Archive for March, 2011

The most recent benchmarked data does little to evidence that state and local government is recognizing the true impact of the recent recession. As shown in the chart below, as private sector employment in the nation and the Delaware region dropped from 2007 through 2009, state and local government employment continued to grow.

While total private jobs in the U.S. fell 4.2%, state and local government jobs across the nation rose 1.3% (and Federal government jobs jumped 3.4%). The same pattern occurred in Delaware where private sector employment fell by over 20,000 as state and local government added almost 1,000 net new positions.

As benchmarked 2010 data becomes available, we will be able to see if state and local government is reacting slowly due to contract obligations, or if politicians simply are reluctant to lose the votes of government employees. Preliminary national data for 2010 is encouraging with private sector jobs up 1.1%, and although Federal employment is also up 1.0%, state and local government employment dropped by -1.3%.

Dr. John E. Stapleford, Director
Center for Economic Policy and Analysis

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The nuclear crisis in Fukushima, Japan shows, beyond a doubt, the time has come to open existing, secure nuclear storage facilities in the United States to avert a similar tragedy. Stored fuel is the biggest concern in Japan. We currently store spent nuclear fuel rods at power plants in above ground facilities in secure Transportation, Aging, and Disposal Canisters (TAD). These canisters can be shipped and stored without opening them. There are currently about 71,000 metric tons of spent fuel and high level radioactive waste stored at 121 nuclear power plants and non-military government sites. All of this waste, minus shipping containers, could be stacked forty-one feet high on one football field. Waste grows at a rate of 2,000 metric tons a year. It is time for Congress to authorize opening the Yucca Mountain nuclear waste storage facility on an emergency basis.

In 1982, Congress passed the Nuclear Waste Policy Act requiring the federal government to provide a high security, permanent, underground storage site and began charging a fee of 1 tenth of a cent on every kilowatt-hour of nuclear power produced to pay for it. According to recent Department of Energy reports, the Nuclear Waste Fund totals $25 Billion and is increasing by $750 Million a year in payments and $1 Billion a year in interest.

The federal response to the act was to build the Yucca Mountain, Nevada, underground storage facility for $13.5 Billion. The initial facility is complete and ready to accept up to 70,000 metric tons of waste and only requires final licensing. The storage capacity of Yucca Mountain could be tripled. Despite being incredibly safer than current storage options, licensing has been stalled by complaints it is not secure enough. The site has passed every safety review and is called by some the most studied piece of real estate in the world. Transporting existing waste would require about 7000 tractor trailer and rail shipments. There have already been an estimated 9000 shipments of radioactive material without incident.

The Obama Administration has tried to close Yucca Mountain by executive order. The Nuclear Regulatory Commission is suing to continue the licensing application as an executive order cannot overrule established law. There are elements of the environmental community who do not want this problem solved as they prefer to keep the lack of permanent storage as an argument against building new nuclear power plants. Delayed opening of Yucca Mountain could require refunds on the Nuclear Waste Fund totaling as much as $11 Billion.

We also have a second storage option, the Waste Isolation Pilot Plant (WIPP) located 25 miles east of Carlsbad, New Mexico used to store military grade nuclear waste. It is already open and the storage of a backlog of military waste is almost complete with only a small portion of the available space consumed. There is an existing list of civilian waste sites classified by their relative level of security. Congressional legislation should allow immediate use of WIPP for civilian waste starting with the most at risk waste until such time as Yucca Mountain is ready to receive waste.

An additional option would be to reprocess spent fuel rods as only one third of the uranium in a rod is used before re-fueling. Reprocessing is used in other countries, such as France, which produces 75% of its electricity at nuclear plants. Current EPA rules have made reprocessing impractical in the United States. There will be access to materials stored at Yucca Mountain for fifty years before the facility is backfilled.

All the information presented here is available in various reports published at the U.S. Department of Energy website.

