Category: Government

Most expensive school building in the United States goes over budget…

by philg

… before the first concrete has been poured.

Yeoman suburbanites west of Boston voted overwhelming to build themselves the most expensive, on a per-student basis, school ever constructed in the United States (see betterlincolnschools.wordpress.com ). It will be 2.5X the cost, per town-resident student, of Newton North, a nearby high school that was formerly the high-water mark for lavish government spending.

At $600/square foot for a combination of renovation and new construction, I figured that it was set up so that there was no possibility of a cost-overrun. Here’s an email from the school superintendent:

Last night, the Lincoln School Building Committee met to review the outcomes of going out to bid for the construction portion of the Lincoln School project that is slated to begin in June. As construction bids have come in for the school building project, the total bid value has exceeded our budget for the project by 3.5 million dollars. This is forcing us to make some significant cuts from the 100% design to remove elements from the project. These cuts are going to be hard and feel frustrating, and perhaps dispiriting, at this juncture in the project. However, this is the process working – we are confronting the real costs of the project now, before work has begun, so we are sure we are building within the budget the community has provided. This is not unlike what would happen if a homeowner was planning a big kitchen remodeling project, and when they received quotes from contractors, the quotes were all higher than what the homeowner had budgeted. Tough choices to cut some aspects of the project would need to be made. Maybe the counters will be Corian instead of quartz, the island will be 10 sq./ft. smaller, and the old refrigerator will be kept until it needs to be replaced. While it is disappointing to have to make these decisions, the homeowner will still be getting a wonderful new kitchen.

They already took $15-20 million out of the construction budget via an Enron-style accounting maneuver (letting a third party company buy the solar panels in exchange for an agreement to purchase power at above-market prices for 30 years). This was necessary because state law limits the amount that a town can borrow as a percentage of property value and Lincoln was trying to go over the limit. Somehow this off-books borrowing from the solar panel vendor doesn’t count and the town therefore managed to move forward as the most indebted town in the state, but not over the limit.

The town committee volunteers/experts predicted that property prices would rise once people heard about the fancy new school building and they’d be able to borrow more. Instead, however, property prices have fallen since the vote to approve the school (i.e., the market may value the new school building at $0). So the town can’t borrow more for what the school superintendent compares to a Whole Foods heater-uppers new kitchen.

I think this is of more than local interest because of the human psychology involved. First, there is the faith that an upgraded building housing the same teachers and students using the same curriculum will yield superior academic outcomes. Then, there was the in-person town meeting Vote of the Righteous in which retirees who had no chance of ever sending a child to the Palazzo of Education enthusiastically voiced their support for saving Planet Earth by bulldozing the existing school (sections that were 25-year-olds and sections that had been renovated 25 years earlier) and creating a Net Zero structure in its place.

What is most interesting for explaining decisions in the rest of the country was that people were able to come together to agree to spend the money, but later fought amongst themselves regarding how to pay for the spending. Massachusetts enables towns to use a progressive property tax structure such that owners of lower-value property pay a lower rate. Would a town of self-described “progressives” vote for progressive property tax? It turned out to be a tougher question than Hillary v. Trump and depended quite a bit on whether one occupied a higher-than-median-value home!

Another passionate discussion ensued regarding approving the construction of more housing and commercial structures in the town. This was now vital to increase the property tax base since (a) the density of the town wasn’t sufficient to support a $110 million (with solar panels) school building, and (b) the property values of the existing houses had fallen (“Lincoln home values have declined -0.1% over the past year and Zillow predicts they will fall -0.7% within the next year.”; compare to nearby “Cambridge home values have gone up 1.7% over the past year and Zillow predicts they will rise 1.2% within the next year.”).

What happens when people who enthusiastically support U.S. population increase via migration ponder the prospect of population growth within their own town? At a minimum, any project needs to be built far away from their own homes. And, they wonder, without quoting any numbers, if the per-pupil spending at the school is $25,000/year plus capital costs of $250,000 per student, how can they make sure that the occupants of the new housing don’t breed additional children that might further drive up school spending? As the average property tax per household will settle in at about $20,000 per year, if there is even one school-age child in a household, the result is a net drain on the town treasury.

A great example of the fiscal outcomes of democracy in action!

