Category: Government

Regulators Are Bad at Monitoring Unhealthy Banks

(p. A26) Silicon Valley Bank’s failure looks a bit like an S.&L. crisis in miniature. Like its 1980s counterparts, S.V.B. grew extremely rapidly, had many assets parked in fixed, long-term bonds, and was done in when inflation caused the Fed to raise interest rates, raising the cost of keeping deposits.

Like the S.&L.s, Silicon Valley Bank was heavily concentrated. It catered to start-ups for whom an S.V.B. account was a matter of status. One tech savant who had recently changed jobs (aren’t they always switching jobs?) told me that in his experience, roughly two thirds of start-ups banked with S.V.B. (the bank claimed that nearly half the country’s venture capital-backed technology and life science companies were customers).

. . .

The regulators clearly failed to monitor S.V.B.’s unhealthy mismatch of assets and liabilities.

. . .

Once you take risk out of a part of a bank’s operations, it is hard to let market principles govern the rest.

. . .

In past bank failures, uninsured depositors did not lose all — 10 to 15 percent was typical. And in this episode, there wasn’t any systemically bad asset à la mortgages in 2008. Given that the risk was contained, and that the Federal Reserve provides liquidity to banks facing runs (and provided emergency liquidity this week), allowing uninsured depositors of banks that fail to suffer a haircut might have been healthier for the system in the long run.

For the full commentary, see:

Roger Lowenstein. “The Bank Rescues Just Changed Capitalism.” The New York Times (Thursday, March 16, 2023): A26.

(Note: ellipses added.)

(Note: the online version of the commentary has the date March 15, 2023, and has the title “The Silicon Valley Bank Rescue Just Changed Capitalism.”)

Tighter Zoning Laws Resulted in More Racial Segregation

(p. A22) Across the New York City suburbs, a thicket of local zoning laws thwarts the building of all but the most expensive single-family homes.

In some parts of Scarsdale, in Westchester County, new homes must be built on lots of at least two acres. In most parts of the village of Muttontown, on Long Island, new homes must be at least 2,000 square feet. The Town of Oyster Bay, also on Long Island, requires that some guest apartments, known as accessory dwelling units, be occupied only by family members or domestic servants.

These zoning laws are among the most restrictive in the country. They severely limit the state’s housing supply, making the entire region less affordable. And they are rooted in Jim Crow.

For much of the 20th century, towns surrounding New York City used a stomach-churning mix of racial covenants and restrictive zoning laws to shut out Black Americans and others considered undesirable from thriving suburbs. The federal government supported this system in myriad ways, including by denying government backing for mortgage loans in Black neighborhoods, a practice known as redlining, which hardened segregation and sharply restricted the ability of Black Americans to secure mortgages and buy homes. After World War II, the government greatly expanded its role in residential segregation by backing large suburban developments across the United States like Levittown, on Long Island, on the condition that they exclude Black buyers.

The Fair Housing Act of 1968 made racial discrimination in housing illegal. But communities were still allowed to enact and maintain zoning laws that had the same effect. By this time, prices had risen, and the generous postwar federal subsidies that made it possible for white Americans to buy suburban homes — but which had largely been denied to Black Americans — were no longer available. Even if a suburb might no longer be allowed to overtly ban Black families, limiting development to large and expensive homes could achieve a similar goal.

As a result, the tighter zoning laws became associated nationally with increased racial segregation, as well as a diminished housing supply.

For the full commentary, see:

Mara Gay. “To Cut New York Housing Costs, Ease Suburbs’ Zoning Laws.” The New York Times (Thursday, Feb. 23, 2023): A22.

(Note: the online version of the commentary has the date February 21, 2023, and has the title “The Era of Shutting Others Out of New York’s Suburbs Is Ending.”)

Allow Entrepreneurial Competition in Medicine by Ending Obamacare’s Ban on Physician-Owned Hospitals

(p. A17) A tiny paragraph in the enormous Affordable Care Act prohibits physicians from building or owning hospitals. Any existing physician-owned hospital built before 2010 is prohibited from growing beyond the size it was when the bill passed. This law limits competition, defies common sense and is likely contributing to higher prices for Medicare and reduced access to treatment for millions of Americans.

