Will Rail Revolutionize the Oil Industry?

Open Markets looks at how railroads are making “a 21st-century impact on the U.S. crude oil industry.”

“What was first seen as a stop-gap measure to deal with extra output is now being considered a viable complement to pipelines and a permanent part of the energy infrastructure in the U.S…. In 2012, the Association of American Railroads said it moved a record amount of crude oil: 233,811 Class 1 carloads, up 256 percent from the 65,671 carloads moved in 2011.”

“Nothing beats the efficiency and convenience of pipelines, but the use of unit rail car trains, where 100 cars or more are dedicated to one product, helped to significantly lower the cost of using rail… producers who use rail can respond to market forces and send crude oil where prices are higher, rather than being stuck with where the pipeline ends, opening new domestic markets… The third benefit of rail is that rail companies offer shorter-dated contracts of one to four years, versus pipelines, which were 10 to 15 year contracts.”

What You Need to Know About the Oklahoma Tornado

A massive tornado swept through Moore, Oklahoma on Monday, causing severe damage and over 50 deaths. Alexis Madrigal answers a number of frequently asked questions about tornados generally and this tornado in particular.

“Moore has a deep and tragic tornado legacy. The town could probably lay claim to being the very center of Tornado Alley… On May 3, 1999, Moore was hit by one of the worst tornadoes on record.”

“The National Weather Service’s Norman, Oklahoma office says that a tornado warning went into effect 16 minutes before the storm hit. That’s three minutes faster than the current average lead time for a warning.”

“Because there was a large tornado in 1999, we have detailed information on some of the problems with the construction methods in the area… much of the construction in the area does not follow best practices for resisting a tornado’s winds.”

Jeff Masters looks at the damage and expected costs of this tornado, noting that “after the damage tally from the May 20 tornado is added up, Moore will hold two of the top five spots on the list of most damaging tornadoes in history.”

Bonus Chart of the Day

– Joe Weisenthal notes an interesting similarity between the decline in the labor force participation rate (in blue) and the fall in per capita vehicle miles driven (in red).

“As you can see, per capita miles driven peaked just before the recession, and hasn’t recovered at all… It reminds us of the chart of the Labor-Force Participation Rate (the share of workers working or looking or work), which also started sliding before the recession, and hasn’t stopped sliding at all during the recovery.”

“There’s a logical connection between the two. Not in the workforce? You’re less inclined to drive.”

Let Drones Fly Free

The Federal Aviation Administration is working to implement new regulations on commercial drone use in US airspace, and Eli Dourado argues that while privacy concerns are important, “it’s even more important that we consider the effect of too-early, heavy-handed regulation on future innovation.”

“Regulation at this juncture requires our over-speculating about which types of privacy violations might arise. Since many of these harms may never materialize, pre-emptive regulation is likely to overprotect privacy at the expense of innovation… Imagine if we had tried to comprehensively regulate online privacy before allowing commercial use of the internet. We wouldn’t have even known how to.”

“Not only would such requirements…be overkill, but they’re unnecessary. Because there are already federal, state, and local laws that protect individuals’ rights to privacy… By allowing time for social norms to adapt, we may find that we’ll all become accustomed to drones.”

Obama Picks Foxx for Transportation

The Hill reports that President Obama has nominated Charlotte, North Carolina Mayor Anthony Foxx to replace outgoing Transportation Secretary Ray LaHood.

Matthew Yglesias critiques one of Foxx’s major transportation policies as mayor.

“As a substantive matter, the Charlotte Streetcar Project is not my favorite kind of mass transit. Building a streetcar line that runs in mixed traffic is a lot more expensive than simply upgrading the local bus routes…while providing at best a minor upgrade in transportation quality… But fundamentally lots of good things have happened in Charlotte under Foxx, and tapping him is a good sign that Obama wants to continue with progressive transportation reforms. I’m happy.”

Rolling Back (Parts) of the Sequester

Lawmakers are beginning to make a habit of avoiding some of the most noticeably disruptive effects of the sequester cuts, notes Josh Hicks, who looks at which agencies are benefitting from the politics of budget cuts.

