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From an email of the Freedom Foundation of Minnesota:

Metro Transit has set a goal of 897,000 riders in 2010. Monthly ridership goals begin at 45,000 in January, climbing to 71,600 in June and ramping up to 102,000 in November. In the first three full months of operation, ridership has averaged around 45,000.

Officials estimate passenger fares will only cover an estimated 21% of Northstar�s $16.8 million 2010 operating budget, requiring taxpayers to subsidize the difference. For every $14 round trip ticket purchased between Big Lake and Minneapolis, taxpayers kick in an operating subsidy of $29.66 per ticket to keep the trains running. Total operating cost per round trip: $43.66, based on Metro Transit�s operating $16.8 million operating budget and projection of 897,000 riders.

Yet the taxpayers� ticket to ride on Northstar is far higher when you take into account the amortized $317 million capital costs - a combination of federal, state, and local funds � that it took to build the line. Using a standard federal government formula, Northstar�s capital costs come to $25.3 million annually.

Thus, the true taxpayer cost of operating Northstar is about $42 million annually: $16.8 million in operating costs and $25.3 million in capital costs.

While I won't quibble the data -- I haven't checked every one of their figures -- let's take it as correct. Let's also assume that some of those 45,000 people are substituting Northstar for their cars. Certainly for some it's greater value than for others, and their benefits should be accounted. And the benefit of less congested roads and less maintenance needed therein should be counted. Do we think this will account for the entire amount? As I often say about cost-benefit analysis: We usually can measure the costs pretty well but we measure the benefits pretty poorly. It will be little more than a SWAG to get the benefits. I do know this press release doesn't get all the benefits written down yet.

I still would argue that if the elasticity of demand for Northstar riding is sufficiently high, we should lower the price of the ticket. Would FFM agree? I'll have to get them on the air some day to find out.

Labels: Minnesota, Northstar

Today's Wall Street Journal tells the story of WWII's Unsung Women Pilots, The Women Air Force Service Pilots (WASPs). These pilots were real trailblazers, a group of 1,102 female civilians who flew military aircraft under the direction of the US Army Air Forces. From 1942-1944 the WASP ferried aircraft from factories to air bases throughout the United States. One of these great women, Betty (Wall) Strohfus, lives near Faribault, MN.

These feisty fliers contributed much to our air training, safety and defense during WWII yet went unrecognized by the military; they were considered civil servants and were unceremoniously deactivated in December of 1944.

Finally, those grandmothers and great-grandmothers will be recognized for their work. They will meet in Washington, DC to proudly take their place in history among the unsung heroes of WWII on March 10 when they will receive the Congressional Gold Medal in a ceremony that will be held at the US Capitol.

An added bonus: I have heard Betty speak - she is just riveting. The stories will have you holding your sides - her delivery is fantastic. You will be able to hear her stories at the CD 2 Reagan Dinner to be held May 14, in Lakeville, MN. Details will be forthcoming.

Labels: American Heroes, Feminists, US History, US Soldiers

I had the pleasure last week to speak on the phone with Kevin Libin, who writes for the National Post in Canada. He added some comments from me to an article (a little old, but very instructive -- sorry, Mr. Libin, I simply missed it till now) on how not all government spending comes with a multiplier. It's a very basic point: You must be spending money on something that will not have money spent on it otherwise, it must come from funds that were going to otherwise lie idle, etc. This part is well done:

The thinking behind stimulus spending comes from economist John Maynard Keynes, who argued that amid rising unemployment, the government might as well bury money underground and let private companies dig it up, if that�s what it takes to create jobs and soften a recessionary shock. But even if you accept the theory, and what Keynes considered the �multiplier effect� of government spending (spending a dollar of government money creates more than one dollar in positive economic effects), not all stimulus spending is created equal, notes University of Alberta economist Bev Dahlby. Given that it costs Ottawa money to borrow the money it�s been spending (the Tories have forgiven themselves for running a predicted $56-billion deficit in the fiscal year just ending, claiming it was imperative to rescuing the economy), some stimulus projects may actually take more out of the economy than they put in. The difficulty, he says, is picking the right projects.

�It�s not a free lunch; you just can�t push money out the door,� Mr. Dahlby says. In a recent paper for the C.D. Howe Institute, Mr. Dahlby calculated benchmarks for how Ottawa should select stimulus projects; anything not delivering sufficient and rapid direct consumptive and productivity results is better left on the shelf.

But with such a wad to spend, in a short time, the government often lacks enough options to park funds properly, which is why we might end up with plainly non-stimulating spending like the IndyCar grant. While a �more measured and slower response� is required in planning spending, Mr. Dahlby says. �The problem with that is that it might mean that, effectively, the timing of the stimulus will be screwed up, because then most of the projects and the money will be coming out in fact when the economy is recovering.�

Labels: economics

For the past few months, I�ve been looking for a job. It�s a long, arduous process, and sometimes I wonder what it would take for someone to hire me. They would have to pay me a salary, Social Security, unemployment insurance and perhaps health coverage and retirement benefits.