. . .

. . . recent research affirms the power of American entrepreneurship to lower costs and improve quality. Doctors, whether at the bedside or the forefront of scientific innovation, are well-suited to reimagine healthcare operations, lower costs and improve the quality of care.

Specialty physician-owned hospitals focused on cardiology and cardiac surgery were found to deliver higher-quality care than nonprofit hospitals, with lower rates of hospital readmission or mortality for high-risk surgery. Physician-owned specialty hospitals for orthopedic procedures, such as hip and knee replacements, offered lower costs and higher quality than nonprofit counterparts.

. . .

Healthy competition drives job creation, innovation and long-term economic growth. The federal government doesn’t prohibit plumbers from owning plumbing companies, radio hosts from owning radio stations or farmers from owning farmers markets. It’s time to reopen the free market in healthcare and let the power of competition do its work.

For the full commentary, see:

James Lankford and Brian J. Miller. “End ObamaCare’s Ban on Physician-Owned Hospitals.” The Wall Street Journal (Tuesday, Feb. 21, 2023): A17.

(Note: ellipses added.)

(Note: the online version of the commentary has the date February 20, 2023, and has the same title as the print version.)

State Bureaucracies Did Not Nimbly and Effectively Spend Massive Pandemic Crisis Funds

(p. A1) . . . when the Biden administration gave Mississippi $18.4 million in mid-2021 to hire public health workers — part of $2 billion in grants to bolster the Covid work force at state and local health agencies nationwide — it appeared that help had, at long last, arrived.

But as of January [2023], 18 months later, Mississippi had spent just $3.6 (p. A14) million of its grant — less than a fifth. Its attempts to hire epidemiologists, nurses and other soldiers in the war against Covid had largely fallen flat. The state has lost one in 224 residents to Covid-19, one of the nation’s worst death rates, including 122 people in tiny Scott County alone.

Mississippi’s woes are an acute example of a larger public health failure that is reprised nearly every time a major health threat grabs headlines. The problem, experts say, is that Congress starves state and local health agencies of cash for even basic needs in quiet times. Then, when a crisis hits, it floods them with millions or even billions of dollars earmarked to battle the disease of the moment. And the sluggish machinery of Capitol Hill often ensures that most of the aid arrives only after the worst of the crisis has passed.

The $2 billion in Covid hiring grants is the latest example. Nationwide, states and localities had spent only $371 million of the money by December, or about 19 percent, according to the Centers for Disease Control and Prevention, the conduit for the funds.

. . .

The record is replete with other such fumbles.

Six months after the World Health Organization declared the H1N1 influenza pandemic over in mid-2010, states and localities had used just a third of the $1.4 billion in federal funds they had received to combat it. The outbreaks of the Ebola virus in 2014 and the Zika virus in 2016 also led to funding windfalls, but health experts say most of the money arrived late.

For the full story, see:

Sharon LaFraniere. “In Mississippi, Covid Millions Left Unspent.” The New York Times (Monday, Feb. 13, 2023): A1 & A14.

(Note: ellipses, and bracketed year, added.)

(Note: the online version of the story has the same date as the print version, and has the title “Why Mississippi, a Covid Hot Spot, Left Millions in Pandemic Aid Unspent.”)

“The 1619 Project” Shows How Government Policies “Discriminated Against African-Americans”

(p. A15) Hulu’s series “The 1619 Project” blames economic inequality between blacks and whites on “racial capitalism.” But almost every example presented is the result of government policies that, in purpose or effect, discriminated against African-Americans. “The 1619 Project” makes an unintentional case for capitalism.

The series gives many examples of government interventions that undercut free markets and property rights. Eminent domain, racial red lining of mortgages, and government support and enforcement of union monopolies figure prominently.

The final episode opens by telling how the federal government forcibly evicted black residents of Harris Neck, Ga., during World War II to build a military base. The Army gave residents three weeks to relocate before the bulldozers moved in, paying below-market rates through eminent domain. After the war, the government refused to let the former residents return. Violation of property rights is the opposite of capitalism.

For the full commentary, see:

David R. Henderson and Phillip W. Magness. “‘The 1619 Project’ Vindicates Capitalism.” The Wall Street Journal (Tuesday, Feb. 21, 2023): A15.

