Susan Pendergrass speaks with Andrew G. Biggs, senior fellow at the American Enterprise Institute, about the Social Security trustees’ latest report and what it means for the program’s future. They discuss the projected 2032 insolvency of the retirement trust fund, why the trustees’ birth rate assumptions may be too optimistic, the proposed Moreno-Warren plan to eliminate the payroll tax ceiling, the Cassidy-Kaine plan, and why pension experts oppose it, what would actually happen if the trust fund ran out, and more.

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Episode Transcript

Susan Pendergrass (00:00):
I feel fortunate to have grabbed some of your time. Andrew Biggs from the American Enterprise Institute, I appreciate you coming on to talk to us. Social security has been nothing but in the news recently, and you know more than anyone else. So thank you for taking the time.

Andrew Biggs (00:14):
That’s why I’m so cheerful. The more you know about Social Security, the happier you are. But thanks for having me, Susan. It has been busy. I’m really happy to be with you today.

Susan Pendergrass (00:16):
I’m in my sixties. I see something about Social Security running out of money and I pay attention. So just to bring us all up to speed: in the last week, there was a news flash that Social Security is going to run out of money sooner. What does it really mean?

Andrew Biggs (00:39):
Every year the Social Security trustees, which is mostly members of the cabinet, the Secretary of the Treasury, the Social Security Commissioner, and so on, come out with a report projecting the program’s financial health, both in the short term and the long term. That happens every year, and it’s been getting worse every year. In this year’s report, they projected that the retirement trust fund will go insolvent, or run out of money, in 2032. They also projected a significantly larger long-term funding gap in the years thereafter, and this is worth explaining.

When the trust fund runs out, it doesn’t mean there’s zero money to pay benefits. As long as we’re paying a trillion dollars a year in payroll taxes, there will be money to pay benefits. But when the trust fund runs out, it means benefits will be cut, and their projection is somewhere around 22%. The size of that long-term funding gap dictates how big the cuts are going to be in the years thereafter. The trustees lowered their projections for birth rates, and they found that the One Big Beautiful Bill has worsened Social Security’s finances. A variety of things made this long-term funding gap worse. It’s really hard to paint a happy picture. The trust fund can be running out in about six years, and the funding gap and the benefit cuts in years thereafter are going to be larger. It’s a sobering picture.

Susan Pendergrass (02:16):
I’m not trying to pile on, but I think I saw that they extended the time when they expect birth rates to bounce back. Is that true? Because I have not seen anything anywhere, and I’ve spoken to some demographers, to suggest birth rates are ever going to bounce back.

Andrew Biggs (02:35):
Here’s the interesting thing. If you look at the Congressional Budget Office or the US Census Bureau, right now the fertility rate is about 1.6 children per woman on average, and both the CBO and the Census project that’s going to remain pretty much steady, declining a little bit over coming decades. Social Security had a very different picture. As of last year, they thought the birth rate, which is 1.6 now, was going to immediately start rising and go back up to 1.9 children per woman in the next several decades. That makes Social Security’s finances better. More kids being born means more people paying into the system. What they did in this year’s report is moderate a bit on fertility. They said, okay, it’s not going to rise back to 1.9, it’ll rise back to 1.75. So they are still over-optimistic. I’ve talked to some demographers and economists who’ve really focused on the birth rate, and they described the trustees’ assumptions as, quote, fanciful, meaning they just weren’t plausible. Now they’re somewhat more plausible, but they still tend

Susan Pendergrass (03:32):
Okay.

Andrew Biggs (03:48):
to be more optimistic than other agencies. And to me, frankly, this is a concern. You really want the people who are the scorekeepers, the umpires, to be playing it as straight as they possibly can. We know that these guesses are going to be wrong because this stuff is impossible to predict with certainty, but most demographers think the best guess is we’ll stay around 1.6 going forward. You’ve seen a decline, and a good predictor of birth rates is religiosity, the level of religious belief in a country. The US has typically been much more religious than Western Europe, and that’s played into fertility. There has been a big decline in religious belief, particularly among younger Americans, along with all the other pessimism you see among younger people. When people are pessimistic, they tend not to have a lot of kids. So the best guess is we’re going to stay about where we are.