Full post, including comments

Boeing dispels rumors that the SLS rocket will be overpriced…

by philg

… with a $40 T-shirt celebrating the Space Launch System (SLS):

Kennedy Space Center gift shop

If the project comes in on budget, it will be nearly $1 billion per launch with roughly 15 percent more thrust than the 50-year-old Saturn V.

The entire program, including the Orion capsule, appears similar to Apollo and, in fact, is named “Artemis,” after Apollo’s twin sister. I asked an astronaut why NASA would do this, 60 years after Apollo. Why not just wait for Blue Origin to have their inexpensive rockets ready at roughly the same time? “It’s what they know how to do,” he responded. My mole inside the scientific side of NASA, responding to “Unless Blue Origin fails it seems as though they will be far cheaper per pound”:

That question has been the hot topic for the last two years or so. Congress keeps pushing SLS so until there is something flying that is obviously better value, SLS will keep going. It’s a jobs program that employs all the same people that Shuttle did. And NASA has a PR push about first woman on the moon for Artemis.

If taxpayers are concerned that the true cost will be more than the $1 billion/launch planned, would it make sense for Boeing to limit the shirt prices to $25? Also, if they’re going to spend $10+ billion on a new-ish rocket, shouldn’t they be able to come up with a more original name than “Space Launch System”?

Related:

  • in the early part of this century, NASA spent at least $9 billion on the Ares I and V rockets that proved to be a dead-en (NBC)
Full post, including comments

Every American welfare program eventually turns into welfare for rich white people?

by philg

“A Surprising Finding on Paid Leave: ‘This Is Not the Way We Teach This’” (nytimes):

One of the biggest arguments for paid leave for new parents has been an economic one: Research has repeatedly shown that women with paid time off after childbirth are more likely to keep working.

But a new study, the largest to be done in the United States, found the opposite. In California, which in 2004 became the first state to offer paid family leave, new mothers who took it that year ended up working less and earning less a decade later. They averaged $24,000 in cumulative lost wages, it found.

For first-time mothers, there was a clear negative effect. After 10 years, the new mothers who took paid leave right after they gave birth were 5 percent to 7 percent less likely to be employed, and those who were employed earned 5 percent to 8 percent less. The researchers said the earnings decreases could be because they worked fewer hours, moved to jobs with lower wages and more flexibility, or became self-employed.

These patterns held no matter the age or prior earnings of the mother, and were true for both unmarried and married mothers, though the decreases in employment were slightly larger for unmarried women

Not too surprising. Pay people to refrain from work and they discover how enjoyable it is to hang out at home!

Usually it takes a while for a welfare program to be co-opted by rich white Americans, but this one was immediately latched onto:

Despite the large sample, the effects were limited to women who took leave immediately after it became available. Only about a fifth of women who gave birth then did so, and that group might have been more inclined to step back from work in the first place.

A variety of research has found that this group was more likely to be older, high-earning, white and college educated than those who took leave after the program had been in effect for a while. Even later, awareness of the program was low, particularly among low earners — exactly the group that research has shown gets the most economic benefits from paid leave.

Related:

Full post, including comments

Tesla proves that it is easier to deal with government of China than government of Michigan

by philg

Annals of free markets #7231… “Tesla Model 3 floodgates open in China next week” (CNET):

Now, with local production in Shanghai, Tesla can skirt the ongoing US-China trade war. The occasion is also monumental for a different reason — Tesla’s Chinese factory is one of the first solely owned by a foreign automaker.

How are things back here in the Land of the Free (market)? Wikipedia shows that Tesla is restricted or banned from selling its products in 20 out of 50 states. It is banned from servicing its vehicles in 5 out of 50. “Our Tesla Model 3 Suffered a Catastrophic Failure While Parked” (Car and Driver):

… he received an ominous push notification from the Tesla app that the car had “suffered a failure and will no longer drive.” … it’s also an extraordinarily rare case of any car leaving us stranded, something unacceptable for any new vehicle, particularly one that costs $57,690 and with merely 5286 miles on the odometer. … even on Christmas Day, Tesla roadside assistance got a tow truck to us in about a half hour, which brought the car to the closest service center: Toledo, Ohio, because Tesla isn’t allowed to operate company-owned service centers in Michigan.

After a two-day wait, we were informed that there are issues with the rear drive unit, the pyrotechnic battery disconnect, and the 12-volt battery and that they are waiting for parts.