(Note: the online version of the commentary has the date February 20, 2023, and has the title “‘The 1619 Project’ on Hulu Vindicates Capitalism.”)

The commentary quoted above is related to Magness’s book:

Magness, Phillip W. The 1619 Project: A Critique. Great Barrington, Massachusetts: American Institute for Economic Research, 2020.

As College Enrollments Drop, Apprenticeships Flourish

(p. A5) Today, colleges and universities enroll about 15 million undergraduate students, while companies employ about 800,000 apprentices. In the past decade, college enrollment has declined by about 15%, while the number of apprentices has increased by more than 50%, according to federal data and Robert Lerman, a labor economist at the Urban Institute and co-founder of Apprenticeships for America.

Apprenticeship programs are increasing in both number and variety. About 40% are now outside of construction trades, where most have traditionally been, Dr. Lerman said. Programs are expanding into white-collar industries such as banking, cybersecurity and consulting at companies including McDonald’s Corp., Accenture PLC and JPMorgan Chase & Co.

. . .

. . ., some employers say a mismatch has developed between the skills employers are seeking and the lessons students are learning in college and university courses. To address the mismatch, companies are dropping requirements for degrees for some jobs, and states are rebuilding the vocational-education pathways that were de-emphasized two generations ago when the nation adopted a college-preparatory path for nearly all students.

. . .

Companies such as Alphabet Inc.’s Google, Delta Air Lines Inc. and International Business Machines Corp. have responded by dropping college degrees as requirements for some positions and shifting hiring to focus more on skills and experience. Pennsylvania has cut college-degree requirements for some state jobs, and Maryland has set a statewide goal of 45% of high-school students starting a registered apprenticeship by 2031.

For the full story, see:

Douglas Belkin. “More Choose Apprenticeships Instead of Heading to College.” The Wall Street Journal (Saturday, March 18, 2023): A5.

(Note: ellipses added.)

(Note: the online version of the story was updated March 16, 2023, and has the title “More Students Are Turning Away From College and Toward Apprenticeships.”)

California Bureaucracy and Regulations Block Nimble Use of Flood Waters to Recharge Depleted Groundwater

(p. A15) It sounds like an obvious fix for California’s whipsawing cycles of deluge and drought: Capture the water from downpours so it can be used during dry spells.

Pump it out of flood-engorged rivers and spread it in fields or sandy basins, where it can seep into the ground and replenish the region’s huge, badly depleted aquifers. The state’s roomiest place for storing water isn’t in its reservoirs or on mountaintops as snow, but underground, squeezed between soil particles.

Yet even this winter, when the skies delivered bounties of water not seen in half a decade, large amounts of it surged down rivers and out into the ocean.

Water agencies and experts say California bureaucracy is increasingly to blame — the state tightly regulates who gets to take water from streams and creeks to protect the rights of people downriver, and its rules don’t adjust nimbly even when storms are delivering a torrent of new supply.

During last month’s drenching storms, some water districts got the state’s green light to take floodwater only as the rains were ending, allowing them to siphon off just a few days’ worth. Others couldn’t take any at all because floods overwhelmed their equipment.

. . .

The permitting process is meant to ensure that the takers aren’t encroaching on other people’s water rights or harming fish and wildlife habitats. There are meetings and consultations to hash out details, and a public comment period to hear objections. The whole process can take months. And the resulting permit allows the holder to divert water only on a temporary basis, usually 180 days, and only when specific hydrological conditions are met.

. . .

The process is too slow and cumbersome to help corral big floods that come, like this winter’s, out of the blue.

The Omochumne-Hartnell Water District, which operates along a stretch of the Cosumnes River near Sacramento, applied for a permit last August. When the storms started up in December, its application was still pending.

“It was frustrating,” said Michael Wackman, the district’s general manager. He and his colleagues called up the State Water Board: “What’s going on there? Let’s get these things moving.”

Its permit finally came through on Jan. 11, more than a week after the swollen Cosumnes had crashed through nearby levees and killed at least two people. By that point, so much water was roaring down the river that it damaged the pumps that were supposed to send it away, Mr. Wackman said.