I wrote something the other day saying the bad news in this trustees report is even worse than last year’s, but it could have been even worse. They project a long-term funding gap above 4.4 percent of payroll. What that means is if you took the 12.4% payroll tax today and raised it immediately and permanently by 4.4 percentage points, from 12.4 to 16.8, that would in theory keep the trust fund solvent for 75 years. But a better guess would be a funding gap of around 4.8 to 5 percent. This is real money. For years, people on the left have said, well, okay, we know Social Security has a solvency problem, but it’s a manageable issue. They were saying that when the funding gap was 2% of payroll. Now you’re looking at four to five percent. That’s a lot of money, at a time when a lot of other things are making claims on the budget. We have some difficult choices to make and we really have to start thinking hard about this.

Susan Pendergrass (06:09):
Okay, so what about this idea that’s been floated in the last week of getting rid of the payroll cap? First of all, explain the payroll cap, and then this idea of getting rid of it.

Andrew Biggs (06:17):
Sure. Social Security has a 12.4% payroll tax, half paid by you and half paid by your employer. That applies only to wages up to $184,500. That’s called the payroll tax ceiling, or the tax max. That dollar figure goes up every year, but this year it’s $184,000. You only pay taxes on those wages, and you also earn benefits only on those wages. People say, well, Bill Gates doesn’t pay more taxes than that. But he doesn’t earn any benefits either. So you’re capping both the taxes and the benefits.

To fast forward a little bit: there’s an op-ed in the Washington Post this week from Senator Bernie Moreno, a Republican from Ohio, and Elizabeth Warren, a Democrat from Massachusetts. They say it’s just common sense to eliminate that cap and tax all earnings for Social Security. The interesting thing is how uncommon that would actually be. Our payroll tax ceiling is $184,000. Almost every other country has a ceiling on their payroll taxes for their pension system, and in almost every other country that ceiling is lower. In Canada, you only pay taxes and earn benefits up to around $60,000 in earnings. In the UK it’s about $70,000. In Germany it’s about $70,000. We are already an outlier for how high up the income ladder we tax people. To eliminate the cap entirely is a big deal. It’s effectively a 12 percentage point increase in the top marginal tax rate. I pulled an example of somebody living in New York City. A high-income person already pays 37% in federal income taxes, plus regular Medicare taxes, the additional Medicare tax, state taxes, and city taxes. If you add another 12 percentage points on top of that, their marginal tax rate would be in the mid-60s. And that’s before we’ve fixed Medicare or done anything else. The federal budget is still broke, and you’ve taxed these people as high as you possibly can. So these things that look like common sense, why don’t we just tax everybody,

Susan Pendergrass (08:37):
Right, right.

Andrew Biggs (08:46):
look, there are reasons for that.

Susan Pendergrass (08:49):
And were they suggesting that if I make $300,000 and I pay my 6.2 percent, totaling 12.4 with my employer, on my entire salary, that my Social Security benefit one day would be higher? Are they talking about capping the benefit or just getting rid of the cap on contributions?

Andrew Biggs (09:06):
They haven’t been very specific. They say Social Security would continue to be an earned benefit, which kind of implies you would continue to earn benefits on the additional taxes you would pay. Let’s say if we uncap the payroll tax and base your taxes on your total earnings, you’d also base your benefits on your total earnings. What you get then is, okay, you’re getting all this money from people in the short term, but you have to pay them higher benefits in the long term. That offsets some of the savings. And this morning I was running some numbers looking back to the 1970s. We had a huge run-up in benefit levels from Social Security in the 1970s. The benefit formula we have today is not the one FDR invented. It really happened in the 1970s, where they jacked up benefits in a really foolish way, and then to help pay for it, they increased the payroll tax ceiling. Right now you pay taxes on earnings up to $180,000. If we had just kept the tax max from 1970 and indexed it to wages, it would have been only $95,000. So they essentially doubled the wages on which you pay Social Security taxes. But what happens is they also doubled the wages on which people earn benefits. I’ve highlighted the point that if you have a high-income

Susan Pendergrass (10:38):
Mm-hmm.

Andrew Biggs (10:43):
couple retiring today, they could get almost $100,000 in total benefits, which is absurd. There’s no reason a government program should be paying anybody that amount. If you want that kind of income in retirement, you save more in your 401k. It’s better for you, better for the economy. But it was a result of this short-term step they took in the 70s. They said, hey, we raised benefits too high, let’s jack up the tax max. And they didn’t worry about the fact that in the future you’d have to pay benefits on that. Well, the future is today.

Susan Pendergrass (11:05):
Okay.

Andrew Biggs (11:13):
Now we’re broke again, we need extra money again, and these guys say, well let’s just jack up the tax max. But then you’ll pay extra benefits in the future. It becomes this chasing-your-tail kind of thing.