“The stopgap budget that Congress approved last month to fund the government through the end of the fiscal year provided certain agencies with additional funding or budgeting flexibility to help them avoid some of the worst impacts of the sequester. The Agriculture Department benefited from that legislation, as it allowed the agency to avoid furloughing meat inspectors.”

“Defense officials are trying to determine how much the stopgap budget will change their sequester plans; the agency already has reduced the number of furlough days to 14 from 22. Customs and Border Protection is in a similar situation.”

The Huffington Post reports that the latest agency likely to receive budget flexibility is the Federal Aviation Administration, who began furloughing air traffic controllers this week causing thousands of delays around the country.

Another Energy Department Loan Goes Bad

The New York Times looks at how Fisker Automotive became “the Solyndra of the electric car industry,” as it nears a likely bankruptcy after receiving over $500 million in government loans.

“Fisker, with its technical problems, management turmoil and mounting losses, offers a cautionary tale in the fiercely competitive arena of alternative-fuel vehicles and of government subsidies for start-up businesses… members of the Senate and the House, complain that standards for awarding federal loans were overlooked in the rush to promote green technology.”

Seth Fletcher doesn’t think Fisker’s failure will slow the development of electric vehicles.

“As in any product category, there are good specimens and bad ones. The Chevy Volt, the Nissan Leaf, and the Tesla Model S are all quick, quiet, well-engineered, technically sophisticated vehicles that point the way toward the future of the auto industry—a future in which drivers can choose what fuel they want to rely on for transportation. The Fisker Karma is just kind of a dud.”

Air Traffic Control Furloughs Begin to Cause Delays

The Federal Aviation Administration has begun furloughs due to the sequestration cuts, causing significant delays and complaints from lawmakers, according to the Washington Post.

“The FAA has estimated that a third of passengers will face delays during the furloughs, with up to 6,700 flights arriving late at more than a dozen major airports each day. The agency says furloughs are necessary to achieve $200 million of the $637 million in savings mandated this fiscal year to meet sequestration targets.”

“Republicans and some Democrats challenged the way the White House has chosen to impose sequestration cuts by furloughing 10 percent of the 15,000 air traffic controllers for the rest of the fiscal year.”

We Need More Public-Private Partnerships

Peter Orszag makes the case for more collaboration between the public and private sectors to “finance, build and operate infrastructure.”

“From 1990 to 2006, for example, public-private partnerships financed five times as much transportation infrastructure in the U.K. as in the U.S. — even though the U.S. economy is more than six times larger than that of the U.K…. What’s getting in the way of infrastructure investments today? That’s a question that 17 U.S. big-city mayors took up last week at the first meeting of a new task force formed by the Clinton Global Initiative and the United States Conference of Mayors.”

“The discussion among the mayors was wide-ranging, but they seemed to generally agree that access to low-cost financing isn’t the crucial obstacle. The more basic problem is the complex decision-making and approval process, along with the challenge to generate future revenue streams sufficient to pay for the ongoing costs of the project and the original loans to build it.”

Obama Releases Budget

President Obama unveiled his fiscal year 2014 budget proposal, including “nearly $250 billion in new spending on jobs, public works and expanded pre-school education and nearly $800 billion in new taxes, including an extra 94 cents a pack on cigarettes,” according to the Washington Post.

“But the president’s spending plan would also cut more than $1 trillion from programs across the federal government — for the first time targeting Social Security benefits… his budget seeks $50 billion in new cash for roads and public works, $1 billion for 15 new institutes to promote innovation in manufacturing and $77 billion to make free, public pre-school available to 4-year-olds nationwide.”

Wall Street Journal: “The budget would replace the across-the-board spending cuts known as the “sequester” with new caps on military and domestic spending, higher taxes, and changes to Medicare and Social Security, among other things… The budget calls for raising the federal tax on a pack of cigarettes from $1.01 to $1.95, which the White House says would raise $78 billion over 10 years… It would also, for the first time, propose forcing banks and other firms to pay higher taxes on trading of derivatives by accounting for gains and losses each year, raising $19 billion over 10 years.”

