A Central Plan for the Twin Cities

Source: Katherine Kersten, "Turning the Twin Cities Into Sim City," The Wall Street Journal, May 19, 2014

Minneapolis -- Here in the Twin Cities, a handful of unelected bureaucrats are gearing up to impose their vision of the ideal society on the nearly three million residents of the Minneapolis-St. Paul metro region. According to the urban planners on the city's Metropolitan Council, far too many people live in single family homes, have neighbors with similar incomes and skin color, and contribute to climate change by driving to work. They intend to change all that with a 30-year master plan called "Thrive MSP 2040."

The Met Council, as it's known here, was founded in the 1960s to coordinate regional infrastructure -- in essence, to make sure that sewers and roads meet up. Over the years, its power to allocate funds and control planning has expanded. Now, under Democratic Gov. Mark Dayton --who appointed all 17 current members -- the council intends to play Sim City with residents' lives.
Thrive MSP 2040 is part of a nationwide movement called "regionalism." Regional planning of infrastructure is important, of course. But regionalism, as an ideology, is about shifting power away from local elected officials and re-engineering society on behalf of "equity" and "sustainability." According to regionalist guru David Rusk, author of the book "Cities Without Suburbs," federal programs that promote regionalism should strive to produce "racially and economically integrated and environmentally sustainable regions."

While minority residents have been streaming into the Twin Cities' suburbs for the past 15 years, the Met Council wants to make sure there is a proper race-and-income mix in each. Thus it recently mapped every census tract in the 2,800 square-mile, seven-county region by race, ethnicity and income. The purpose was to identify "racially concentrated areas of poverty" and "high opportunity clusters." The next step is for the council to lay out what the region's 186 municipalities must do to disperse poverty throughout the metro area.

The council has provided few details, beyond noting that it will emphasize construction of low-income housing in "higher-income areas." But the federal Department of Housing and Urban Development --the source of the $5 million planning grant used to fund the racial mapping --says that mapping is intended, in part, to identify suburban land-use and zoning practices that allegedly deny opportunity and create "barriers" for low-income and minority people. Under its forthcoming "Affirmatively Furthering Fair Housing" rule, HUD will provide communities with "nationally uniform data" of what it views as an appropriate racial, ethnic and economic mix. Local governments will have to "take meaningful actions" to further the goals identified.

The Met Council has declared that "transit-oriented development" will be the guiding principle of regional development. To this end, the Thrive plan instructs the region's municipalities to consider "travel modes other than the car at all levels of development." The strategy has two parts. First, the council wants all future housing and economic development within "easy walking distance" (one-half mile) of major transit stops -- primarily in the urban core and inner-ring suburbs. There tax dollars (mostly from people who live elsewhere) will be lavished on high-density housing, bike and pedestrian amenities and subsidized retail shops.

The Thrive plan also will pour public funds into mass transit while virtually ignoring congestion relief on highways. The Twin Cities region is projected to have just $52 million available annually from 2014 to 2022 for highway congestion relief, according to the Minnesota Department of Transportation. Yet the Met Council intends to spend at least $1.7 billion on a single light-rail project, with more rail transit to follow.

The Thrive plan's most radical element may be to evaluate all future development policies through the "lens" of climate change. Over time, this could give the council a license to dramatically remake the entire metro area.

One former member of the Met Council told me that in the not-so-distant future local governments seeking approval of a new sewer line may first have to meet onerous "carbon footprint" dictates. The council apparently views herding people into dense urban conclaves and restricting their use of cars as the key to reducing greenhouse gases. Yet an exhaustive report by McKinsey & Co. in 2007 found that neither driving less nor densification is necessary and that technological advances, such as fuel-economy improvements, can achieve sufficient reductions.

Regional planning is on the march in other states. Leading examples include "Plan Bay Area" in the nine-county San Francisco Bay region and "Seven/50" in southeast Florida. The movement is getting a strong assist from the Obama administration, which is aggressively promoting such plans through new HUD rules and grants like the one awarded the Met Council.