Where do they get this money? Because I can make them more profitable, or at least support them in their efforts to become more profitable. And if I can�t do that, no employer would hire me unless they wanted to lose money.

I�m not alone. About 6.3 million Americans have been unemployed for more than six months, up from 2.7 million a year ago. There�s talk of another jobs stimulus bill. But if government creates jobs for me, it needs to pay those things. Where does it get the money to do this?

That's the start of her column today, which may have gotten more notice than the news report on last night's Economic Outlook. Good for her. I don't think it's just because she's married to an economist that she thinks her job prospects depend on potential employers making a profit.

Labels: economics, St. Cloud

Obama, touring a small business in Arlington, Va., said that the 36,000 jobs lost last month was "actually better than expected" considering the massive snowstorms that devastated the East Coast.

But the president said the steady number also �shows that the measures we're taking to turn our economy around are having some impact.�

From the Hill. I'm sure he only had time to read the executive summary, but if you read the actual report it includes this:

Major winter storms affected parts of the country during the February reference periods for the establishment and household surveys.

In the establishment survey, the reference period was the pay period including February 12th. In order for severe weather conditions to reduce the estimate of payroll employment, employees have to be off work for an entire pay period and not be paid for the time missed. About half of all workers in the payroll survey have a 2-week, semi-monthly, or monthly pay period. Workers who received pay for any part of the reference pay period, even one hour, are counted in the February payroll employment figures. While some persons may have been off payrolls during the survey reference period, some industries, such as those dealing with cleanup and repair activities, may have added workers.

In the household survey, the reference period was the calendar week of February 7-13. People who miss work for weather-related events are counted as employed whether or not they are paid for the time off.

That says to me that BLS does not think the storm greatly altered the employment data.

Where you would see a real effect of the storm would be on hours worked, but the data has a half-hour decline for construction and not much else. The headline number for private sector hours worked declined by 0.1 hours, with a similar small drop in weekly earnings, even though hourly wages were up three cents.

There are no data on hours worked in the government sector in that report. But Diana Furchgott-Roth of the Hudson Institute notes that those government workers who were unable to work did not lose pay and weren't laid off. So they can't be in this number.

36,000 jobs lost is a bit better than the consensus of 50k, but 14,000 is certainly smaller than the margin of error or the size of the monthly revision. The January number was revised to -26,000 from -20,000, for example.

On the good news/bad news front, the household survey actually showed job gains in February, but also an increase in those that had left the labor force but still wanted a job. The suddenly-fashionable U-6 unemployment rate (including discouraged workers, marginally attached workers and those working part-time that would prefer full-time work) rose to 16.8% from 16.5% in January.

In that context, Obama also promised a zero unemployment rate:

Despite the relatively good news, Obama repeated his pledge that he �will not rest� until every American who wants a job has one.

Good luck with that.

Labels: economics

It's been Winter Institute day here today, and I have been caught up in listening to speakers and helping get a workshop started, while thinking about my evening talk. Our first speaker this morning was the return of St. Louis Federal Reserve President Jim Bullard to our campus. Here are his slides and text. A few notes:

• He's unsurprisingly negative on the idea of a Federal Reserve audit. He estimates that his staff spends about 425,000 hours a year on auditing between internal controls, the Board of Governors, and the external audit from Deloitte. The GAO audit is in addition to that. His slide notes: "Additional audits are welcome, so long as they do not constitute political meddling." You know where I stand on this.
• I note a good point he made on political influence via appointments to the Fed. Governors have 14 year terms which are staggered; however, most governors do not stay for 14 years and replacements are only appointed to complete terms, not get their own 14 year term from the start. This has effectively shortened terms and increased political influence. I talked about this a little two years ago when Sen. Dodd held up appointments to the Federal Reserve, waiting for a Democrat to take the White House. Glad to see he picked that up.
• On regulation, he stated the common Federal Reserve line that the Fed had limited visibility of the financial crisis. Only 12% of of banks and 14% of financial assets were in institutions primarily regulated by the Fed in January 2007. The financial landscape has many institutions, and the Fed regulates only one of those. Yet it is lender-of-last resort to all. Many will scoff at this as a facile dodge of responsibility. But there are two points to be made: One, we can't use the term "the banks" to mean financial markets any more, since most financial firms aren't banks. Second, if the Fed actually could have controlled these institutions, why is the Congress debating how much additional authority to give the Fed?
• Every time I see this graph, I'm still surprised. I don't know why I am, but I am. While much of that will wind up, the part that represents agency MBS purchases, Bullard noted, will not. It's a big piece.
  
• I posed a question to him about whether the Federal Reserve's response to regulatory problems or to the financial crisis were influenced by the dual mandate the Fed has, vis-a-vis the sole mandate of the ECB or many other OECD central banks. He replied it did not -- they pretty much all behave the same way regardless of the mandate. He then ventured further to comment on whether the Fed should respond to asset bubbles. This has been a theme with him in the past, and he reiterated his view that the Fed has very limited tools to pre-empt bubbles.

Off to finish my duties -- see you tomorrow.

Labels: economics, SCSU