Big Box Retail 2008: Costco Arrives in (Madison) Middleton

Costco held a very well attended party this evening celebrating the opening of their new Middleton warehouse club [Map].

I did not see a stand to purchase law degrees.

Middleton provided a TIF (Tax Incremental Financing) agreement to the site developer. A related Isthmus article can be found here.

A few additional photos:

Clusty search: Costco.

Lessig on John McCain's Technology "Platform"

Larry Lessig



I have my doubts - unfortunately - that Obama will be much better on the crucial broadband issue for two reasons:

• AT&T, very good at spreading the love money, or the king of telco lobbying is sponsoring the Democratic convention
• Our own Democratic Governor - Jim Doyle, recently signed a AT&T supported "Video competition bill" into law - maybe useful for AT&T, but hardly good for citizens.

California Declares Free Market Broken, Recommends Price Controls For Phone Services

The Consumerist:

Verizon, AT&T, and their regulated cohorts love to blab how the "free market" and "competition" will keep prices low for consumers. According to California, it's a big fat expensive lie. The cost of basic phone service has soared since the Public Utilities Commission lifted price controls in 2006, leading the agency to conclude:

"There is no indication of any change in the near future regarding the current state of competition. Market forces have not yet met the challenge of controlling price increases."

Why No Outrage?

James Grant:

Raise less corn and more hell," Mary Elizabeth Lease harangued Kansas farmers during America's Populist era, but no such voice cries out today. America's 21st-century financial victims make no protest against the Federal Reserve's policy of showering dollars on the people who would seem to need them least.

Long ago and far away, a brilliant man of letters floated an idea. To stop a financial panic cold, he proposed, a central bank should lend freely, though at a high rate of interest. Nonsense, countered a certain hard-headed commercial banker. Such a policy would only instigate more crises by egging on lenders and borrowers to take more risks. The commercial banker wrote clumsily, the man of letters fluently. It was no contest.

The doctrine of activist central banking owes much to its progenitor, the Victorian genius Walter Bagehot. But Bagehot might not recognize his own idea in practice today. Late in the spring of 2007, American banks paid an average of 4.35% on three-month certificates of deposit. Then came the mortgage mess, and the Fed's crash program of interest-rate therapy. Today, a three-month CD yields just 2.65%, or little more than half the measured rate of inflation. It wasn't the nation's small savers who brought down Bear Stearns, or tried to fob off subprime mortgages as "triple-A." Yet it's the savers who took a pay cut -- and the savers who, today, in the heat of a presidential election year, are holding their tongues.

Biofuels Deathwatch Map

Craig Rubens:

Biofuel plants have been put on hold faster than your phone company’s tech support line. With corn and soy prices hitting record high prices and an ethanol glut flooding the market, ethanol’s profit margin per gallon has dropped to a meager 25 cents from $2. That’s causing numerous ethanol and biodiesel plants to get put on hold or downright canceled. Hundreds of millions of gallons of production capacity and hundreds of millions of dollars in biofuel investments are now hanging in limbo, as investors hope prices will level out.

That’s not to say that ethanol is dead in the water. There’s a variety of positive reports coming out on the future of the industry — there’s reports that see a meaningful future for ethanol , as well reports saying ethanol could be deliver a better-than-expected energy return. Add in a healthy merger and acquisition market and biofuels will play a role in the future of weaning the U.S. off oil.

Tammy Baldwin's Office on the Farm Bill

Dear Mr. Zellmer:

Thank you for contacting me about the 2007 Farm Bill (the Farm, Nutrition, and Bioenergy Act, H.R. 2419). It is good to hear from you, and I apologize for the delay in my response.

As you know, the U.S. House of Representatives recently considered the 2007 Farm Bill. The Farm Bill is a comprehensive piece of legislation which touches on a number of agriculture-related issues, including commodity price support programs, nutrition programs, alternative energy, and rural development.

After a considerable amount of deliberation in a conference committee, the House and Senate each passed a conference report that represented the resulting policy compromises. You may be interested to know that I joined my colleagues in the House of Representatives to pass this conference report by a vote of 318 to 106.

While I believe that the U.S. House of Representatives should have taken this opportunity to implement expansive agricultural policy reforms, I supported the conference report because it does contain some noteworthy improvements in the Farm Bill programs. The alternatives to reauthorizing the Farm Bill this year were to extend the previous version of the farm bill or to revert to regulations dating to the 1940s. In my view, neither of these alternatives are desirable or acceptable.

The aspects of the conference report that I strongly support include expanding and updating the Milk Income Loss Contract (MILC) program, and investments in nutrition programs that help 38 million American families afford healthy food. For the first time, the MILC program will include the cost of feeding dairy cows as a factor for triggering program payments, a relief for Wisconsin dairy farmers who face increasing costs of inputs. The nutrition title includes an additional $10 billion to expand food stamp eligibility and increase the minimum weekly benefit, as increase funding for many worthy programs such as food banks, food pantries, soup kitchens, and schools providing healthy snacks to students.

I am pleased that the legislation makes progress in lowering the income limits for wealthy farmers to qualify for federal farm payments, although I believe these limits should be made even lower to ensure payments go to those farmers who need the aid the most. Under the conference report, individuals making over $500,000 in non-farm income, or $750,000 in farm income, would become ineligible for federal payments. This report ceases Conservation payment eligibility at incomes of $1 million. In contrast, the 2002 Farm Bill discontinued federal farm payments to individuals earning over $2.5 million.

The conference report also makes progress on several issues I have long-supported. These reforms include levying the Dairy Import Assessment against companies that import dairy products into the U.S., and implementing mandatory Country Of Origin Labeling (COOL) for all meats. I am also very pleased it contains a farm flexibility pilot program that will allow farmers receiving direct payments for commodities to opt out of these payments on a year-by-year basis, and grow fruits and vegetables for processing. This program is especially meaningful for the Upper Midwest, and I am hopeful the program will prove successful and be expanded in coming agricultural authorizations. Additionally, the 2007 Farm Bill conference report:

Increases the Wetland Reserve Program's (WRP) enrollment ceiling to more than 3 million acres;

Reestablishes the WRP's budget authority at $1.3 billion over five years, through 2012;

Authorizes the Conservation Reserve Program (CRP) to enroll 32 million acres from 2010-2012, a 7.2 million acre decrease from the 2002 Farm Bill;

Provides a one-time $84 million mandatory funding for the McGovern-Dole International Food for Education and Child Nutrition Program during fiscal year 2009, $24 million over previous discretionary funding levels;

Rejects Farm Credit Service proposals to expand their lending authority and deviate from their stated mission;

Directs the Department of Agriculture (USDA) to review studies on the use of random source animals for research, and consider the recommendations in those studies to end the black market trade in stolen pets;

Provides for penalties for animal fighting ventures, increases penalties for violations of the Animal Welfare Act, and prohibits the importation of puppies under the age of 6 months.

You may be interested to know that shortly after the House vote the Senate also passed the conference report by a vote of 81 to 15. I am disappointed that the President vetoed this bill, but I am pleased that both the House and Senate voted to override the President's veto. However, due to an administrative error the bill vetoed by the President and passed into law by a veto override was only part of the conference report Farm Bill. As a result, I joined my colleagues in the House in passing the same version of the Farm Bill as new legislation. This identical copy is still pending in the U.S. Senate, and will likely be passed. It is my hope that in light of the veto override the President will acknowledge widespread support for this Farm Bill and sign it instead of forcing a second veto override vote.

In a country as vast as ours, crafting legislation that addresses vastly different regional and industrial priorities is painstaking, and often contentious, work. I believe the 2007 Farm Bill conference report does represent some positive changes in our agricultural policy, and it is my hope that a consensus will exist for far greater reforms in the future. Please know that I will keep your thoughts in mind as the U.S. Congress continues to consider the 2007 Farm Bill.

Again, thank you for sharing your views. Your opinion matters to me. If I can be of service to you in any other way, please do not hesitate to let me know. As a security precaution, all mail sent to Congress is first irradiated. This process causes significant delays. To ensure the fastest response, I encourage all constituents who have access to the internet to contact me through my website at http://tammybaldwin.house.gov.