For the full story, see:

Raymond Zhong. “In Parched California, Rainwater Keeps Rushing Out to Sea.” The New York Times (Wednesday, February 22, 2023): A15.

(Note: ellipses added.)

(Note: the online version of the story has the date Feb. 21, 2023, and has the title “Parched California Misses a Chance to Store More Rain Underground.”)

Environmentalists Want “Shooters in Helicopters” to “Gun Down” Free Range Cows

(p. A13) For the second year in a row, shooters in helicopters will gun down an estimated 150 feral cattle that are trampling habitats in the Gila Wilderness, a sprawling undeveloped area of more than a half million acres within the Gila National Forest in New Mexico.

. . .

Lethal removal of cattle in the Gila Wilderness has long been a divisive issue, with environmentalists and ranchers firmly at odds.

Cattle growers in New Mexico have unsuccessfully sued the Forest Service over the aerial shooting, claiming that the method imperils their privately owned cattle. The New Mexico Cattle Growers’ Association, a coalition of more than 1,000 ranchers, has previously challenged the Forest Service over cattle removal and maintains that shooting cattle from a helicopter violates state and federal laws and regulations.

. . .

The plaintiffs say that if their privately owned cattle are killed, it would be “nearly impossible” to know because the agencies intend to let the carcasses decompose where they die.

Loren Patterson, the association’s president, said he wished the authorities would address the cause of the growing feral cattle population by taking measures such as repairing shoddy fences that allow cattle to enter the Gila Wilderness.

“They are not looking at solving the reason the cattle is there,” Mr. Patterson said, adding that for two consecutive years, federal authorities were instead opting for lethal removal as quick fixes.

For the full story, see:

Christine Chung. “Feral Cattle Will Be Shot From Above to Cull Herd.” The New York Times (Thursday, February 23, 2023): A13.

(Note: ellipses added.)

(Note: the online version of the story has the date Feb. 22, 2023, and has the title “Feral Cattle in New Mexico Will Be Shot From Helicopters.” The version quoted above omits a sentence that appears in the online, but not the print, version of the article.)

Billions in Subsidies for Solar and Wind Are Wasted by Delayed Approvals of Connections to a Slow-Growing Grid

(p. A1) Plans to install 3,000 acres of solar panels in Kentucky and Virginia are delayed for years. Wind farms in Minnesota and North Dakota have been abruptly canceled. And programs to encourage Massachusetts and Maine residents to adopt solar power are faltering.

The energy transition poised for takeoff in the United States amid record investment in wind, solar and other low-carbon technologies is facing a serious obstacle: The volume of projects has overwhelmed the nation’s antiquated systems to connect new sources of electricity to homes and businesses.

So many projects are trying to squeeze through the approval process that delays can drag on for years, leaving some developers to throw up their hands and walk away.

More than 8,100 energy projects — the vast majority of them wind, solar and batteries — were waiting for permission to connect to electric grids at the end of 2021, up from 5,600 the year before, jamming the system known as interconnection.

. . .

(p. A15) It now takes roughly four years, on average, for developers to get approval, double the time it took a decade ago.

And when companies finally get their projects reviewed, they often face another hurdle: the local grid is at capacity, and they are required to spend much more than they planned for new transmission lines and other upgrades.

. . .

Electricity production generates roughly one-quarter of the greenhouse gases produced by the United States; cleaning it up is key to President Biden’s plan to fight global warming. The landmark climate bill he signed last year provides $370 billion in subsidies to help make low-carbon energy technologies — like wind, solar, nuclear or batteries — cheaper than fossil fuels.

But the law does little to address many practical barriers to building clean energy projects, such as permitting holdups, local opposition or transmission constraints. Unless those obstacles get resolved, experts say, there’s a risk that billions in federal subsidies won’t translate into the deep emissions cuts envisioned by lawmakers.

. . .

Delays can upend the business models of renewable energy developers. As time ticks by, rising materials costs can erode a project’s viability. Options to buy land expire. Potential customers lose interest.

. . .

When a proposed energy project drops out of the queue, the grid operator often has to redo studies for other pending projects and shift costs to other developers, which can trigger more cancellations and delays.