Politico: ”One novelty in the fiscal 2014 submission was that Pentagon officials evidently feel they’ve culled all the high-profile weapons programs they need – Wednesday’s submission did not contain news of any major cancellations. In fact, it includes funding for a new Air Force rescue helicopter program; fully supports Lockheed Martin’s controversial F-35 Lightning II with orders for 29 aircraft; and continues supporting nascent programs such as the Army’s Ground Combat Vehicle and the Marine Corps’ Amphibious Combat Vehicle.”

Infrastructure is Actually Getting Better

Evan Soltas notes that while lawmakers have voiced significant concerns over the quality of US roads and bridges, “infrastructure has improved significantly over the last two decades.”

“In its report for 2010, the Federal Highway Administration said that 57 percent of all vehicle-miles were traveled on federal highways with ratings of ‘good’ or higher… That was up from 48 percent in 2000. The percentage of roads in bad condition has also declined.”

“America’s bridges have never been safer. The highway administration rated 21.9 percent of its bridges ‘deficient’ in 2009, as compared to 37.8 percent in 1989. And contrary to Obama’s implication, the word ‘deficient’ does not mean unsafe.”

“Traffic congestion has diminished. In 1989, 52.6 percent of urban interstates were rated ‘congested’ according to a comparison of peak volume to planned capacity. In 2009, the figure was 26.3 percent.”

Are Suburbs Reinforcing Inequality?

Becky Nicolaides and Andrew Weise examine a “defining pattern of contemporary suburban life”: neighborhoods increasingly segregated by economic and social classes.

“The point is not simply that rich and poor people live in different places through a kind of class sorting in the marketplace. The places themselves help to create wealth and poverty. Because of this power of places to fix inequity over time, current patterns are likely to outlive their residents.”

“Policies to redress suburban inequality must focus not only on factors like income but also on tax equity across metro areas and regional planning that fairly distributes resources and responsibilities (like affordable housing). We should limit the mortgage-interest deduction for second homes and for values above the regional median. These steps would reduce distortions that inflate housing prices and concentrate wealth in what are already wealthy places.”

LA Revolutionizes Traffic Control

“Now, in the latest ambitious and costly assault on gridlock, Los Angeles has synchronized every one of its 4,500 traffic signals across 469 square miles — the first major metropolis in the world to do so,” according to the New York Times.

“Built up over 30 years at a cost of $400 million and completed only several weeks ago, the Automated Traffic Surveillance and Control system, as it is officially known, offers Los Angeles one of the world’s most comprehensive systems for mitigating traffic… The city’s Transportation Department says the average speed of traffic across the city is 16 percent faster under the system, with delays at major intersections down 12 percent.”

“Now, the magnetic sensors in the road at every intersection send real-time updates about the traffic flow through fiber-optic cables to a bunker beneath downtown Los Angeles, where Edward Yu runs the network. The computer system, which runs software the city itself developed, analyzes the data and automatically makes second-by-second adjustments, adapting to changing conditions and using a trove of past data to predict where traffic could snarl, all without human involvement.”

Senate Works to Finalize Government Funding Bill

Congress is hoping two hammer out a final deal on a continuing resolution to fund the government through September before two deadlines next week: the expiration of current government spending on March 27 and the start of a two week congressional recess for the holidays. But Politico reports that parochial fights are stalling the bill.

Sen. Jerry Moran (R-KS) “spent the day pretty much objecting to everything unless he was promised a vote on his amendment to protect funding for air traffic controllers at rural airports in states like his own… And that was not good news for meat — the packers, ranchers and poultry farmers who had been waiting patiently for a promised vote on their amendment to, well, beef up funding for the Food Safety Inspection Service.”

The New York Times looks at what amendments have made it into the bill so far: “The worst of the federal cuts to a major infant nutrition program would be reversed. Embassy security and construction could be spared… And child care subsidies, once seen as critical to the success of welfare reform, would take a haircut, not the hammer blow… Also, managers in some departments, especially the Defense Department, will gain more flexibility to carry out cuts.”