Susan Pendergrass (11:16):
Yeah. Yeah.

Andrew Biggs (11:25):
And the problem when you do it is there’s no country on earth paying $100,000 a year from a social insurance program, except for us. And the reason we do is these stupid historical decisions. If you’ve got this high-income couple in the US retiring today, they can get almost $100,000 from Social Security. If they lived in Canada, they’d get like $35,000. And that’s perfectly fine. Nobody’s starving to death in Canada in retirement. They just save more on their own.

Susan Pendergrass (11:35):
I’ll say.

Andrew Biggs (11:55):
The irony is that we think of ourselves as a free-market, small-government country, and our Social Security program is enormous, primarily because we’re paying benefits to people that other countries say, yeah, we don’t need to pay benefits to these guys.

Susan Pendergrass (12:11):
And yet people say, I put my money in, I get my money out.

Andrew Biggs (12:14):
Yeah, and I understand it. When I say we shouldn’t be paying $100,000 a year to a high-income couple, you get the email saying, well, I paid in. And if you paid in, you feel you have this moral claim on benefits. The problem is Social Security is still broke. We still need higher taxes or lower benefits. The idea that you’re just going to get your full benefits with the taxes you paid doesn’t work because the system can’t afford to do it. So you have to make the choice: do I want to pay higher taxes or get lower benefits? I’ve got to pick my poison. Most high-income people would prefer to get lower benefits. They care more about their taxes than their benefits. But people are still living in this dream world where this system, which is $30 trillion in the hole, is somehow going to pay them everything they’ve been promised and just screw somebody else. Everybody thinks they’re the guy who’s going to get everything and somebody else is going to get screwed.

Susan Pendergrass (13:14):
Yeah. I definitely hear people saying today, maybe I should go ahead and take it early and then I’ll get grandfathered in and my benefits won’t get lowered.

Andrew Biggs (13:26):
It probably won’t make a difference. In general, the Social Security benefit formula works based on your birth cohort, the year in which you’re born, not really the year in which you claim benefits. And people who are going to do Social Security reform understand the incentives. They don’t want to make it easy for people to game the system. So Social Security reform will probably work itself out in such a way that

Susan Pendergrass (13:42):
Right.

Andrew Biggs (14:03):
you can’t get some big advantage by claiming early. I could think of some conceivable possibilities, but I still would not encourage people to claim early.

Susan Pendergrass (14:14):
Okay, I want to talk about two more things I read in the last week. One was a letter from Tim Kaine about his idea with Senator Cassidy. What’s that idea for fixing it?

Andrew Biggs (14:24):
The interesting thing is people say Social Security reform has to be bipartisan. So we have two bipartisan ideas. We have Moreno and Elizabeth Warren, a Republican and a Democrat. They’ve got one idea, eliminating the payroll tax ceiling.

Susan Pendergrass (14:39):
Third rail.

Andrew Biggs (14:49):
Cassidy, a Republican from Louisiana, and Tim Kaine, a Democrat from Virginia, they’ve got a bipartisan plan. And guess what? Their plan is also terrible. If there’s any lesson from this, it’s that bipartisan doesn’t mean good.

Susan Pendergrass (15:00):
Bipartisanly terrible.

Andrew Biggs (15:04):
Yeah. Look, ultimately Social Security reform is going to have to be bipartisan, given the way the political system works. On the other hand, there is some lesson that if both Republicans and Democrats can agree on something, it might be a terrible idea. With Cassidy and Kaine, they are explicitly, and Cassidy said this, solving a political problem. The political problem is that neither Republicans nor Democrats want to vote for either tax increases or benefit cuts. You’d think Democrats want to raise your taxes and Republicans want to cut your benefits. The reality is they don’t want to do either of those things because they realize both are politically unpopular, which is why we’ve gone 40 years literally doing nothing. So their solution is that we don’t have to make these difficult votes. Instead, the federal government will borrow about $2 trillion, invest that money

Susan Pendergrass (16:02):
Tough.

Andrew Biggs (16:04):
in stocks and private equity, high-risk, high-return stuff. Then they claim they’re going to hold this fund for 75 years so it can build up value. In the meantime, when Social Security’s trust fund runs out in 2032, the federal government will borrow against the assumed gains on this investment fund.

Susan Pendergrass (16:06):
Right. Mm-hmm.