Sincerely,

Tammy Baldwin
Member of Congress

P.S. I regularly send out email updates on federal issues and opportunities. These reports also include regular surveys through which you can express your opinion. If you would like to receive these email updates, you may sign up by visiting my website at: http://www.house.gov/formbaldwin/IMA/get_address_news.htm

Russ Feingold's Office on the Farm Bill & Special Interest Legislation from Herb Kohl

via email, in response to my message:

Dear Mr. Zellmer,

Thank you for contacting me to share you concerns about the Farm Bill. I appreciate hearing from you. While I was disappointed by the lack of reform to the commodity programs in the Farm Bill, significant improvements were made in other areas of the bill to assist small and medium farmers.

As you may know, the House approved the final version of the Farm Bill on May 14, 2008, by a vote of 318-106. The Senate passed it the following day by a vote of 85-15. The President vetoed the Farm Bill on May 21, 2008. The House voted to override the veto the same day, and the Senate the next day. I was pleased to support both the Farm Bill itself and the motion to override the President's veto. The bill became law on May 22, 2008, although an enrollment error meant that the Trade and Food Aid Title was not included. The House and Senate have passed a new version of the bill to correct the error.

For instance, the bill restores the payment rate for the Milk Income Loss Contract (MILC) program and, for the first time, factors in the cost of production for farmers. MILC is vital for Wisconsin's dairy farmers, and is an extremely responsible program as it kicks in when times are tough and covers only a certain amount of milk. Thus, it targets small and medium farms rather than subsidizing the expansion of large farms.

The bill also makes significant improvements to nutrition programs, including Food Stamps and the Emergency Food Assistance Program, totaling more than $10 billion over the five-year life of the bill and accounting for about three-quarters of total spending in the bill. Other positive provisions of the Farm Bill include a new livestock title, which contains important competition provisions and over $4 billion for agriculture conservation programs. The bill also provides more funding for smaller-scale programs such as the Community Food Program, Value-Added Producer Grants, and the Beginning Farmer and Rancher Program.

I was also able to have several amendments accepted to the bill on a range of issues important to Wisconsin farmers. I was particularly pleased to have an amendment accepted to strengthen the office for small farmers at USDA.

I share the disappointment I have heard from some Wisconsinites that the reforms in the Farm Bill don't go far enough. I supported a number of amendments to reform the bill when the Senate considered it in December 2007, including an amendment offered by Senators Byron Dorgan (ND) and Chuck Grassley (R-IA) to cap subsidy payments to the largest producers. I also filed an amendment with Senator Robert Menendez (D-NJ) to trim direct payments. In addition, I supported and cosponsored an amendment offered by Senators Sherrod Brown (D-OH) and John Sununu (R-NH) to trim government subsidies to crop insurance companies, and voted in favor of an amendment offered by Senator Amy Klobuchar (D-MN) that would have prohibited farm support payments to wealthy individuals. I was disappointed that these amendments failed. The final bill does reform the commodity support programs by modestly trimming direct payments and reducing the adjusted gross income eligibility cap, but more reforms are needed.

To read my full statement on the bill, please visit here. While we may not always agree, I look forward to hearing from you in the future.

Speaking of our politicians, Bruce Murphy notes some special interest assistance from Senator Kohl and link to this New York Times article:

Senator Herb Kohl, Democrat of Wisconsin, persuaded the Appropriations Committee and the full Senate to accept legislative language benefiting Aurora BayCare Medical Center in Green Bay.

The hospital’s lobbyists include Theodore H. Bornstein, a former chief of staff for Mr. Kohl, and Bill Broydrick, whose Web site quotes a description of him as “the state’s No. 1 super lobbyist.”

The Kohl provision would allow the Green Bay hospital to expand by building a new cardiac catheterization laboratory.

The issue often puts lawmakers in the awkward position of having to choose between doctors and hospitals.

Critics say that when doctors have a financial stake in a hospital, they have an incentive to send patients there because they not only receive professional fees for their services, but also can share in hospital profits and see the value of their investment increase. Such arrangements can lead to greater use of hospital services and higher costs for Medicare and other insurers, say the critics, including many in Congress.

My email to Senator Kohl:

Dear Senator Kohl:

I hope this message finds you well.

I am writing to express my disappointment at your support for the "Aurora BayCare Medical Center in Green Bay" carve out in what I believe to be upcoming health care legislation.

http://www.nytimes.com/2008/06/08/washington/08hospital.html

Such narrow special interest treatment is at odds with your "Nobody's Senator but Yours" mantra.

These carve outs simply increase costs for middle America.

I am disappointed.

Best wishes,

Jim Zellmer

Message to Tammy Baldwin, Russ Feingold and Herb Kohl Regarding the Farm Bill Vote

I sent this email to Representative Tammy Baldwin along with Senators Russ Feingold and Herb Kohl regarding their support for the pork laden farm bill:

Dear ___________:

I am writing to express my disappointment in your vote for the pork laden farm bill.

Similar to the support given for a 5% large corporation offshore tax rate a few years ago, this legislation benefits only the rich on the backs of middle class taxpayers.

I am surprised and disappointed.

Jim Zellmer

Much more on the farm bill here.

Wisconsin Democrat Ron Kind, to his credit, voted against the farm bill:

“Today Congress squandered the best opportunity in decades to reform our wasteful, outdated subsidy system.

“We need a Farm Bill, but we need the right kind of farm bill. Let me be clear: This bill is not a reform bill. It is not even the illusion of reform. Continuing to send unlimited subsidies to millionaires is not reform. Creating a new disaster entitlement program is not reform. And setting ourselves up for billions in unaccounted spending is not reform. The president was right to veto it.

“As families kick off their summer vacations this weekend facing the highest gas prices ever, skyrocketing food costs, stagnant paychecks and a lagging economy, I urge them to ask their member of Congress how they could justify sending unlimited taxpayer subsidies to agribusinesses and wealthy landowners making up to $2.5 million a year in profit.

Related:

• John McCain on the Farm Bill
• Barack Obama

Wisconsin Radio Network notes that Green Bay Democrat Steve Kagen and Wausau Democrat David Obey also voted for the farm bill.

2007 Farm Subsidy Database by Congressional District.

A Tear: Vietnam Approves a $4.5 Billion Dollar Coastal Casino Project. Atlantic City on the South China Sea?

Bruce Stanley:

Communist Vietnam is set to become the latest country in Asia to embrace Las Vegas-style casinos, with a Canadian property developer planning to break ground Saturday on the first phase of a $4.5 billion casino-resort project on the nation's southern coast.

The project, called Ho Tram, will be the biggest foreign investment to date in Vietnam, said Michael Aymong, chairman of Toronto-based Asian Coast Development Ltd., the project's lead investor, with a 30% stake. Its main partner in the project is New York hedge fund Harbinger Capital LLC, which has a 25% share.

The initial phase will cost $1.3 billion and consist of two five-star hotels with a combined 2,300 rooms and a casino with approximately 90 gambling tables, 500 slot machines and an area for VIP customers. When completed in 2015, the resort will comprise five hotels with 9,000 rooms and a second casino, Mr. Aymong said.

Ho Tram also will target vacationing families, with features including an 18-hole golf course designed by Greg Norman, a Cirque du Soleil theater, and a site for guests to swim with dolphins.

"It's a needed project in Vietnam" that, in spite of the country's poor infrastructure, will be able to "effectively compete" with integrated resorts in neighboring China, Malaysia and Singapore, Mr. Aymong said

Susan Spano offers another perspective after a recent visit.

The photo was taken on Highway 1 several hundred kilometers northeast of Ho Chi Minh City (Saigon).

Gasoline Tax Comparison

Via The Economist.

Kill the Farm Bill

Alex Tabarrok:

Farm subsidies in the United States go to just a handful of crops, corn, wheat, cotton, soybeans, and rice. Most fruits and vegetables are not subsidized, at least not directly but don't forget opportunity cost!

David Zetland has the dirt.

2007 Farm Subsidy Database by Congressional District and a Wisconsin Earmark Update

Environmental Working Group. Wisconsin's Ron Kind ranks 37th @ 264,820,105 and Tammy Baldwin ranks 61st @ $140,993,229.

Audrey Hoffer takes a useful look at Wisconsin politician's use of earmarks to further redistribute federal income taxes - otherwise known as pork:

Earmark is a dirty word.

That's the tacit message of Taxpayers for Common Sense, which describes itself as a progressive nonpartisan budget watchdog.