So far, Twin Cities-area mayors and city councils have not mounted organized resistance to the Thrive plan. Yet even officials in inner-ring suburbs such as Brooklyn Park, which hope to benefit from light rail, are troubled by the plan's aggressive densification provisions. Many officials in outer-ring counties such as Scott and Anoka worry their communities will disproportionately shoulder the plan's costs while getting little back in infrastructure and public services. Fearing retaliation, many local officials hesitate to speak out against a Met Council power grab that will undermine their ability to direct their own communities' future.
Once implementation begins, however, Twin Cities residents will likely realize that Thrive MSP 2040's centralized decision-making and Orwellian appeals to "equity" and "sustainability" are a serious threat to their democratic traditions of individual liberty and self-government. Let's hope that realization comes sooner rather than later.
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Ms. Kersten is a senior fellow at the Center of the American Experiment in Minneapolis.

Feldstein on Pickety

Source:  Martin Feldstein, "Piketty's Numbers Don't Add Up," The Wall Street Journal, May 14, 2014

Thomas Piketty has recently attracted widespread attention for his claim that capitalism will now lead inexorably to an increasing inequality of income and wealth unless there are radical changes in taxation. Although his book, "Capital in the Twenty-First Century," has been praised by those who advocate income redistribution, his thesis rests on a false theory of how wealth evolves in a market economy, a flawed interpretation of U.S. income-tax data, and a misunderstanding of the current nature of household wealth.

Mr. Piketty's theoretical analysis starts with the correct fact that the rate of return on capital -- the extra income that results from investing an additional dollar in plant and equipment -- exceeds the rate of growth of the economy. He then jumps to the false conclusion that this difference between the rate of return and the rate of growth leads through time to an ever-increasing inequality of wealth and of income unless the process is interrupted by depression, war or confiscatory taxation. He advocates a top tax rate above 80% on very high salaries, combined with a global tax that increases with the amount of wealth to 2% or more.

His conclusion about ever-increasing inequality could be correct if people lived forever. But they don't. Individuals save during their working years and spend most of their accumulated assets during retirement. They pass on some of their wealth to the next generation. But the cumulative effect of such bequests is diluted by the combination of existing estate taxes and the number of children and grandchildren who share the bequests.

The result is that total wealth grows over time roughly in proportion to total income. Since 1960, the Federal Reserve flow-of-funds data report that real total household wealth in the U.S. has grown at 3.2% a year while the real total personal income calculated by the Department of Commerce grew at 3.3%.

The second problem with Mr. Piketty's conclusions about increasing inequality is his use of income-tax returns without recognizing the importance of the changes that have occurred in tax rules. Internal Revenue Service data, he notes, show that the income reported on tax returns by the top 10% of taxpayers was relatively constant as a share of national income from the end of World War II to 1980, but the ratio has risen significantly since then. Yet the income reported on tax returns is not the same as individuals' real total income. The changes in tax rules since 1980 create a false impression of rising inequality.

In 1981 the top tax rate on interest, dividends and other investment income was reduced to 50% from 70%, nearly doubling the after-tax share that owners of taxable capital income could keep. That rate reduction thus provided a strong incentive to shift assets from low-yielding, tax-exempt investments like municipal bonds to higher yielding taxable investments. The tax data therefore signaled an increase in measured income inequality even though there was no change in real inequality.
The Tax Reform Act of 1986 lowered the top rate on all income to 28% from 50%. That reinforced the incentive to raise the taxable yield on portfolio investments. It also increased other forms of taxable income by encouraging more work, by causing more income to be paid as taxable salaries rather than as fringe benefits and deferred compensation, and by reducing the use of deductions and exclusions.

The 1986 tax reform also repealed the General Utilities doctrine, a provision that had encouraged high-income individuals to run their business and professional activities as Subchapter C corporations, which were taxed at a lower rate than their personal income. This corporate income of professionals and small businesses did not appear in the income-tax data that Mr. Piketty studied.
The repeal of the General Utilities doctrine and the decline in the top personal tax rate to less than the corporate rate caused high-income taxpayers to shift their business income out of taxable corporations and onto their personal tax returns. Some of this transformation was achieved by paying themselves interest, rent or salaries from their corporations. Alternatively, their entire corporation could be converted to a Subchapter S corporation whose profits are included with other personal taxable income.