David T. Stevenson

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Over the past five fiscal years the operating budget of the Delaware Department of Transportation (DELDOT) has grown 18% while inflation rose 7%. So, DELDOT has been living large, yet the winners and losers inside the Department are curious.

The big winner with a 45% budget increase over the five years is the Motor Vehicles administration. Curiously, for those of us who have visited the DMV during the past year, according to their mission statement the DMV embraces “high standards of courteous, efficient and timely service.”

Other winners include the Office of the Secretary (24% increase), Technology and Support (19%), and Public Relations (16%).

Oddly enough, given all DELDOT’s questionable decisions on capital projects as revealed recently by the News Journal, among the big losers in the budget battle are Planning (a 1% increase) and Transportation Solutions (a 34% decrease). One key objective of Planning is to acquire real estate needed for protecting and improving the state’s transportation system (e.g., a million dollars an acre for the closed Wright Chrysler dealership). And a key objective of Transportation Solutions is to ensure that DELDOT consistently delivers high-quality projects from concept through construction and ensure projects are completed on time as scheduled (e.g., the Indian River Bridge).

Although more information is needed before conclusions can be drawn, on the face of it one wonders if DELDOT should be spending less money on Public Relations and more money on the functions of Planning and Transportation Solutions.

Dr. John E. Stapleford, Director
Center for Economic Policy and Analysis

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According to Gaming & Resort Development, national casino and racino revenue has emerged from the recession losses to post a modest 1% gain in 2010. Delaware’s racino revenue rose 1.5%.

The combination of the recession and the growth in gaming revenue in Pennsylvania and Maryland has dropped Delaware from an 11% share of regional gaming revenue to 8.7%. The good news for Delaware is that its share has held stable for three straight years, as Delaware offset slot revenue losses with revenue from table games and a sports parlay program.

The recovery in gaming is good news for Delaware state government as gaming activity generates almost 9% of the state’s tax revenue. Also, it potentially makes the losses in market share for Delaware’s three existing racinos less painful should casinos be approved for the City of Wilmington and the shore in Sussex County. The social costs of gaming remain a fly in soup.

Dr. John E. Stapleford, Director
Center for Economic Policy and Analysis

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Republicans in the US House of Representatives are on the right track in wanting to link spending and regulation to Constitutional authority. It may take a Constitutional amendment to make their desired changes stick, however.

Our country’s Founders limited the scope of the federal government to the Departments of War and State for security, the Attorney General to maintain the Rule of Law, the Treasury Department for funding, and the Post Office. As such the federal budget stayed steady at 2-percent of the Gross Domestic Product (the total market value of all final goods and services produced in a country in any given year) from the time of George Washington’s first budget to about 1916. At that rate our budget today would be about $300 billion, instead it is $3,800 billion. The funding for the departments in the original constitution alone is now $1,300 billion.

What changed? Well, the Constitution and its’ interpretation.

The first Progressives passed the sixteenth amendment in 1913 instituting the federal income tax. Before that, revenue had been severely constrained with tariffs as the only significant source. Progressives further unbound spending and regulatory limits with Supreme Court findings that just about anything Congress wanted to do could be justified by the Interstate Commerce or General Welfare clauses of the Constitution. Broad interpretation of the Supremacy clause cemented federal power over the states. Unlimited federal power combined with unlimited federal taxing and borrowing power has led to unlimited debt and overbearing regulation.

These findings are far afield from original intent. James Madison, often called the father of the Constitution, in reference to a bill authorizing spending for roads and canals famously said, “The legislative powers vested in Congress are specified and enumerated in the eighth section of the first article of the Constitution, and it does not appear that the power proposed to be exercised by the bill is among the enumerated powers”. He vetoed the bill. Madison also said, “Charity is no part of the legislative duty of the government.” As Dr. Walter E. Williams of George Mason University recently penned, “Was Madison just plain constitutionally ignorant or has the Constitution been amended to permit such spending?” The obvious answer is no to both questions as these issues were left to each state to decide.