Separately, another recent Car and Driver article has a calculation by Mazda that its own modest-range electric car only emits less CO2 than a diesel-powered version after the car is driven at least 50,000 miles. It looks like a Tesla with a big battery would have to go 200,000+ miles before there was a net reduction in CO2 emissions compared to an efficient petroleum-powered car.

Full post, including comments

Hospital price lists are a good idea, but let’s wait until 2021?

by philg

“Hospitals Sue Trump to Keep Negotiated Prices Secret” (nytimes):

The nation’s hospital groups sued the Trump administration on Wednesday over a new federal rule that would require them to disclose the discounted prices they give insurers for all sorts of procedures.

The administration wanted the disclosure rule, which would go into effect in 2021, to allow patients to better shop for deals on a range of services, from M.R.I.s to hip replacements.

It is the 2021 part that fascinates me. There is enough time between now and 2021 for China to build an entire Manhattan worth of office and residential space within each of a few of their larger cities, to open another 2,000 miles of high-speed rail, to add some metro lines in their secondary cities, etc.

If hospitals have all of these prices in their computer systems (funded by tax dollars) and this is a good idea, why wouldn’t the regulation be for them to push them out onto their web sites within a few months?

Full post, including comments

Cost of adding 1,000′ of runway

by philg

I thought that “Morgantown Municipal Airport set to expand runway with FAA funding” contained two extra zeroes:

The Federal Aviation Administration has given final approval for the extension of the Morgantown Airport runway.

Under the plan, the runway will stretch another 1,000 feet from the current 5,199 feet. Currently, the Morgantown Airport runway is one of the shortest in the state.

The project will cost $50 million and take up to 10 years to complete

Surely it would be $5 million and 1 year?

Then I found the city’s page on the project, which estimated a cost of $45 million.

Does a mountain have to be moved? The airnav page for the airport does not show anything like that. It is a bit tough to interpret the official project plan, and the associated nearly 2,000 pages of environmental assessment documents, but the area of work appears to be fairly flat:

Full post, including comments

Billionaire Raj: only a bigger government can address the inequality create by a big government

by philg

I’m listening to the Billionaire Raj on Audible. For those of us who live in a U.S.-centric bubble, there is a lot of interesting modern history regarding India’s most successful people and enterprises, including Mukesh Ambani who lives in a $2 billion house in Mumbai and was rich enough to spend $30 billion building a from-scratch mobile operator called Jio. Some of the success seems to come from rapid growth in an immature economy, which therefore offers niches that don’t exist in Germany, Japan, or the U.S. (what start-up could realistically compete with Verizon, for example?). The author attributes most of the success, however, to cronyism. Current Indian billionaires were those who got early licenses and permits from paid-off friends in politics and government. Maybe they don’t need to bother with bribes now because they have huge market share and momentum.

The author, James Crabtree, makes righteous-sounding statements about the dramatic income and wealth inequality that prevails in India today. Implicit in his decrying of the current situation is that the Indian government needs to grow in size and capacity until money can be taken away from the undeserving billionaires and distributed to the worthy poor. He draws dozens of comparisons between India’s current crop of billionaires and the robber barons that grew rich in the late 19th century United States.

The book itself contradicts this comparison. Crabtree paints India pre-1990 as having a centrally planned economy with at least as many restrictions as the Soviet Union. Nobody could buy or sell anything without approval from a government bureaucrat. Nobody could get on a plane and leave the country without government permission. The Indian government, even in its stripped-down post-1990 form, is vastly larger and more powerful than the U.S. government was in the 1800s.

There are some good sections on the infrastructure of corruption. Most people don’t know how to bribe government officials and wouldn’t want to learn how. Thus, a corrupt society encourages the development of a layer of middlemen agents who obtain the required permits from government officials. If they’re paying bribes, the customer of the agent never need know.

Ever wonder why the folks calling with credit card refinancing scams all have Indian accents? There are plenty of people worldwide who speak English and quite a few are willing to work at low wages. Crabtree makes the case that India has the world’s richest and deepest tradition of corruption.

The author studied government and public policy and his proposal for India is essentially that government be “reformed” so that bribery and inefficiency are eliminated in favor of enlightened technocracy. Once that is done, presumably, then an Elizabeth Warren-style sanding down of the billionaires will take place to address the scourge of inequality.