Andrew Biggs (16:29):
They say the borrowing will be at a lower rate because it’s the federal government. And they say after 75 years, all the gains in this investment fund will pay back all the borrowing and we’re all good. And let me count the ways there are problems with that. If you work at the state level,

Susan Pendergrass (16:45):
It’s just kicking the can.

Andrew Biggs (16:52):
state-based think tanks almost know more about this than federal people. A lot of underfunded state pension systems do things called pension obligation bonds. Their pension system is underfunded, they don’t want to raise contributions or cut benefits, so they borrow and invest in the stock market and hope it works. The pension obligation bond is the hallmark of a poorly funded, poorly run pension system. Think New Jersey, Illinois, things like that.

Susan Pendergrass (17:21):
Yeah.

Andrew Biggs (17:23):
There’s a national group of state budget officers that has come out and basically said as an institution, don’t do this. Borrowing for your pension is a bad idea. So it really is fitting for the times that the Cassidy-Kaine plan says, let’s take this worst idea from state and local government

Susan Pendergrass (17:45):
Yeah.

Andrew Biggs (17:47):
employee pensions, which has been condemned as bad practice, and put it on steroids and do that for Social Security. And what it really gets to is they just don’t understand the finances of it. And to be frank, they won’t listen. They have talked to every pension expert I know, and this Social Security world is pretty small. We all know each other on both sides. We may not agree on everything. Literally every pension expert I know says this is a terrible idea.

Susan Pendergrass (17:54):
Yeah.

Andrew Biggs (18:17):
But their political considerations are more important than policy, and that’s the problem with all of them.

Susan Pendergrass (18:24):
I mean, it feels free. They’re basically saying it’s like a timeshare. It just feels free right now. We just borrow the money. Okay, so

Andrew Biggs (18:31):
It’s been pointed out to them that if you can fund Social Security this way, you could fund the entire federal government this way and never collect any taxes. At one point Senator Cassidy was quoted in a newspaper article saying, well, yeah, sure, in theory you could. And I’m like, if something implies there’s a free money machine, maybe you need to question your assumptions.

Susan Pendergrass (18:38):
Sure. Okay.

Andrew Biggs (18:54):
I could give you a whole variety of reasons why this doesn’t work, but one macro point that’s come to me: I’ve been doing Social Security for a long time. I worked in the Bush administration in 2005 when they tried and failed to do Social Security reform. One of the problems we face today is that your elected officials understand Social Security policy much less well than they did 20 years ago. They just don’t understand how the system works. Going back to the Moreno-Warren idea of applying the payroll tax to all earnings,

Susan Pendergrass (19:22):
Yeah.

Andrew Biggs (19:37):
okay, you’re adding 12 percentage points to your top tax rate. There’s a reason Sweden and France and others don’t do this anymore. They used to have incredibly high tax rates. They don’t now. We would end up in many cases with a higher tax rate than most European countries. We have some philosophical dedication to small government and things like that. They don’t. And so if they’re not doing it,

Susan Pendergrass (19:43):
Yes. Yeah, yeah.

Andrew Biggs (20:02):
it’s because there’s a practical reason this isn’t a good idea. The same applies to wealth taxes. That’s been tried in Europe. They’re like, yeah, we’re not doing that anymore because it doesn’t work. But your average senator now

Susan Pendergrass (20:14):
It is happening around the country, the billionaire tax. What happens in 2032 if no one is either brave enough or smart enough to take this on in the next six years?

Andrew Biggs (20:17):
They’re just not aware of these policy issues, and that’s a real problem. It’s like having a guy fix your car who doesn’t know how to fix cars. 2032 is the date. If you have a recession, it might be 2031. It’s not certain, but it is certain it’s happening soon.

Susan Pendergrass (20:47):
Yeah. Okay.

Andrew Biggs (20:53):
There’s a literal reading of the law, which is that Social Security can’t pay out benefits it doesn’t have dedicated resources for. Once the trust fund runs out, the only dedicated resources are mostly the payroll tax, plus a little bit of money from income taxes levied on retirement benefits. And those were cut as part of the One Big Beautiful Bill. So if the trust fund runs out, they’d have to rely on the money they have on hand, which implies around a 22% benefit cut.

A lot of times people assume that benefit cut has to be across the board. If you did it that way, you’d throw a lot of people into poverty. I did some work a year or so ago with a lawyer in DC named Kristen Shapiro, and what we found is that the legal precedent shows the executive branch, meaning the president working through the Social Security Commissioner, would have some discretion. What we found is you could maintain full benefits for about 50% of people, the poorest 50% of seniors, and then cap benefits above that. If you cap the maximum benefit at about $24,000 per year for a single person or $48,000 for a couple, that is enough to make Social Security solid without raising taxes. So the point is simply you have some discretion.