An earmark is a project in their district for which members of Congress designate funds. Earmarks often are awarded without public hearings or other congressional debate over their merits. Congress inserted 12,881 earmarks worth $18.3 billion into this year's spending bills, according to the watchdog group.

While some taxpayers and their representatives decry earmarks as boondoggles and wasteful government spending, others defend them as a way to accomplish important objectives while bringing jobs and benefits to their constituents.

Taxpayers for Common Sense 2008 Earmark Database.

Wisconsin political earmark (deficit) spending:

Herb Kohl $153,438,700

Russ Feingold: $0

Dave Obey: $102,137,950

Steve Kagen: $24,547,700

Tammy Baldwin: $16,443,500

Tom Petri: $12,999,000

Ron Kind: $11,433,000

Gwen Moore: $7,482,300

Paul Ryan: $5,396,000

Jim Sensenbrenner: $932,000

It would be interesting to compare campaign contributions to earmark recipients.

Hoffer closes with these quotes:

Steve Ellis, vice president of Taxpayers for Common Sense, said: "It's really easy to isolate an earmark and say it's a good thing, but if we do that, we miss the overall context. It's a zero-sum game. We need to make sure we spend every penny wisely."

Obey has his own reservations about the system and said last summer on the "Bill Moyers Journal" television show:

"The reason I hate earmarks is because they suck everybody in. They suck them into the idea that we have to be ATM machines for our districts, and so they focus on the tiny portion of most bills that are earmarks instead of focusing on the policy that is represented by the legislation that we produce.

Fixing US broadband: $100 billion for fiber to every home

Nate Anderson:

The US is in desperate need of 100Mbps "big broadband." That's the conclusion of a new report from EDUCAUSE (PDF), a group that represents IT managers at over 2,200 colleges and universities. But these 100Mbps connections are coming slowly; in the meantime, countries like Japan already have them. To avoid falling further behind, the report calls for a national broadband policy to be passed this year, one that includes $100 billion for a fiber-to-the-home infrastructure that will connect every household and business in the country.

The report opens by citing the familiar, dreary facts: US broadband might now be widely available, but it's slow and relatively expensive. Between 1999 and 2006, the US fell from third place to 20th in the International Telecommunications Union's broadband usage measurements. When it comes to average connection speeds, the US isn't beaten just by Japan but also by France, Korea, Sweden, New Zealand, Italy, Finland, Portugal, Australia, Norway, Luxembourg, the United Kingdom, and Germany. And it's not about population size or density, either; Finland, Sweden, and Canada beat us on most broadband metrics despite having lower population density. Finally, we're getting beat on price, coming in 18th worldwide when it comes to cost per megabyte.

David Cay Johnston on How the Rich Get Richer

Fresh Air:

Investigative reporter David Cay Johnston explores in his new book how in recent years, government subsidies and new regulations have quietly funneled money from the poor and the middle class to the rich and politically connected.

Rolling Over for AT&T: "Video Competition" Bill is a Major Missed Opportunity for Wisconsin

A reader forwarded this full page, color advertisement paid for by large telco (AT&T, etc.) front group TV4us. The advertisement appeared in this morning's Wisconsin State Journal. The State Journal supports the AT&T "video competition bill".

Click to view a larger version

Brian Clark has more:

Vergin said he's pleased he'll only have to get one state franchise, instead of having to deal with the 33 different municipalities in his service area.

“That’s a big benefit for us and what I think the bill is all about,” he said.

Vergin said his company’s prices won’t be any lower than Charter’s. But he's convinced his firm will be able to offer better service and options to bundle cable, phone and wireless service.

He said he was opposed to proposed rules that would have required his company to serve entire communities. He also rejected suggestions telecommunications firms should be ordered to run fiber optic to homes and businesses.

“The 100 requirement would limit us,” he said. “And we are running fiber optic to new construction, but not existing buildings. I just don’t think the government should tell us what technology we should use. The market should decide that. I also think have 50 percent of any area covered is better than none.”

.....

(Charles) Higley (Citizen's Utility Board Executive Director) said he, too, would have liked to have seen a requirement that companies build fiber optic cable.

“We’ve had promises to build it before and it didn’t come,” he said. “In the future, if not already, broadband is an essential service like telephone and electricity. We think government should require essential services.”

The Governor and Legislature appear to have obtained nothing while giving away significant regulatory changes. A disaster for Wisconsin business, schools residents and public agencies. What a deal for the large telcos: spend money on lobbying and advertising but not fiber to the home. Classic rentier approach: milk the slow copper network that we've paid for many times over as long as possible.

Keep in mind Verizon's FIOS, a fiber to the home product installed in many communities [Service Map] - none in Wisconsin.

I recently had the opportunity to use basic FIOS service while on travel. The service was symmetrical - that is, upload and download speeds are the same. Local dsl services are not symmetrical - AT&T and TDS limit upload speeds to a very slow 768kpbs.

This archaic approach is awful for those of us creating, uploading and backing up media (photos, videos and music, not to mention data heavy scientific applications). FIOS provides at least 5 to 50X the speeds of the fastest dsl service generally available in the Madison area. Slow networks limit entrepreneurial opportunities, particularly emerging home based businesses.

Finally, I spoke briefly some years ago with then Gubernatorial candidate Jim Doyle at a campaign event. I mentioned Wisconsin's very poor broadband infrastructure. He said he understood these issues but could not address them in his first term but hoped to in a second. Will Doyle leave a legacy of aging, slow copper networks? I put a call into Susan Goodwin, Chief of Staff, for an update.

-------

A bit of sugar for AT&T. This giant organization is fully capable of implementing a modern, high quality, fast fiber network. They simply need to make the strategic decision, as Verizon has, to upgrade their network. How much longer must we pay for the old, old copper lines? I've received excellent, economical service from AT&T's cell network.

Background:

• Copper vs. Fiber
• "Network Effect"
• Community Broadband Networks
• 124K PDF "Draft" Video "Competition" Bill
• $200 Billion Broadband scandal

Mayor Dave's 2007 Property Tax Letter

Madison Mayor Dave Cieslewicz:[72K PDF]

Enclosed you will find your 2007 property tax bill. While the City of Madison processes your taxes, the property tax bill is actually made up of five parts. The Madison Metropolitan School District has the largest share, followed by the City, Dane County, and Madison Area Technical College. A small amount is also levied for the state forestry tax.

The primary concern in our community today is the quality of life and safety in our neighborhoods. This summer and fall, I attended eight listening sessions across the City on these issues. People told me they wanted their City government to make sure their neighborhoods are safe and healthy. In response, the City budget makes the following investments:

• Increasing Police Resources. In addition to 30 new officers, the City budget includes two additional crime analysts to make sure we' re not j ust stronger, but also smarter, in use of our resources.
• Targeting Bad Landlords. The addition of three new building inspectors and our new nuisance abat ement ordinance give us the tools we need to get after landlords who don't maintain their properties or adequatel y screen their tenants.
• Strengthening Neighborhoods. We doubled the Emerging Nei ghborhoods Fund to $200,000, giving us quick-access resources to prevent small problems from becoming bigger, more expensi ve ones. We' re launching a Neighborhood Indicators Project to give us statistical early warning signs of neighborhood decline. The budget also funds another graffiti elimination crew to keep our neighborhoods free of gang-related messages.
• Programs for Young People. We are increasing Communi ty Service programs by over 7%, funding initiatives for after school and youth programs, and doubling the number of youth conservation corps crews.

The City budget also includes park improvements, expanded library hours at some branches, road
projects, energy efficiency initiatives, a new effort to clean our beaches, and other programs to maintain and improve Madi son' s quality of life.

These words are a useful look at the Mayor's perspective on local taxpayers.

Owe The IRS? No Problem!

Lloyd Garver:

"If you owe the IRS lots of money, forget about it. We'll take care of it. We'll get them off your back. You won't have to pay all of what you owe. So, why should you pay what you really owe when our expert former IRS agents can negotiate a low settlement for you?"

The above is a paraphrase of the many commercials that I've been seeing on television lately. The premise is that through no fault of your own, you have failed to pay the taxes that you owe, and the mean and nasty IRS wants its money. There is no reason for you to despair, because there are companies who can help you negotiate a settlement with the government.