There are whole federal departments whose existence rests on those liberal interpretations of the Constitution. Frequently mentioned are the Departments of Energy, Education, Health and Human Services, and the Social Security Administration. Serious budget cutting will necessarily entail closing departments and re-defining the purpose of government. While any Congress has the power to close departments, any Congress has the power to re-instate them after the next election.

Where would this country be had it stayed with the original intent of the Constitution? With a lot less debt and a Congress that had to debate and vote on new regulations, rather than having federal departments write regulations that become law without a single elected official having to see them at all.

Congressional Republicans are stressing the Constitution, and they should be, however, A Constitutional amendment overruling these broad Supreme Court findings with narrow definitions of federal power may be the only long term solution to federal government over reaching. Congress will need 38 state governments to agree.

David T. Stevenson and Daniel G. Anderson
Caesar Rodney Institute

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The sales tax in Pennsylvania is a hefty 6%, while because of the gross receipts tax, the perception is that the sales tax in Delaware is zero. How much of an impact does this have on retail trade in Delaware?

The chart in the full article NCC retail compares retail sales per $1,000 of residential personal income in New Castle County (NCC) to that of Delaware and Chester counties in Pennsylvania combined. The results are exactly what one would expect.

Residential personal income in the two southeastern Pennsylvania counties is roughly double that of NCC and a considerable amount of residential spending from Pennsylvania occurs in Delaware. The leading retail beneficiaries of the leaked spending are high price durables. Sales of electronics and appliances in NCC are 318% of the level of sales in southeastern PA. Similarly, NCC department stores sales are 246% above southeastern PA and furniture sales 210% above. Lower value goods that typically have a more local market, such as health and personal care items and supermarkets, are least benefited from the absence of a Delaware sales tax.

Delaware retail trade is a significant beneficiary of the state’s tax policies and is certainly grateful to Pennsylvania (and Maryland and New Jersey) for their persistently high sales taxes.

Dr. John E. Stapleford, Director
Center for Economic Policy and Analysis
NCC retail

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by P. Gosselin

Back when I was a boy in the 1960s and 70s, northern New England was as conservative as could be. My home state of Vermont (which is French for “green mountain”) was George Aiken and Winston Prouty country. Back then the revolutionary Yankee-spirit of Ethan Allen, fighter for freedom, was alive – but rapidly dying.
Vermont has long since been overrun by the politically-correct from New York, Massachussetts, New Jersey and other deep blue areas, and has been turned into a socialist cesspool with one of the highest property tax rates in the country and socialist Senator Bernie Sanders.
This all makes the latest news from sister state New Hampshire (home of the White Mountains) all the more encouraging. New Hampshire was also once very conservative – so much so that it’s official motto is still ”Live free or die“. Its governor from 1973 to 1979 was Republican “Ax-the-Tax” Medrim Thomson. But New Hampshire too succumbed the same political fate as Vermont, turning deep blue.
But who knows! Maybe the “live free or die” spirit is making a comeback. Let’s hope so. The latest news seem to indicate so. Fox News writes in a piece called:  “One Giant Leap Forward -New Hampshire has smacked down Cap & Trade”
The New Hampshire House of Representatives voted overwhelmingly — 246 to 104 – to become the first state to move to repeal an already up-and-running global warming cap-and-trade energy tax scheme.  The Granite State’s repeal appears headed for a similarly veto-proof repeal in the State Senate that will make Governor John Lynch powerless to stop it.”  Big things often start in New Hampshire – especially presidential things. Let’s hope the Senate makes it something big there, too. New Hampshire’s cap & trade scam is known as the Regional Greenhouse Gas Initiative (RGGI), which originated in New Jersey. Its stunning defeat in New Hampshire was led by conservative House Speaker William O’Brien, who, according to Fox News, said: “The Regional Greenhouse Gas Initiative has always been a backdoor tax increase on the citizens of New Hampshire. RGGI is a perfect example of the cost of regulation to the public. Rarely has a program been as transparent in its attempts at income redistribution.”
The big beneficiaries of RGGI are politically correct corporations and special interest groups. The big losers are consumers. The rejection of cap & trade in New Hampshire sends a strong signal nationally. Fox News writes: “At the national level, it cements the extremely strong opposition to cap-and-trade in New Hampshire and therefore colors how the issue will play in the Republican presidential primaries. In 2008, both parties nominated pro-cap-and-trade candidates for president, and again this year there are a number of pro-cap-and-trade Republicans vying for the nomination. They will have a difficult time explaining to voters why a program that has failed and been overwhelmingly rejected at the state level should be taken national.”