“It could reduce some of the most obvious disruptions in federal services, potentially easing the pressure that Mr. Obama had hoped would soften Republican opposition to a replacement that combined spending cuts with tax increases.”

House Progressives Take on the Ryan Budget

Ezra Klein delves into the budget proposal released by the House Progressive Caucus and argues that it represents a better foil to House Budget Committee Chairman Paul Ryan’s (R-WI) latest budget than the “cautious plan” released by Senate Budget Committee Chairwoman Patty Murray (D-WA).

“It begins with a stimulus program that makes the American Recovery and Reinvestment Act look tepid: $2.1 trillion in stimulus and investment from 2013-2015… Investment on this scale will add trillions to the deficit. But the House Progressives have an answer for that: Higher taxes. About $4.2 trillion in higher taxes over the next decade, to be exact.”

“The revenues come from raising marginal tax rates on high-income individuals and corporations, but also from closing a raft of deductions as well as adding a financial transactions tax and a carbon tax… there’s more than $900 billion in defense cuts, as well as a public option that can bargain down prices alongside Medicare.”

“Comparatively, both Ryan and the House Progressives are offering much sharper, more bracing, and more ambitious efforts. They have identified what they consider the country’s core problems and laid out an uncompromising vision for how they would like to see them fixed.”

Texas Wonders What To Do With Budget Surplus

Texas Comptroller Susan Combs announced last month that the state would have an $8.8 billion surplus, according to The Economist, but the extra funds have sparked a fight over what to do with the taxpayers’ money.

“Under Texas law, the state may not spend more than the comptroller expects it to have. The 2011 estimate…meant that the state was in effect facing a budget shortfall of more than $20 billion… Most of the shortfall was made up by deep cuts… So now the Democrats are arguing that the state can afford to be a lot more generous.”

“The state’s Republican leaders are apparently willing to spend more money this time round than last, and the state will probably allocate billions of dollars to much-needed infrastructure improvements… The Republicans seem less interested, though, in operational expenses such as school funding.”

Bracing for the Sequester

With the sequester set to take effect on March 1 and little evidence that lawmakers will prevent the cuts in the near future, federal agencies, private companies, and non-profits are preparing for reductions in almost every area of government.

ABC News has a lengthy roundup of over 50 areas that will be impacted by the cuts, from air travel disruptions to a weaker social safety net to reduced border security.

The Hill looks at health care: “Doctors and hospitals say the sequester’s Medicare cuts will cost their industries more than 200,000 jobs just this year. A reduction in food inspections could lead to more food-borne illnesses, the White House has warned. And advocates for medical research say their work could be set back a generation… Those losses could cause delays in the approval of new drugs and medical devices.”

The Financial Times notes that the cuts will impact the long-term unemployed: “About 3.8m Americans who have been unemployed for more than six months receive emergency federal jobless benefits worth on average about $300 per week… that assistance would be cut by a little less than $30 per week.”

There is No Infrastructure Crisis

President Obama highlighted the need to spend more on infrastructure to repair “the nearly 70,000 structurally deficient bridges across the country,” but Jack Shafer warns not to buy into the hype.

“As the Federal Highway Administration explains (pdf), when inspectors grade a bridge as ‘structurally deficient’ they’re not saying it’s unsafe, only that it is deteriorating and its load-carrying capacity is reduced.”

“Anything with a $2.7 trillion price tag should be approached with suspicion… Does every infrastructure ‘need’ demand a flotilla of dollars from Washington? Must we rescue every aging bridge in rapidly depopulating states like Michigan? Shouldn’t infrastructure projects such as harbor dredging be billed to those who directly benefit from them, and not the government?”

More on the State of the Union Policy Proposals

Below is a roundup of the policy proposals in President Obama’s State of the Union address.

Here at Wonk Wire, we pulled out the key excerpts on the major agenda items in the speech.

Brad Plumer has a copy of the White House fact-sheet on the many proposals.