Inside Wal-Mart's Bid to Slash State Taxes - Our Political Class at Work

&Jesse Drucker:

About a decade ago, Wal-Mart adopted another approach, following advice from Ernst & Young. Wal-Mart transferred ownership of its stores to various in-house real-estate investment trusts. REITs pay no corporate income tax as long as they pay out at least 90% of their income to shareholders as dividends, which are usually taxed. Wal-Mart paid tax-deductible rent to those REITs. For one four-year period, the setup saved the retailer an estimated $230 million on its tax bill, even though the rent payments never left the company.

That strategy was the focus of a Wall Street Journal article in February. Since then, at least six states, including New York, Illinois, Maryland and Rhode Island, have passed laws attempting to prohibit the maneuver, which also has been used by banks and other retailers such as AutoZone Inc. The practice is being challenged by tax authorities in at least four other states, court records show.

Legislative sausage supported by our elected officials only makes these "loopholes" worse. Here's an example that both Russ Feingold and Herb Kohl supported - a 5.25% offshore earnings tax rate for major corporations. More here. Another example of special interest legislation.

The Subprime Collapse Didn't Start Bothering the Bush Administration until Wall Street Bankers Started Whimpering

Daniel Gross:

When individual borrowers began to suffer, Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson didn't seem overly concerned. The market would clear out the problem through the foreclosure process. Loans would get written off; properties would change hands and be resold. When upstart subprime mortgage lenders ran into trouble, Bernanke and Paulson shrugged again. The market would clear out the problem through the bankruptcy process. Subprime companies like New Century Financial filed for Chapter 11, others liquidated or restructured, and loans made to the lenders were written down. Meanwhile, Paulson and Bernanke assured us that the subprime mess was contained.

But as the summer turned to fall, and the next several shoes dropped, their attitude changed. And that is because the next group of unfortunates to fall victim to subprime woes were massive banks. In recent years, banks in New York, London, and other financial capitals set up off-balance-sheet funding vehicles called SIVs, or conduits. The entities borrow money at low interest rates for short periods, say 30 to 90 days, and use the funds to buy longer-term debt that pays higher interest rates. To stay in business, the conduits must continually roll over the short-term debt. But as they searched for higher yields, some conduits stuffed themselves with subprime-mortgage-backed securities. And when lenders became alarmed at the declining value of those holdings, they were reluctant to roll over the debt. Banks thus faced a choice. They could either raise cash by dumping the already-depressed subprime junk onto the market, or bring the conduits onto their balance sheets and assure short-term lenders they'd get paid back.

Related: Credit Risk is Rising Again.

Morning Workout Zeitgeist, or "Let's turn the Capitol into a Casino/Waterpark"

Props to the early morning workout group for this inspiration.

Average US Income Tax Rates

Greg Mankiw. It would be interesting to see a more detailed analysis of this.

Obama's Earmarks

Washington Post.com

Senator Barack Obama (D-Ill.) requested federal funding for several projects as part of this year's annual appropriations process. The projects, with the amounts designated by his constituents and several national organizations were released by the senator.

Random Tax Audits Return to the IRS

Wendy Kaufman:

The Internal Revenue Service began this month selecting thousands of taxpayers for audits — even though the IRS has no reason to think they've underpaid their taxes. It's part of the IRS' National Research Program.

State of Wisconsin Federal Spending Profile

Eagle Eye:

The following tables show aggregated prime contract dollar totals for the state of Wisconsin. Key data elements (agencies, companies, metropolitan areas) are ranked by their FY2006 - FY2007 YTD Totals. All aggregated data is copyrighted by Eagle Eye Publishers, Inc. Tables may not be reproduced without written permission from Eagle Eye.

Parsing Earmarks with Our Entrenched Political Class: David Obey....

John Solomon & Jeffrey Birnbaum:

Rep. Jeff Flake (R-Ariz.) confronted David R. Obey (D-Wis.), chairman of the House Appropriations Committee, on the House floor in March over this practice, noting that a spending bill then under debate contained $35 million for a risk-mitigation program at a federal space-exploration facility, even though the measure had been certified to contain no earmarks.

"We have passed some good rules with regard to earmark reform and transparency," Flake said. "But we have found a way around them already." Obey said that the provision was not an earmark under the rules. "An earmark is something that is requested by an individual member," Obey said. "This item was not requested by any individual member; it was put in the bill by me."

Two months later, Obey again rebuffed Flake when Flake pointed out that a supposedly earmark-free bill on the House floor contained an allocation of $8.7 million to ward off floods in New York. The provision was not called an earmark, Flake noted, but Rep. Nita M. Lowey (D-N.Y.) put out a news release applauding the provision and its potential benefit to her district.

Much more on earmarks, here.

Taxes & The Closing of Foreign Car Specialists

Marv Balousek:

Beebe bought the business after working there a year and Lucey sold the building to the family of President Kennedy. Beebe said the Kennedys bought the building because they wanted a business reason to visit Wisconsin where the former president's sister, Rosemary Kennedy, who was mentally retarded and lobotomized at age 23, spent decades at St. Coletta's in Jefferson until her 2005 death at age 86.

Beebe bought the building from the Kennedy family in 1979 and recently paid off the mortgage

Hearing on Fair and Equitable Tax Policy for America’s Working Families

House Ways & Means Committee. Submit your statement to this useful event:

Chairman Rangel Announces Hearing on Fair and Equitable Tax Policy for America’s Working Families

House Ways and Means Committee Chairman Charles B. Rangel (D-NY) today announced the Committee on Ways and Means will hold a hearing on fairness and equity in the tax code. The hearing will focus on a number of tax fairness issues, including the tax treatment of investment fund managers and the impact of the alternative minimum tax on working families. It will also examine the reasons why investment funds are being organized offshore. The hearing will take place on Thursday, September 6, 2007, in 1100 Longworth House Office Building, beginning at 10:00 a.m.

In view of the limited time available to hear witnesses, oral testimony at this hearing will be from invited witnesses only. However, any individual or organization not scheduled for an oral appearance may submit a written statement for consideration by the Committee and for inclusion in the printed record of the hearing. A list of invited witnesses will follow.

IRS Taxpayer's Advocacy Panel 2006 Report

Taxpayer Advocacy Panel: [PDF]

On Earmark Reform

Tyler Cowen:

Maybe not:

Eight months after Democrats vowed to shine light on the dark art of “earmarking” money for pet projects, many lawmakers say the new visibility has only intensified the competition for projects by letting each member see exactly how many everyone else is receiving...

The earmark frenzy hit fever pitch in recent days, even as the Senate passed new rules that allow more public scrutiny of them.

Far from causing embarrassment, the new transparency has raised the value of earmarks as a measure of members’ clout. Indeed, lawmakers have often competed to have their names attached to individual earmarks and rushed to put out press releases claiming credit for the money they bring home.

Community Broadband Act would overturn bans on municipal broadband

Eric Bangeman:

A bill introduced into the House of Representatives this week will attempt to spur broadband development in the US by overturning existing state bans on municipal broadband deployments. Titled the Community Broadband Act of 2007, the bill (PDF) is cosponsored by Rep. Rick Boucher (D-VA) and Rep. Fred Upton (R-MI).

Currently, laws in Arkansas, Florida, Missouri, Texas, and a handful of other states prevent cities and towns from installing and operating their own broadband networks. Most of those laws were enacted in the wake of heavy lobbying from the telecommunications industry, which doesn't want to see competition coming from local governments.

Last year's attempted rewrite of the Telecommunications Act contained a similar provision but never made it to the floor of the Senate for a vote. With the state of broadband in the US a hot topic of discussion lately, both on Capitol Hill and around the country, Reps. Boucher and Upton may be able to find allies in Congress a bit more easily this time around. The congressmen are hopeful that, should it be passed, the Act would lead to more—and better—broadband options for US citizens.

Wisconsin Congressional Earmarks: Spending our Children's Money via a Bloated Defense Bill

Taxpayers for Common Sense posted a very useful and in some ways surprising look at $3,000,000,000 in Congressional Earmarks attached to a $459,600,000,000 defense appropriation bill (not the entire defense budget). This amount is $40,000,000,000 more than last year's authorization (nice). Wisconsin congressional earmarks are lead by long time incumbent David Obey with $42,000,000, who also conveniently serves as Chair of the House Appropriations Committee. Obey's earmark methods have been criticized recently: John Solomon & Jeffrey Birnbaum writing in the Washington Post:

Democrats had complained bitterly in recent years that Republicans routinely slipped multimillion-dollar pet projects into spending bills at the end of the legislative process, preventing any chance for serious public scrutiny. Now Democrats are poised to do the same.