These changes in taxpayer behavior substantially increased the amount of income included on the returns of high-income individuals. This creates the false impression of a sharp rise in the incomes of high-income taxpayers even though there was only a change in the legal form of that income. This transformation occurred gradually over many years as taxpayers changed their behavior and their accounting practices to reflect the new rules. The business income of Subchapter S corporations alone rose from $500 billion in 1986 to $1.8 trillion by 1992.
Mr. Piketty's practice of comparing the incomes of top earners with total national income has another flaw. National income excludes the value of government transfer payments including Social Security, health benefits and food stamps that are a large and growing part of the personal incomes of low- and middle-income households. Comparing the incomes of the top 10% of the population with the total personal incomes of the rest of the population would show a much smaller rise in the relative size of incomes at the top.

Finally, Mr. Piketty's use of estate-tax data to explore what he sees as the increasing inequality of wealth is problematic. In part, this is because of changes in estate and gift-tax rules, but more fundamentally because bequeathable assets are only a small part of the wealth that most individuals have for their retirement years. That wealth includes the present actuarial value of Social Security and retiree health benefits, and the income that will flow from employer-provided pensions. If this wealth were taken into account, the measured concentration of wealth would be much less than Mr. Piketty's numbers imply.

The problem with the distribution of income in this country is not that some people earn high incomes because of skill, training or luck. The problem is the persistence of poverty. To reduce that persistent poverty we need stronger economic growth and a different approach to education and training, not the confiscatory taxes on income and wealth that Mr. Piketty recommends.
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Mr. Feldstein, chairman of the Council of Economic Advisers under President Ronald Reagan, is a professor at Harvard and a member of the Journal's board of contributors.

Mafia's Gay Bars

Article Link

From the article:

Two conditions brought these seemingly oppositional groups together. One: It was illegal to be gay, with police routinely hauling in homosexuals on charges of lewdness or indecency. Two: The Mafia, principally Vito Genovese, controlled Manhattan’s West Side, including the Village.

In short, a gay bar was an illegal business — or at a minimum, a business subject to relentless harassment. Yet where most New Yorkers saw deviance, the Mafia saw profit. Same as with gambling, prostitution or bootlegging, all it took was the customary payoffs for cops to look the other way.

Source: Michael Kane, "How New York City's Gay Bars Thrived because of the Mob," The New York Post, May 3, 2014 

C_Rossiter on Climate Change and Africa

Source:  Caleb S. Rossiter, "Sacrificing Africa for Climate Change," The Wall Street Journal, May 4, 2014

Every year environmental groups celebrate a night when institutions in developed countries (including my own university) turn off their lights as a protest against fossil fuels. They say their goal is to get America and Europe to look from space like Africa: dark, because of minimal energy use.
But that is the opposite of what's desired by Africans I know. They want Africa at night to look like the developed world, with lights in every little village and with healthy people, living longer lives, sitting by those lights. Real years added to real lives should trump the minimal impact that African carbon emissions could have on a theoretical catastrophe.
I've spent my life on the foreign-policy left. I opposed the Vietnam War, U.S. intervention in Central America in the 1980s and our invasion of Iraq. I have headed a group trying to block U.S. arms and training for "friendly" dictators, and I have written books about how U.S. policy in the developing world is neocolonial.

But I oppose my allies' well-meaning campaign for "climate justice." More than 230 organizations, including Africa Action and Oxfam, want industrialized countries to pay "reparations" to African governments for droughts, rising sea levels and other alleged results of what Ugandan strongman Yoweri Museveni calls "climate aggression." And I oppose the campaign even more for trying to deny to Africans the reliable electricity -- and thus the economic development and extended years of life -- that fossil fuels can bring.
The left wants to stop industrialization -- even if the hypothesis of catastrophic, man-made global warming is false. John Feffer, my colleague at the Institute for Policy Studies, wrote in the Dec. 8, 2009, Huffington Post that "even if the mercury weren't rising" we should bring "the developing world into the postindustrial age in a sustainable manner." He sees the "climate crisis [as] precisely the giant lever with which we can, following Archimedes, move the world in a greener, more equitable direction."

I started to suspect that the climate-change data were dubious a decade ago while teaching statistics. Computer models used by the U.N. Intergovernmental Panel on Climate Change to determine the cause of the six-tenths of one degree Fahrenheit rise in global temperature from 1980 to 2000 could not statistically separate fossil-fueled and natural trends.