Wall Street Journal: “He proposed a boost in the minimum wage to $9 an hour, from $7.25 today, and called for preschool programs to be more widely available for children of low- and moderate-income Americans… The president also said in his speech that he plans to work toward a comprehensive trade agreement with the European Union, a bid to deepen ties across the Atlantic… And he renewed his call for an overhaul of the tax code… Mr. Obama renewed a proposal to tie federal aid to colleges to measures of affordability.”

New York Times: “Obama did not call for a cap on carbon emissions on Tuesday. Instead, he pledged to increase the fuel efficiency of vehicles, double the use of renewable electricity generation and create a new energy security trust that would use oil and gas revenue from federal lands to finance clean energy research… He urged lawmakers to put off the automatic cuts to military and domestic spending to avoid a new economic slump.”

Washington Post: “Obama also announced that he will bring home 34,000 American troops from Afghanistan over the next year… The proposals include spending $40 billion to upgrade bridges… Obama also reiterated his desire to address problems in the U.S. voting system, typified in the last election by the hours-long wait some voters endured to cast ballots in crowded polling stations, many in urban areas.”

Reuters: “Obama urged Congress to approve his proposals for tighter gun regulations, requiring background checks for all gun purchasers, and banning assault weapons and high-capacity ammunition clips… Obama urged lawmakers to approve over the next few months an overhaul of immigration laws to permit a pathway to citizenship for some 11 million illegal immigrants.”

State of the Union Policy Roundup

President Obama articulated a robust policy agenda on everything from the economy to infrastructure, education to climate change, and immigration to gun control in his fourth State of the Union address. Below are the key policy portions of his speech on each of these issues.

Economy: “A year and a half ago, I put forward an American Jobs Act that independent economists said would create more than one million new jobs.  I thank the last Congress for passing some of that agenda, and I urge this Congress to pass the rest… Last year, we created our first manufacturing innovation institute in Youngstown, Ohio… So tonight, I’m announcing the launch of three more of these manufacturing hubs, where businesses will partner with the Departments of Defense and Energy to turn regions left behind by globalization into global centers of high-tech jobs.  And I ask this Congress to help create a network of fifteen of these hubs… Now is the time to reach a level of research and development not seen since the height of the Space Race.  And today, no area holds more promise than our investments in American energy.”

Infrastructure: “Tonight, I propose a “Fix-It-First” program to put people to work as soon as possible on our most urgent repairs, like the nearly 70,000 structurally deficient bridges across the country.  And to make sure taxpayers don’t shoulder the whole burden, I’m also proposing a Partnership to Rebuild America that attracts private capital to upgrade what our businesses need most: modern ports to move our goods; modern pipelines to withstand a storm; modern schools worthy of our children.”

Education: “Tonight, I propose working with states to make high-quality preschool available to every child in America… Tonight, I’m announcing a new challenge to redesign America’s high schools so they better equip graduates for the demands of a high-tech economy.  We’ll reward schools that develop new partnerships with colleges and employers, and create classes that focus on science, technology, engineering, and math – the skills today’s employers are looking for to fill jobs right now and in the future… Tonight, I ask Congress to change the Higher Education Act, so that affordability and value are included in determining which colleges receive certain types of federal aid.”

Climate change: “I urge this Congress to pursue a bipartisan, market-based solution to climate change, like the one John McCain and Joe Lieberman worked on together a few years ago.  But if Congress won’t act soon to protect future generations, I will.  I will direct my Cabinet to come up with executive actions we can take, now and in the future, to reduce pollution, prepare our communities for the consequences of climate change, and speed the transition to more sustainable sources of energy… Solar energy gets cheaper by the year – so let’s drive costs down even further… my Administration will keep cutting red tape and speeding up new oil and gas permits.  But I also want to work with this Congress to encourage the research and technology that helps natural gas burn even cleaner and protects our air and water.”

Immigration: “Real reform means strong border security, and we can build on the progress my Administration has already made… Real reform means establishing a responsible pathway to earned citizenship – a path that includes passing a background check, paying taxes and a meaningful penalty, learning English, and going to the back of the line behind the folks trying to come here legally… And real reform means fixing the legal immigration system to cut waiting periods, reduce bureaucracy, and attract the highly-skilled entrepreneurs and engineers that will help create jobs and grow our economy.”