"I don't give a damn if people criticize me or not," Obey said.

Obey's spokeswoman, Kirstin Brost, said his intention is not to keep the projects secret. Rather, she said, so many requests for spending were made to the appropriations panel -- more than 30,000 this year -- that its staff has been unable to study them and decide their validity.

Here's a list of all earmarks (.xls file) attached to this defense bill. Wisconsin delegation earmarks:

1. David Obey 42,000,000 (Unique ID Column 837, 854, 874, 921, 947, 1053, 1093, 1165)
2. Tammy Baldwin $7,500,000 (Unique Id Column 56, 740, 1334)
3. Steve Kagen $5,000,000 (Unique ID 496, 561, 562)
4. Ron Kind $4,000,000 (Unique Id 1033 and 1083)
5. Tom Petri $4,000,000 (Unique Id 782)
6. Gwen Moore $2,000,000 (Unique Id 575, 898, 978 and 1151)
7. Paul Ryan $0.00
8. Jim Sensenbrenner $0.00 (shocking)

HouseDefenseEarmarks.xls. Congress's approval ratings (3%) are far below the President's (24%), which isn't saying much (Zogby Poll)

Much more on local earmarks, here [RSS Feed on earmarks]

Tax Code Sausage Making - for the Rentier Class

NY Times Editorial:

The corrosive effects of that trend were detailed in The Times yesterday by Alex Berenson, who examined the fallout of the Orwellian-named American Jobs Creation Act of 2004. Pitched by tax-axing lawmakers as a way to generate cash for new hiring, it allowed American companies to bring foreign-held profits back to the United States in 2005 at a discount of up to 85 percent off the normal tax rate. Some 100 companies repatriated about $300 billion, avoiding about $90 billion in taxes.

But instead of hiring more workers, many of the participating multinationals had mass layoffs, especially drug companies. Pfizer, the world’s largest drug company, repatriated $36 billion at the discounted rate, while laying off 8,000 employees in 2006 and announcing layoffs of 10,000 more. Eli Lilly and Schering-Plough also repatriated billions while laying off thousands. Technology companies did the same. Hewlett-Packard, for example, repatriated $14.5 billion in 2005 and laid off 14,500 workers. In some instances, the corporate tax savings were more than enough to cover the severance costs and other expenses of the layoffs.

Our good Senators, Russ Feingold and Herb Kohl supported this massive giveaway. Rentier

Earmarks, "Phonemarking", Congressional Excesses and Wisconsin Representative David Obey

John Solomon & Jeffrey Birnbaum:

But the new majority is already skirting its own reforms.

Perhaps the biggest retreat from that pledge came this week, when House Appropriations Committee Chairman David R. Obey (D-Wis.) told fellow lawmakers that he intends to keep requests for earmarks out of pending spending bills, at least for now. Obey said the committee will deal with them at the end of the appropriations process in the closed-door meetings between House and Senate negotiators known as conference committees.

Democrats had complained bitterly in recent years that Republicans routinely slipped multimillion-dollar pet projects into spending bills at the end of the legislative process, preventing any chance for serious public scrutiny. Now Democrats are poised to do the same.

"I don't give a damn if people criticize me or not," Obey said.

Obey's spokeswoman, Kirstin Brost, said his intention is not to keep the projects secret. Rather, she said, so many requests for spending were made to the appropriations panel -- more than 30,000 this year -- that its staff has been unable to study them and decide their validity.

For instance, a new emergency spending bill for the Iraq war passed by the House this month had no specific earmarks, but it included a clause declaring that all the projects lawmakers had included in a previously vetoed bill were, in effect, included.

Likewise, the House Appropriations Committee report accompanying the Iraq supplemental spending bill vetoed by President Bush boldly declared: "This bill, as reported, contains no congressional earmarks, limited tax benefits, or limited tariff benefits." But it set aside money for pet projects including $25 million for spinach, $60 million for salmon fisheries and $5 million for aquaculture.

"Absolutely nothing has changed," said the Center for Defense Information's Winslow T. Wheeler, a Senate appropriations and national security aide who worked for both Democrats and Republicans over three decades before stepping down in 2002. "The rhetoric has changed but not the behavior, and the behavior has gotten worse in the sense that while they are pretending to reform things, they are still groveling in the trough."

A 2006 spending bill included $6.9M for Obey's Northern Wisconsin District. Much more on earmarks, including those spread around Madison, here.

More from the Examiner here.

True Broadband: Vermont vs. Wisconsin

Tom Evslin:

An hour or so ago the Vermont House and Senate both gave final approval to a bill designed to make Vermont the nation’s first e-state. As defined in Vermont, e-stateness means cellular and adequate broadband coverage – fixed and mobile – everywhere in the state by 2010. The initial definition of adequate fixed broadband is 3 megabits per second service in at least one direction; but the bill contains a mechanism for ratcheting that up as requirements escalate. It is estimated that this requirement may be as high as 20 megabits in both directions by 2013.

Although the bill passed the Vermont House with an overwhelming 132-2 vote more than a month ago, it was by no means assured of passage. Vermont’s citizen legislature is hoping to adjourn for the year sometime tonight. There was a danger that the Senate would not have the time it needed to consider all aspects of this very large bill. But they did!

Quite a contrast to Wisconsin's process, where AT&T's stagnant infrastructure (and more importantly, their lobbying prowess) carries the day. Gotta love our forward thinking politicians.

Big Political Donors are also Tax Shelter Players

Walter F. Roche Jr. and Michael A. Hiltzik:

What's a politician to do upon discovery that a generous billionaire donor turns out to be a major tax dodger? It's a dilemma already encountered by the Republican and Democratic parties in this season of unprecedented political fundraising.

At a time when newly powerful Democrats, including presidential hopeful Sen. Hillary Clinton of New York, are pressing for aggressive pursuit of unpaid tax bills to boost federal revenue, the party's biggest financier and prominent Clinton backer is tied to one of the largest individual tax avoidance schemes on record.

And two Republican billionaires — Texas brothers who have poured a small fortune into supporting the presidential bids of two George Bushes and, more recently, Sen. John McCain (R-Ariz.) — were accused last year of exploiting offshore havens to escape taxes on nearly $200 million in gains.

Amid predictions that the 2008 presidential campaign will be the most expensive in history, with spending possibly topping $1 billion, pressure to raise huge sums of cash is a certainty. For candidates, the question is whether the headlong pursuit of deep pockets may also risk embarrassment over their donors' financial baggage.

Sheila Krumholz, executive director of the Washington-based Center for Responsive Politics, said that candidates sometimes have to make their own "cost-benefit analysis."

A few Suggestions for Governor Doyle Regarding the AT&T "Video Competition" Bill

AT&T's lobbying efforts to change Wisconsin's cable TV regulations has generated a refreshing amount of commentary. 5 years ago, during Governor Doyle's first Gubernatorial campaign, I had a chance to briefly talk with him after a debate with Scott McCallum. I mentioned Wisconsin's poor broadband infrastructure (we continue to stand still, which means we're falling further behind) and how AT&T had failed to invest in fiber networks. Doyle mentioned that he was aware of this, but could not do anything about it in a first term.....

Fast forward to 2007. This map, via broadbandreports.com displays the communities that have Verizon's fiber to the home available. Fiber networks provide much higher speeds and more citizen choice than our aging and long since paid for copper networks (we continue to pay and pay and pay for the old stuff).

Perhaps, Governor Doyle might put citizen's interests first and sign the bill only if:

• Those who provide service via this bill must do so via symmetrical fiber to the home, and,
• Customers may purchase the symmetrical fiber to the home service for internet use only (ie, without phone or video service). Such "naked" internet service shall be available at speeds equal or greater to those offered via phone/video bundles.. Cost and terms shall not penalize naked internet buyers vis a vis bundled phone/video purchases
• Customers shall have complete access to all internet services. Vendors will not restrict any IP services.

What are the odds? UPDATE: A friend emailed simply: "Lotsa luck". Interestingly, this type of an initiative would be quite a legacy for the Governor. The fiber will be connected to our homes for many, many years.

I.R.S. Audits Middle Class More Often, More Quickly

David Cay Johnston:

Middle-class Americans, listen up: the I.R.S. is much more likely to audit you this year. Those caught cheating can expect to pay about $4,100 more on average in income taxes.