Then, as now, the computer models simply built in the assumption that fossil fuels are the culprit when temperatures rise, even though a similar warming took place from 1900 to 1940, before fossil fuels could have caused it. The IPCC also claims that the warming, whatever its cause, has slightly increased the length of droughts, the frequency of floods, the intensity of storms, and the rising of sea levels, projecting that these impacts will accelerate disastrously. Yet even the IPCC acknowledges that the average global temperature today remains unchanged since 2000, and did not rise one degree as the models predicted.

But it as an Africanist, rather than a statistician, that I object most strongly to "climate justice." Where is the justice for Africans when universities divest from energy companies and thus weaken their ability to explore for resources in Africa? Where is the justice when the U.S. discourages World Bank funding for electricity-generation projects in Africa that involve fossil fuels, and when the European Union places a "global warming" tax on cargo flights importing perishable African goods? Even if the wildest claims about the current impact of fossil fuels on the environment and the models predicting the future impact all prove true and accurate, Africa should be exempted from global restraints as it seeks to modernize.

With 15% of the world's people, Africa produces less than 5% of carbon-dioxide emissions. With 4% of global population, America produces 25% of these emissions. In other words, each American accounts for 20 times the emissions of each African. We are not rationing our electricity. Why should Africa, which needs electricity for the sort of income-producing enterprises and infrastructure that help improve life expectancy? The average in Africa is 59 years -- in America it's 79. Increased access to electricity was crucial in China's growth, which raised life expectancy to 75 today from 59 in 1968.

According to the World Bank, 24% of Africans have access to electricity and the typical business loses power for 56 days each year. Faced with unreliable power, businesses turn to diesel generators, which are three times as expensive as the electricity grid. Diesel also produces black soot, a respiratory health hazard. By comparison, bringing more-reliable electricity to more Africans would power the cleaning of water in villages, where much of the population still lives, and replace wood and dung fires as the source of heat and lighting in shacks and huts, removing major sources of disease and death. In the cities, reliable electricity would encourage businesses to invest and reinvest rather than send their profits abroad.

Mindful of the benefits, the Obama administration's Power Africa proposal and the World Bank are trying to double African access to electricity. But they have been hamstrung by the opposition of their political base to fossil fuels -- even though off-grid and renewable power from the sun, tides and wind is still too unreliable, too hard to transmit, and way too expensive for Africa to build and maintain as its primary source of power.

In 2010 the left tried to block a World Bank loan for a new coal-fired plant in South Africa. Fortunately, the loan was approved (with the U.S. abstaining). The drive to provide electricity for the poor has been perhaps the greatest achievement of South Africa's post-apartheid governments.
Standing on the mountainside at night in Cape Town, overlooking the "Coloured" township of Mitchell's Plain and the African township of Khayelitsha, you can now see a twinkling blanket of bulbs. How terrible to think that so many people in the West would rather block such success stories in the name of unproved science.
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Mr. Rossiter directs the American Exceptionalism Media Project. He is an adjunct professor at American University and an associate fellow at the Institute for Policy Studies.

Bruce Thornton on International Idealism

Article Link

From the article:

This behavior surprises no one who recognizes the wisdom expressed by George Washington, who said of the new nation’s alliance with France, “It is a maxim founded on the universal experience of mankind, that no nation can be trusted farther than it is bounded by its interests.” 

Internationalism, in contrast, assumes that “customary norms,” and the terms of a treaty like those creating international institutions, encode the universal morals and values that over time have emerged as the human race has progressed and become more civilized. Yet there is little evidence supporting this optimism, and much that shows Washington was right: national or regime interests determine whether these norms and terms, either customary or codified in treaties, are ignored, endorsed, or violated. We should not be surprised at this lack of consensus, given the variety of cultures, religions, and interests that shape both the means and the ends a state will pursue. 

and

If we are unwilling to say that ideals like respecting the territorial integrity of neighbors are superior to, not just different from, the cultures of other nations that violate such ideals; and if we cannot affirm that they trump the “sanctity” of the offenders’ territorial integrity and so justify our interventions to stop or punish violators––even if the aggressor’s behavior is motivated by beliefs and values integral to that nation’s culture and identity––then the foundations of the international order are built on sand, and our foreign policy will appear to be yet another hypocritical perfuming of realpolitik with idealistic rhetoric, or the empty diplomatic gestures of a weak state eager to avoid conflict.

Source: Bruce Thornton, "The Perils of International Idealism," Defining Ideas, April 29, 2014