Gun control: “Overwhelming majorities of Americans – Americans who believe in the 2nd Amendment – have come together around commonsense reform – like background checks that will make it harder for criminals to get their hands on a gun.  Senators of both parties are working together on tough new laws to prevent anyone from buying guns for resale to criminals.  Police chiefs are asking our help to get weapons of war and massive ammunition magazines off our streets, because they are tired of being outgunned. Each of these proposals deserves a vote in Congress.”

Our Best Chance to Save Our Infrastructure On the Cheap

Early reports indicate that President Obama will focus his State of the Union address tonight on economic issues, including a push for new infrastructure investments. Neil Irwin warns that the US “may be approaching the end of a five year period in which investing in the nation’s physical infrastructure has been something close to a free lunch.”

“With interest rates near all-time lows and millions of construction workers unemployed, the last few years have been a time that it would have been a historical bargain for the United States… So long as the private sector isn’t building houses and office buildings and factories at its regular pace, the government can build without crowding out the private investment.”

“But that window might not last much longer; at the current pace, private investment will be back to its historical average by the middle of 2014.”

LaHood to Leave Department of Transportation

USA Today reports that Transportation Secretary Ray LaHood will leave his department once a successor is confirmed by the Senate.

“In addition to protecting airline passengers, he’s campaigned against distracted driving on the nation’s roads and cracked down on bus companies after a rash of fatal highway crashes.”

The Hill has more on LaHood’s legacy: “During LaHood’s four years, lawmakers passed a $105 billion surface-transportation bill and a $63 billion FAA reauthorization bill, ending standoffs over both appropriations measures that predated the former congressman’s arrival to the DOT post.”

“More recently, LaHood has been embroiled in the FAA’s decision to ground the Boeing 787 ‘Dreamliner’ airplane after a series of battery defects.”

Driverless Cars Will Reshape Our World

Felix Salmon maps out the world as self-driving cars become widely adopted.

“Firstly, they probably won’t be operated on the owner-occupier model that we use for cars today, where we have to leave our cars parked for 97% of their lives… it makes much more sense to just join a network of such things, giving you the same ability to drive your car when you’re at home, or in a far-flung city… And the consequence of that is much less need for parking…and therefore the freeing up of lots of space currently given over to parking spots.”

“What’s more, the capacity of all that freed-up space will be much greater than the capacity of our current roads… we could wind up moving more people more miles for less total energy expenditure in cars — even when most of those cars continue to have just one person in them.”

Get the Feds Out of Transportation

Rohit Aggarwala argues that if federal lawmakers are unable to raise the gas tax to properly fund infrastructure, “it should just get itself out of the way, by eliminating the federal gas tax entirely and cutting Washington’s role in surface transportation.”

“The basic reason the present system isn’t working is that there is no longer a consensus in Congress on what a national transportation program should be… Getting rid of the tax would force a serious discussion in each state about how, and how much, to fund roads and transit. States could choose to reimpose the same tax, or they could set a different rate based on their desired level of transportation spending.”

“Because the biggest states have the biggest needs, this would probably increase investment nationally. It would also lead to greener transportation policies… the current tax — roughly 6 percent at current prices — is too low to change consumer habits.”

Who Will Pay for Infrastructure Upkeep?

As federal, state, and local governments continue to focus on reining in budget deficits, Fawn Johnson looks at the one area of government spending that needs a massive boost: infrastructure.

“Highways and bridges will need $2.5 trillion in upgrades if they are to survive for another 50 years — a must-do to keep commerce thriving. And that figure doesn’t even take into account the airports, railroads, subways, sewage-treatment plants, waterworks, levees, electric grids, pipelines, and all of those other expensive systems that people ignore until they break down.”

“More and more, the burden is devolving onto the level of government closest to the potholes… If governments are strapped, who’s the last patsy standing? You are.”