Since 2000, authorities at the Internal Revenue Service have nearly tripled audits of tax returns filed by people making $25,000 to $100,000 as part of a broad change in audit strategy.

Audits of these middle-class taxpayers rose to nearly 436,000 last year, up from about 147,000 returns in 2000. For these 61 million individuals and married couples, who make up nearly half of all taxpayers, the odds of being audited rose from 1 in 377 to 1 in 140.

Kevin Brown, the I.R.S. deputy commissioner for services and enforcement, said the audits “were out of whack” in 2000, with far too little attention paid to the middle class and to the very highest income generators, those making $1 million or more. “We try to run a balanced audit program,” Mr. Brown said.

AT&T's Rhetoric on Competition

Mark Pitsch:

Wisconsin residents would lose their rights to cable television repairs within 72 hours, credit for service interruptions and advance notice of rate increases, under a bill on the fast track in the state Legislature.

The proposal, designed to increase competition in an industry dominated by cable companies, is supported by the lobbying muscle of telecommunications giant AT&T.

It's part of AT&T's challenge to cable companies such as Charter Communications, which are licensed by local governments.

There is little agreement on whether the proposal would help consumers or hurt them.

Pitsch mentions this:

But proponents say the bill would lower costs for telecast delivery - whether by cable or AT&T's fiber optic lines - by up to 23 percent by introducing competition and deregulating the industry.

What fiber optic lines would that be? AT&T has done nothing to upgrade it's copper based network to the home (other than spend money on lobbying and advertisements regarding the ongoing resale of the old network, something we've paid for over and over and over...), unlike Verizon in other parts of the country. Nice to see our politicians continue to "stick it to us". `

Some Good Reasons for Governments NOT to invest Taxpayer Money in Schemes

Richard Aboulafia:

Finding Two. If a state plays this game it quickly reaches an absurd level. Just after the LoPresti micro-triumph New Mexico announced a $100 million investment to build…a spaceport (I really wish I was making this up). This will service Richard Branson’s Virgin Galactic and is obviously a necessary subsidy, because Branson, for some reason, has no cash. (See the December 2005 press release at http://ww1.edd.state.nm.us. Title: Richardson Announces $100 Million Commitment to Build World’s First Spaceport. Implicit subtitles: “Private Sector Baulks At Risky Project; We’re enlisting New Mexico Taxpayers To Provide Generous Help” and “Hooray! We’re Morons!”). Today, Kansas and Florida. Tomorrow, Low Earth Orbit. Who can stop New Mexico from operating like an aerospace banana republic? In search of good government I asked my friend Jeff Schwartz what could be done. Jeff is one of the smartest government guys I know, and he works for the Appalachian Regional Commission, which funds development work in states in their jurisdiction. “We’re on it,” he reassured me, referring me to their code (http://www.arc.gov/index.do?nodeId=1242#chap8). The ARC prohibits its money from going to “(A) Any form of assistance to relocating industries; (B) recruitment activities that place a state in competition with another state or states; and (C) projects that promote unfair competition between businesses within the same immediate service area.”

Brenda Konkel recently wondered about the City of Madison's $700K loan to Tomo Therapy. Generally, I think governments should stay out of this. We're all better off if they spend time simplifying processes, taxes and paperwork.

Google's Arrogance in North Carolina: Learning from AT&T?

Ed Cone:

But it turns out that there was a lot more to the story. Google leaned hard on North Carolina lawmakers and officials, not just to get the fattest deal possible but to choke off the flow of information along the way.

According to documents obtained by The News & Observer of Raleigh, the company went beyond reasonable expectations of confidentiality to demand absolute secrecy while negotiations were under way, even asking participants to sign nondisclosure agreements; some legislators and local officials did so, but Department of Commerce officials did not. Google executive Rhett Weiss badgered Commerce Secretary Jim Fain about the state's adherence to process, complaining, for example, when lawmakers wanted an estimate of the cost to North Carolina in lost tax revenue, and threatening to kill the whole thing if Google didn't get its way.

Businesses need some measure of confidentiality when putting together this kind of transaction. Fair enough. But this is the people's business, and Google's high-handedness is an affront to the people of this state.

And then there's that whole "Don't be evil" thing. Google spokesman Barry Schnitt told me that the company's negotiations with the state were "very standard." If that's the case, and this is standard operating procedure for the company, then something has gone wrong in Silicon Valley.

Barry Orton keeps up with AT&T's Wisconsin Lobbying.

Yet another reason to use the excellent Clusty search engine.

Gasoline and the American People

Cambridge Energy Research Associates:

America's "love affair with the automobile" is being transformed -- but not broken up -- by forces that are redrawing the global gasoline and oil market, including higher gasoline prices, tightening environmental requirements, changing demographics, growing world oil demand and expanding fuel options, according to the new 2007 edition of Gasoline and the American People, by Cambridge Energy Research Associates (CERA).

Americans have been driving further -- 40% more than 25 years ago -- and using more gasoline in bigger, more powerful cars and other light duty vehicles. But higher gasoline prices have had a significant impact. The rate of growth in gasoline demand slowed sharply from its 1.6% per year pace (1990-2004) to 0.3% in 2005, and continued to grow slowly in 2006, at 1.0%. And for the first time in 25 years, motorists' average mileage went down. Overall, though, according to the CERA report, improved automotive efficiencies and one of the lowest fuel tax rates among Western countries have kept gasoline and oil's share of average U.S. household budgets at 3.8% in 2006, slightly above the 1960s' 3.4% to 3.6% level despite rising world oil prices.

Media coverage.

Ed Wallace has more.

Ethanol: Very, Very Big Corn

Opinion Journal:

President Bush made a big push for alternative fuels in his State of the Union speech Tuesday night, calling on Americans to reduce gasoline consumption by 20% over 10 years. And as soon as the sun rose on Wednesday, he set out to tour a DuPont facility in Delaware to tout the virtues of "cellulosic ethanol" and propose $2 billion in loans to promote the stuff. For a man who famously hasn't taken a drink for 20 years, that's a considerable intake of alcohol. A bit of sobriety would go a long way in discussing this moonshine of the energy world, however. Cellulosic ethanol--which is derived from plants like switchgrass--will require a big technological breakthrough to have any impact on the fuel supply. That leaves corn- and sugar-based ethanol, which have been around long enough to understand their significant limitations. What we have here is a classic political stampede rooted more in hope and self-interest than science or logic.

I'm Opposed to a $30M Wisconsin Medical Records Subsidy

Sandy Cullen:

A proposal by Gov. Jim Doyle to spend $30 million to help fund electronic medical records systems is just a "drop in the bucket" of what it would take to enable all of the state's health-care providers to access patients' histories at the push of a button, medical experts said.

Doyle said Thursday that he wants to create a $20 million grant program to help nonprofit organizations transition from paper documents to technology he says will reduce medical errors and improve quality.

Another $10 million in tax credits would go to for-profit hospitals and doctors to help cover the cost of their transition.

Cullen's article rightly points out that the "$30M is a drop in the bucket" in a system with billions flowing through it (I don't think they need a subsidy). Creating another layer of tax redistribution (from payroll and income taxes and fees) for state incentives and health care system funding, given the many other state spending priorities, not to mention the $1.6B structural deficit, is misquided. I wonder who is behind this?

Link Hoewing discusses electronic medical records from Verizon's perspective (Verizon is installing Fiber broadband to the home in many markets, unlike AT&T).

The Utility of Asking Questions

Ed Wallace finds some answers:

It seems to me that we might actually be standing at a crossroads of history, and 50 years from now historians will either be writing about the genius of our current plans or bemoaning our utter foolishness. But one thing is for sure. Hoping that things calm down in Iraq, wondering if they are going to get that oil law on the books and praying that the government holds and favors Western oil firms does not sound like a realistic energy policy for the United States.

Everything could go right for us; and the Chinese and Russians could still get back their Iraqi oil contracts, which were abrogated after we invaded that country.

Or we can develop a new energy policy for America. Raise the fuel efficiency standards for automobiles (mid to long-term positive results). Slow down the traffic on our Interstates (immediate impact on the amount of oil we use). Quit using so much oil for fertilizers and plastics and so trim all the waste those industries produce. Tune up our vehicles to maximize fuel economy. And determine whether General Motors’ series hybrid electric is credible, and figure the odds of Detroit’s inventing the lithium-ion batteries that would make the Chevrolet Volt feasible. The subsequent fall in the price of oil would deprive many who detest us of the funding their anti-American plans would require.