Yet it is unclear how this glorious reform is to be achieved. The author describes Indian politics as driven by castes competing for victimhood status and parties promising to dole out government jobs and other government-controlled resources to victim castes. All party activities are fueled by cash from successful businesses and business owners. (Corrupt politicians are punished, however; after 18 years of prosecution and procedure, J. Jayalalithaa was sentenced to 4 years in prison (she served one month before returning to office).)

Ultimately the book is unconvincing regarding the source of wealth of current Indian billionaires. The book describes some of them going bust after making investments that were a bit too daring. The book describes Ambani being unable to get the government to approve helicopter operations off the roof of his $2 billion house. If he’s a government crony, why can’t he get his helipad? GE was able to get their cronies in the City of Boston to approve a helipad in South Boston that nobody else had been able to get (a condition of GE moving its HQ to Massachusetts). Certainly it seems that the Indian billionaires gambled big and won big as the economy continued to grow. And probably they faced a less competitive environment than in some countries with smaller governments and markets closer to the Econ 101 ideal.

Despite the logical contradictions and absurd dreams of hyper-efficient and hyper-honest government in a country that has a multi-century tradition of the opposite, the Billionaire Raj is useful for shaking the American reader out of the notion that the U.S. and China are the only places where big business happens.

Full post, including comments

Lesson from India: Buy gold before Elizabeth Warren is elected

by philg

I’m listening to the Billionaire Raj on Audible. The author says that intensive government regulation (the Licence Raj) and high income tax rates motivated Indians to operate a “black money” economy in which transactions were carried out with cash, gold and savings were stashed in real estate and gold, and the slow-moving wheels of government bureaucracy were lubricated with confidential payments in gold. In fact, it is possible that the massive size of the Indian economy and this massive unexpected need for gold is what has been keeping the price of gold so high over the last 20-30 years.

What if Elizabeth Warren were to be elected in 2020? She proposes more intensive government regulation and dramatically higher tax rates. Might this lead to increased demand from Americans for gold, as the same policies did in India?

Full post, including comments

U.S. Air Force as an employee welfare enterprise

by philg

“Barrett Sworn In As Secretary Of The Air Force” (AVweb):

As Secretary of the Air Force, Barrett is responsible for Department of the Air Force affairs including “organizing, training, equipping and providing for the welfare of 685,000 active duty, Guard, Reserve and civilian Airmen and their families,” along with overseeing the Air Force’s $205 billion annual budget, directing strategy and policy development, risk management, weapons acquisition, technology investments and human resource management. “The Airmen who wear our nation’s uniform are our greatest asset and treasure,” she said in her remarks following the swearing-in. “We have no greater charge than to develop and care for them and their families.”

Just as on the Air Force base where our flight school operates, there is no message about defeating our enemies. It is all about the employees!

What about the previous Air Force Secretary? Here’s an interview with Heather Wilson:

Wilson said her responsibilities as SecAF were broader than those of any other executive position she held…she was obligated to the welfare of 685,000 Total Force Airmen and their families, and the oversight of a $138 billion annual budget.

(Separately, if Donald Trump is hostile to Americans who identify as “women”, as his opponents claim, why did he nominate two such individuals in succession to this job?)

Full post, including comments

Trump is building a wall for only $64 million and in only two years

by philg

From a recent trip to Washington, D.C.:

A large swath of recently public space (used by both tourists and protesters) has been blocked off and is now patrolled by assault rifle-toting guards. Part of this is associated with the construction of a new fence around the White House. The 3,500′ fence will, if there are no overruns, cost $64 million and take approximately two years (AP).

What if the the southern U.S. border fence were completed in this fashion? The White House fence is 0.66 miles long, so the cost will be approximately $100 million per mile. Wikipedia says that 649 miles of the 1,954-mile border is currently fenced. So if the same techniques were used down in Texas and New Mexico, we would be doing 1,305 miles at $100 million per mile, which comes out to a fairly reasonable $130 billion (a couple of months of spending on public housing and Medicaid?).

[Trump cannot take all of the credit for this achievement. The Feds say that planning began in 2014.]

The citizen in the photo above holds a “Hate Won’t Make America Great” sign, but the souvenir vendors a block away apparently disagree:

[Nancy Pelosi said that it was “immoral” to build a more extensive border fence (but the current 649 miles did not have to be dismantled, apparently, because those are the moral miles of fence?). If a Democrat wins the White House in 2020, will this $64 million project be abandoned?]

Full post, including comments