It also creates perverse incentives, experts said. Some developers will submit multiple proposals for wind and solar farms at different locations without intending to build them all. Instead, they hope that one of their proposals will come after another developer who has to pay for major network upgrades. The rise of this sort of speculative bidding has further jammed up the queue.

“Imagine if we paid for highways this way,” said Rob Gramlich, president of the consulting group Grid Strategies. “If a highway is fully congested, the next car that gets on has to pay for a whole lane expansion. When that driver sees the bill, they drop off. Or, if they do pay for it themselves, everyone else gets to use that infrastructure. It doesn’t make any sense.”

. . .

Massachusetts and Maine offer a warning, said David Gahl, executive director of the Solar and Storage Industries Institute. In both states, lawmakers offered hefty incentives for small-scale solar installations. Investors poured money in, but within months, grid managers were overwhelmed, delaying hundreds of projects.

“There’s a lesson there,” Mr. Gahl said. “You can pass big, ambitious climate laws, but if you don’t pay attention to details like interconnection rules, you can quickly run into trouble.”

For the full story, see:

Brad Plumer. “U.S. Solar Goal Stalled by Wait On Creaky Grid.” The New York Times (Friday, February 24, 2023): A1 & A15.

(Note: ellipses added.)

(Note: the online version of the story was updated Feb. 28, 2023, and has the title “The U.S. Has Billions for Wind and Solar Projects. Good Luck Plugging Them In.”)

Americans “Vote with Their Feet” Against Higher Taxes

(p. A15) The Tax Foundation’s 2021 State Business Tax Climate report ranks California’s state and local taxes as the second highest in the nation, just below New Jersey and above New York. People are fleeing these states.

. . .

I analyzed all 50 states’ net domestic migration levels and compared those levels with each state’s overall tax ranking. The ranking includes a weighing of taxes on corporate profits, individual income, sales, property and unemployment insurance.

The 10 states with the lowest taxes gained an average of 948 per 100,000 total population. For states that ranked 11th through 20th on taxes, the average was 457. For states ranking 21st to 30th, the gain was only 97. Net domestic migration turned negative for states ranking 31st to 40th with a loss of 141. And for the 10 states with the highest taxes, the average loss was 809 per 100,000.

These findings strongly reinforce the popular saying that people vote with their feet. They will leave places with relatively high taxes for those with lower levies. It may surprise Mr. Newsom, but people generally want to keep more of the money they earn.

For the full commentary, see:

James L. Doti. “Californians Aren’t the Only Tax Refugees.” The Wall Street Journal (Thursday, Jan. 12, 2023): A15.

(Note: ellipsis added.)

(Note: the online version of the commentary has the date January 11, 2023, and has the same title as the print version.)

The Tax Foundation’s report mentioned above is:

Walczak, Jared, and Janelle Cammenga. “2021 State Business Tax Climate Index.” Washington, D.C.: Tax Foundation, 2020.

Over 100,000 “Non-Covid Excess Deaths” Per Year in 2020 and 2021

(p. A15) Covid-19 is deadly, but so were the draconian steps taken to mitigate it. During the first two years of the pandemic, “excess deaths”—the death toll above the historical trend—markedly exceeded the number of deaths attributed to Covid. In a paper we just published in Inquiry, based on data from the Centers for Disease Control and Prevention, we found that “non-Covid excess deaths” totaled nearly 100,000 a year in 2020 and 2021.

Even these numbers likely overestimate deaths from Covid and underestimate those from other causes. Covid testing has become ubiquitous in hospitals, and the official count of “Covid deaths” includes people who tested positive but died of other causes.

For the full commentary, see:

Rob Arnott and Casey B. Mulligan. “How Deadly Were the Covid Lockdowns?” The Wall Street Journal (Thursday, Jan. 12, 2023): A15.

(Note: the online version of the commentary has the date January 11, 2023, and has the same title as the print version.)

The Mulligan and Arnott commentary is based on their academic article:

Mulligan, Casey B., and Robert D. Arnott. “The Young Were Not Spared: What Death Certificates Reveal About Non-Covid Excess Deaths.” INQUIRY: The Journal of Health Care Organization, Provision, and Financing 59 (Jan.-Dec. 2022): 00469580221139016.