Don’t you love the smell of climate-napalm? Cap & trade gets crushed.

This should lead us to recall how Newt Gingrich cozied up on a couch with Nancy Pelosi in support of regulating carbon. There have been reports about naughty Newt launching a presidential campaign for 2012. Sorry Newt, but you belong on the scrap heap along with Pelosi. You’re not getting my vote.
New Hampshire is a lovely state, especially the northern part with its Presidential Range, which includes Mt. Washington – where the world’s highest ever wind velocity on the planet, 231 miles per hour, was recorded – a climate extreme back in the 1930s when CO2 was only about 320 ppm. New Hampshire is really worth a visit. Vermont is also a beautiful state, but visiting there means you’ll be leaving your money into the wasteful hands of greenie-socialists. Go to New Hampshire instead.

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In CNBC’s recent ranking of the top states for business Delaware came in 42nd. Is there really any reason for concern? If so, what needs to be done to make Delaware more business competitive?

CNBC scores the 50 states on 40 different measures of competitiveness grouped into ten aggregate categories. Each of the ten categories receives a different weight for determining the overall state’s score.

Of the 2,439 possible points, six categories accounted for almost all of Delaware’s lost points. Delaware lost the most points in the following four categories: cost of doing business, quality of life, the economy, and transportation and infrastructure.

The cost of doing business includes the tax burden, labor costs, rental rates, and utilities. Delaware takes a big hit because of its energy costs, and is ranked 36th among all states in this category.

The quality of life includes local attractions, crime rates, health care, and air and water quality. Delaware has a high and rising violent crime rate and poor air quality, and overall ranks 47th among all states.

The economy is measured by CNBC by diversity, economic health, and growth. Because of its concentration of employment and output in financial services and a low proportion of employment accounted for by small businesses, Delaware lags in diversity. Delaware has also been a slow growth economy for almost a decade. Delaware ranks 45th on this category.

Transportation and infrastructure are assessed by the value of goods shipped by air, land, and water, and by the availability of air travel and the quality of roads. A good deal of Delaware’s manufacturing capacity is now focused on management rather than production, and obviously Delaware does not have a major airport. The state ranks 44th on this category.

Delaware is most competitive in the category of business friendliness with a rank of 1st. Delaware is perceived to have a business friendly legal and regulatory environment. The state ranks 17th on workforce, primarily because of business’s aversion to unions.

Delaware ranks 20th on access to capital, reflecting the strides made by state government and business groups in the areas of start-up and venture capital. Delaware ranks 25th on education due to lower traditional measures of K-12 education.

So, based upon the framework used by CNBC, what areas need action to make Delaware more business competitive? There are no surprises here: lower energy costs, lower violent crime rate, increased small business diversity, improved public school student test scores, and continued focus on the factors that encourage economic growth (e.g., low taxes, individual freedom). Delaware has a relatively low tax burden, the flow of polluted air from the rest of the Northeast can’t be stopped, and how can one justify another major airport between Philadelphia and Baltimore?

Given this one study, Caesar Rodney Institute’s focus on energy competitiveness, public education, and economic growth appear to be quite appropriate.

Dr. John E. Stapleford, Director
Center for Economic Policy and Analysis

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