If GM’s 150-mpg Chevrolet Volt were coming to market this spring, would that breakthrough stop the 21,500 troops headed for Iraq? Probably not. But it would stop 500,000 American troops from heading to the Middle East a decade from now.

Wisconsin's GDP = South Africa's

Interesting. A map that equates a US State with a similar Country's GDP.

Hype & the Denver International Airport

I heard the hype while living in Denver nearly 20 years ago. $2.5 billion (turned into $5 billion) was necessary to avoid all of the current airport's problems during snowstorms. Mayer Federico Pena lead the charge with his reward coming later - the highway to the new airport (DIA) is named "Pena Boulevard".

Mike Boyd tells the "rest of the story" in the Grinch Comes Clean:

"All Weather Airport? Oh, That Was Just 'Hype'..." ...Along With Most Of The Other Stuff DIA PromisThis Christmas, it wasn't just chestnuts that got roasted on an open fire. Denver's "all-weather" airport, the one that was built to unclog the Western skies, the one that was going to be the glorious technological beacon for all future airports, got roasted big-time in the national media. Justifiably.

Denver International got cooked on something called "the truth."

For almost two days before Christmas, the airport was shut down due to snow. At most times of the year, and at most other airports, this would have been not much more than a page three human interest story, with interviews of passengers stranded like refugees in a big terminal, being asked really deep questions, like, "How long have you been standing in line?" or "When do you think you'll get home?" Or, "Gee, you gotta lot of luggage there." Anything to fill a 90-second piece that's been done dozens of times before.

But this wasn't just any time of the year. And it wasn't at just any airport. First, it was an event that messed up the Holidays to some degree for perhaps as many as 100,000 people. That meant there were interviews with stranded soldiers from Iraq, their precious leave daysdia2.JPG (13614 bytes) being consumed by a closed airport. Then there were the perfunctory pictures of bewildered young families stuck in the terminal, surrounded by despondent little kids fearful of missing Santa Claus, holding the package containing the ThighMaster they were going to give Grandma for Christmas. High profile, newsworthy stuff.

Second, it took place at an airport that was built on the promise that it would never happen. DIA had repeatedly told the world that it would free mankind once and for all of the scourge of flight delays. Mystical DIA, they promised, would handle any - that's right - any weather. No exceptions. Any weather. And when they said all this, they were dead serious and took condescending shots at any infidel who would question it.

A couple of notable quotes from the days when the City was building DIA. These from 1992, for example:

"It's the world's first all-weather airport. We will be able to operate as well in a in a blizzard as Stapleton does on a sunny day..."

or, how about this:

"...We can still land 90 planes per hour in a blizzard..."

In fact, these wonderous promises were made by DIA officials and City politicians as the foundational reason to build this magic new $2.5 billion - now, over $5 billion - airport for the Mile-High City. "Weather delays will be a thing of the past," one of the breathless promo pieces said. Another, aimed at the bond houses that were to finance this thing, claimed, "An all-weather airport, capable of landing three streams of aircraft, no matter how bad the weather..."

In a blizzard? Since there are no arrest records indicating these people were smokingsnakeoil2.JPG (11535 bytes) funny cigarettes or having Timothy O'Leary parties, it's clear that they were saying this stuff with a straight, sober face in an attempt to claim something that they knew wasn't possible nor true. In English, it's called a lie.

At the time, The Boyd Group and a few others went on record, pointing out that, unless they could get Jesus to be a sub on the engineering contract, the chances of DIA being "all-weather" were zero to none.

Aviation Cognoscenti: The Emperor's New Runways. But this was a billion-dollar project, and there was lot of money to be made. So, virtually nobody else in the aviation industry - not the alphabet groups, not the FAA, not even the aviation media, dared say anything. They wanted to remain politically correct.

They all knew, or should have known, that the "all-weather" claims, as well as many others concocted to support the project, were simply not true. But they said nothing.

Perfect Storm: Snow. No Santa. Four Networks. And A Dumb DIA PR Stunt. Of course, DIA has closed on many occasions due to weather. A couple of times, "officially" closed, and on a lot more occasions, functionally closed when airlines simply couldn't operate, yet the bureaucrats would claim DIA was "open" - it was just those silly airlines who refused to land on runways covered with snow, or where they couldn't taxi to the gates. Or in dangerous wind-shear conditions. Or not operating because of those dumb consumers who couldn't get to the airport because the meandering 12-mile access road was impassible and unplowed.

In those instances, nobody much noticed. But then came The Nightmare Before Christmas. From a public relations standpoint, it was DIA's Perfect Storm.

As would be expected, when DIA shut down, the national media descended to do the usual perfunctory Grandma-got-run-over-by-a-flight-delay stories. But then they noticed three things that didn't make sense.

The first was the actual amount of snow that it took to close the airport in relation to it's all weather, better-than-any-other-airport-in-bad-weather claims. Unlike the rest of the region, which saw in some cases almost four feet of white stuff, DIA got 19 to 22 inches, depending on the source. Even with wind, it was neither a 100-year storm, nor of a size particularly unheard of in Colorado. The second thing that got their attention was DIA's announcement that it would not open for almost 24 hours after the last flake had fallen and the bright Rocky Mountain sun came out. Almost a full day. This at America's supposedly most technologically-advanced airport. Red flags went up.

But the third thing that got the media's investigative juices into hyper-drive was when DIA's PR staff opened their mouths and started spitting absurd excuses in all directions. The reasons for the delay in re-opening, they explained confidently and condescendingly, were the huge snow drifts - at first, claimed to be seven feet high, and later the drifts grew in the press statements like Pinocchio's nose to a whopping 12 feet. With a straight face, they told this to network reporters who had just easily traversed the all-four-lanes-open access road, with little or no evidence of such Himalayan-like snow drifts.

Adding to the intrigue, DIA's PR staff arrogantly claimed that the airport had done everything perfectly - in fact, they said they had no reason to change anything in the future. The PR stunts became more silly when they couldn't answer repeated questions regarding why the 12-mile access freeway was clear and open and free of 12-foot drifts, yet all six of DIA's runways were still closed, its ramp areas were clogged with snow, and it couldn't operate for nearly a day after the weather had cleared.pino2.JPG (26150 bytes)

Looking around the terminal, seeing hundreds of people stranded, soldiers from Iraq spending their holiday leave sitting on the floor in their desert fatigues, and passengers around the country messed up due to 20 inches of snow at a $5 billion facility that was supposedly going to do away with weather delays, and things just didn't add up.

The media smelled a cover-up, which is like waving a t-bone steak in front of a hungry Rottweiler.

If They'd Just Told The Truth Right Off... The truth was that, as humans do sometimes, somebody dropped the ball and DIA found itself without a plan to handle a 20-inch snowstorm. A screw-up. But instead of simply coming out with the hard facts, the airport PR hacks went into their usual tell 'em anything mode, a technique that's worked well in the past, but backfired badly this time. By the time the airport finally opened, DIA's PR department had less credibility than Saddam Hussein as a candidate for term life insurance.

But finally, the intense national coverage led the airport to come clean. They announced at a press conference that indeed, they didn't have an adequate snow-management plan, and - countering their original contentions of operational perfection - they were even going to hire a "snow consultant" to fix things, as opposed to relying on the snow job its PR people were providing.

But the damage was done - Denver was splattered all over the national news as an airport to avoid if there is any chance of bad weather.

A Murder-Suicide Pact In The Works?. And that brings us back to the all-weather claim made by DIA and tacitly supported by a host of financial hangers-on, in order to prove the need for the new airport.

After being repeatedly badgered by reporters on the all-weather claim, including the two quotes above, the Airport's long-time chief spokesperson finally blurted out:

"... I'd like to choke the person who came up with that (all-weather) term..."

Within hours, the Denver media dug up the intended strangle victim. Oops. Guess who was behind those all-encompassing quotes? Put it this way - we now have Denver's first pre-announced murder-suicide. Grab your trachea, guy, and squeeze vigorously.

But it gets better.

All Those Great Promises? Oh, Never Mind. The real story was when this same chief DIA PR official was questioned on a radio talk show on December 28th about the original promises and claims made by the City of Denver, its officials, and DIA supporters in order to "prove" a new airport was needed.

