich getting richer and hence their political influence strengthening allowing them to get laws enacted that once again, make them richer.
 
Hüsker Dü said:
By all means let's continue the cycle of the rich getting richer and hence their political influence strengthening allowing them to get laws enacted that once again, make them richer.
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Daffy! Have an adult read the quote below and explain it to you. Then have them slowly read the entire article & explain it to you....

"The economic and political impacts of soaring U.S. output are breathtaking, cutting the nation's oil imports by a fifth over a decade, providing high-paying jobs in rural communities and lowering consumer prices for domestic gasoline by 37 percent from a 2008 peak."
 
Some inequality of income and wealth is inevitable, if not necessary. If an economy is to function well, people need incentives to work hard and innovate.

The pertinent question is not whether income and wealth inequality is good or bad. It is at what point do these inequalities become so great as to pose a serious threat to our economy, our ideal of equal opportunity and our democracy.

http://robertreich.org/post/85532751265
 
Lion Eyes said:
Daffy! Have an adult read the quote below and explain it to you. Then have them slowly read the entire article & explain it to you....

"The economic and political impacts of soaring U.S. output are breathtaking, cutting the nation's oil imports by a fifth over a decade, providing high-paying jobs in rural communities and lowering consumer prices for domestic gasoline by 37 percent from a 2008 peak."
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Hey Duck!!! Have someone explain this to you, ya pinhead.....

Apple announces plans to repatriate billions in overseas cash, says it will contribute $350 billion to the US economy over the next 5 years
  • Apple says the new tax law will help it will contribute $350 billion to the U.S. economy over the next five years.
  • It says it will create 20,000 new jobs and open a new campus.
  • Apple expects to pay about $38 billion in taxes for the horde of cash it plans to bring back to the United States.
Apple on Wednesday made a slew of announcements about its investment in and contribution to the U.S. economy in part because of the new tax law.
entire article:
https://www.cnbc.com/2018/01/17/apple-announces-350-billion-investment-20k-jobs-over-5-years.html
 
Hüsker Dü said:
By all means let's continue the cycle of the rich getting richer and hence their political influence strengthening allowing them to get laws enacted that once again, make them richer.
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leftist-fairness.jpg
 
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