The host asked why DIA and the City had made claims for the airport that they knew not to be within several zip codes of being accurate. The PR guy's response was clear.

Yes, of course, he admitted, the airport and the City used what he termed as "hype" and "hyperbole" to sell the need for a new airport. They did so, he noted, to get public support. Basically, he admitted that DIA put out outlandish projections, including the all-weather jive, to mislead the public.

Cutting to the chase, he admitted that they lied.

When asked why public officials would say things they knew not to be true, he took the Nuremberg defense. The public officials were just following orders. At the time of construction, those would be coming from none other than Federico Pena, who went on to greater heights of hyperbole, being responsible as DOT Secretary for the ValuJet FAA cover-up that killed 110 people.

Lots of "Hype" & "Hyperbole" Behind DIA. We could get into the other jive-lie claims - like how the new airport would win new nonstops to Asia (topographic, operational and demographic issues essentially preclude it) or how it would increase service for smaller airports in the region (ask the smaller communities in the area that lost service from one of two hubbing carriers) or the ridiculous concocted nonsense that DIA would attract new service from points all over Europe. (Today, DIA has nonstops to three European points, far from the dozen or so, with over 50 weekly departures, that the airport was supposed to magically attract by 1993.) Or the "hyperbole" that Stapleton couldn't be expanded to handle future growth. (The airport's 1988 EIS outlined growth potential to over 70 million passengers.) No, it didn't default on its bonds, at least not yet, but it has been re-financed a number of times, and, according to the former head of the SEC, it loses money. And the delay stuff? Check out the first three years of operations. Even since then, it's nothing spectacular. Weather delays are not a thing of the past.

There's lots more, but now, they've admitted that we can't trust any of the claims on which $5 billion's been spent to date.

But It Exists. So They Need To Be Honest Going Forward. DIA is here. It's operating. And it needs to be supported.

But that doesn't change the fact that it was built on lies and doctored data that were obvious at the time, but conveniently ignored by a lot of aviation sectors who knew better. Now that they've come clean, it's a lesson that needs to be learned.

We're proud that The Boyd Group was among the few in the consulting field that pointed out these things from the start. Too bad some of our colleagues in the business were afraid to stand up lest they offend a politician or lose out on some business.

The nation needs more airport capacity. But when snake oil is needed to support a given project, it's a political boondoggle, not a capacity project.

(c) 2007, The Boyd Group/ASRC, Inc. All Rights Reserved

TSA's Latest: Sponsored X-Ray Bins

John Croft:

The US Transportation Security Administration (TSA) is launching a one-year pilot programme to allow companies to place advertisements in bins at passenger screening checkpoints at “select” US airports in return for equipment donations.

The effort follows a 3-month test programme at Los Angeles International Airport (LAX) security checkpoints that started in July.

TSA is looking for commercial advertising companies who will team with an airport to provide divestiture bins (the plastic bins used to transport passenger carry-on items through the X-ray machine); divestiture and composure tables; and bin return carts free-of-charge to the TSA. In return, the companies will be allowed to place airport-approved ads “on the bottom of the inside of the bins,” says a TSA spokeswoman. Airports partnered with ad companies will ultimately be required to screen the materials for “offensive, obtrusive, political or controversial” content, she adds.

Not a bad idea, actually. How about a free bottle of water with the ad?

On Earmarks & Lobbyists

Doonesbury. Much more on earmarks, including local activity, here.

Earmarks' Declining Political Utility?

Timothy Egan:

Until this year, Richard W. Pombo, the seven-term Republican congressman from the Central Valley, had never caused much fanfare about bringing home earmarks, the special local projects that circumvent the normal budgeting process. He was far better known for his work fighting environmental regulations.

All that changed in the closing months of this year’s surprisingly tight re-election campaign, when Mr. Pombo began trumpeting the money he had directed to his car-bound district — particularly $75 million for highway expansion, a gift for one of the most congested areas of California.

But it was not enough to persuade voters like Alex Aldenhuysen, a self-described independent, just out of the Navy and voting for the first time in two years. He said he was turned off by Mr. Pombo’s earmark talk. And in the end, Mr. Pombo lost his seat to a Democrat in one of the year’s most significant upsets.

Much more on earmarks, including local politicians use and views of them, here.

Sales Taxes & Online Shopping

Opinion Journal:

But even Christmas stories, from Dickens to Seuss, need a villain. We'd like to nominate your friendly neighborhood state governments, which for years now have been predicting dire declines in state finances because untaxed online shopping would erode the revenue-raising ability of sales taxes.

As usual, the political gloom proved to be overwrought. State tax revenues took a header in 2002 along with the rest of the economy, but they've been growing smartly ever since. The third quarter of this year saw state tax revenues up 4.6% over last year, and that was a deceleration from growth that has bumped along at close to 10% at times in recent years. State sales-tax receipts grew at 4% in the third quarter--and that was the slowest growth in three years. The biggest news about the sales-tax apocalypse is that it isn't happening.

But the strong trend lines for overall tax receipts and sales-tax revenue in particular haven't slowed the move among states to grab a piece of the online-sales pie. In the 14 years since the Supreme Court ruled that the myriad state and local taxes were too complex for mail-order retailers to be expected to master, there's been a movement to obviate that argument by "streamlining" the country's many sales-tax regimes.

Federal Subsidies Turn Farms into Big Business

Gilbert Gaul, Sarah Cohen & Dan Morgan:

The cornerstone of the multibillion-dollar system of federal farm subsidies is an iconic image of the struggling family farmer: small, powerless against Mother Nature, tied to the land by blood.

Without generous government help, farm-state politicians say, thousands of these hardworking families would fail, threatening the nation's abundant food supply.

"In today's fast-paced, interconnected world, there are few industries where sons and daughters can work side-by-side with moms and dads, grandmas and grandpas," Rep. Jerry Moran (R-Kan.) said last year. "But we still find that today in agriculture. . . . It is a celebration of what too many in our country have forgotten, an endangered way of life that we must work each and every day to preserve."

This imagery secures billions annually in what one grower called "empathy payments" for farmers. But it is misleading.

Dairy Industry Crushes Innovator Who Bested Price-Control System

Fascinating, by Dan Morgan, Sarah Cohen and Gilbert Gaul:

In the summer of 2003, shopers in Southern California began getting a break on the price of milk.

A maverick dairyman named Hein Hettinga started bottling his own milk and selling it for as much as 20 cents a gallon less than the competition, exercising his right to work outside the rigid system that has controlled U.S. milk production for almost 70 years. Soon the effects were rippling through the state, helping to hold down retail prices at supermarkets and warehouse stores.

That was when a coalition of giant milk companies and dairies, along with their congressional allies, decided to crush Hettinga's initiative. For three years, the milk lobby spent millions of dollars on lobbying and campaign contributions and made deals with lawmakers, including incoming Senate Majority Leader Harry M. Reid (D-Nev.).

Last March, Congress passed a law reshaping the Western milk market and essentially ending Hettinga's experiment -- all without a single congressional hearing.

"They wanted to make sure there would be no more Heins," said Mary Keough Ledman, a dairy economist who observed the battle.

At the end, participants said, Reid was plainly exasperated. "I'm not listening to any more of this," he said. "I'm out of here."

Reid made his move on Dec. 16, with the Senate chamber nearly empty. He brought up the milk bill, which passed a few minutes later by "unanimous consent," a procedure that requires no debate or roll call vote if both political parties agree. Reid and Kyl said in recent statements that their goal was to level the playing field for milk producers.

Our elected officials at work.

Revenge of the Garlic Farmers, or More Feeding at the Public Till

Alexei Barrionuevo:

For decades, the fiercely independent fruit and vegetable growers of California, Florida and other states have been the only farmers in America who shunned federal subsidies, delivering produce to the tables of millions of Americans on their own.

But now, in the face of tough new competition primarily from China, even these proud groups are buckling. Produce farmers, their hands newly outstretched, have joined forces for the first time, forming a lobby group intended to pressure politicians over the farm bill to be debated in Congress in January.

Nobody disputes that competitive pressures from abroad are squeezing fruit and vegetable growers, whose garlic, broccoli, lettuce, strawberries and other products are a mainstay of world kitchens. But the issue of whether the United States ought to broaden farm subsidies beyond the commodity crops like corn and cotton, which have historically been protected,