The reality is Congress isn’t going to allow big benefit cuts, for political reasons. On the other hand, are they willing to have the size of tax increases needed, all in one go, to keep Social Security paying full benefits? I don’t think they want that either. So the reality is probably they’re going to borrow a lot of the money. And that’s where you get to the issue of how much more borrowing the financial markets will swallow. We effectively borrow from the public to repay the Social Security Trust Fund, but there’s an end to that. You say, okay, 2032, we have to do something. We have to raise taxes or cut benefits. If in 2032 the stated policy of the federal government is, well, we’re just going to keep borrowing to pay Social Security even though we have no prospect of paying it back, you wouldn’t blame some big market players for saying, yeah, I’m out, because you don’t want to lend money at low interest rates to someone who says they can’t pay it back. Then you start getting a couple of things. One is more federal borrowing squeezes out capital in the rest of the economy, and so interest rates naturally rise.

Susan Pendergrass (23:18):
Right.

Andrew Biggs (23:31):
But then there’s a second element: if you’re afraid the federal government can’t pay you back, over and above that natural increase in the interest rate, you’d apply a risk premium to treasury debt. You’d say, look, Treasury is not this rock-solid investment anymore. It’s more like a junk bond, or like borrowing from Illinois, and you make them pay a premium. That’s going to drive up

Susan Pendergrass (23:43):
US government borrowing. Yeah, yeah, yeah.

Andrew Biggs (24:01):
interest rates, and that makes it tougher not just for the federal government but for everybody. If you want to buy a car or a house, all your interest rates rise. There’s also going to be real temptation to inflate away the debt. The federal government doesn’t want to default on its debt, but

Susan Pendergrass (24:24):
Yeah, yeah.

Andrew Biggs (24:25):
historically the way you deal with this is inflation. Think about all the debt we took on during COVID, shoveling money out the door to everybody, and then we had massive inflation after it. A lot of those people who bought treasury debt didn’t get a good deal, because if you get 20% inflation on

Susan Pendergrass (24:34):
Absolutely. Yeah.

Andrew Biggs (24:47):
a treasury bond with a nominal fixed interest rate, that’s a real problem. So inflation becomes increasingly tempting. You look at this scenario and you’re like, can’t anybody here play this game? Every other country is not going bankrupt. We just have to do what they do.

Susan Pendergrass (24:51):
Yeah, yeah. So could we, if we really got our heads around it and started today or next year, incrementally raise the 12.4%, or incrementally get people used to lower benefits after a certain income or wealth level?

Andrew Biggs (25:18):
Sure. Yes. The way I think about it, there are two ways people think about it: the wrong way and my way. The wrong way is, let’s just pick from this menu of options to make Social Security solvent. We can raise the payroll tax a bit, raise the retirement age a bit, cut cost-of-living adjustments a bit, raise the tax cap a bit, and do these things until the system is solvent.

Susan Pendergrass (25:34):
Yes. Yeah.

Andrew Biggs (25:54):
That’ll get you a solvent program, but it won’t be a program that particularly works very well or is good for the economy. A more effective way is to ask, what do we want this system to do? If you talk about Social Security reform, what you hear is that it’s a social insurance program, a safety net, an anti-poverty program. Okay, it has to do that. And that part is really very cheap, because we don’t literally have that many poor seniors, their benefits aren’t very high, and it’s not a problem to maintain benefits for low-income seniors. When you ask what Social Security should do, nobody is saying we need to be paying high-income seniors $100,000 a year. There’s no public purpose for it. Nobody thought it out in advance. It was simply an unintended consequence. So if you’ve got things that are really costing a lot of money and have no public purpose, and those people can save for retirement on their own, you start scaling that back. The distinction I’m making is between policy changes simply for the purposes of keeping Social Security solvent, and policy changes for the purpose of making Social Security do what it needs to do, the real public purpose, and not doing things that serve no public purpose. My point is the things I’m talking about are things you should do whether Social Security is insolvent or not.

I’ll give you an example: Australia’s retirement system. Australia is a lot like us, not particularly more conservative or liberal, just sort of normal. Their Social Security program essentially is targeted at eliminating poverty in old age. It’s actually a better safety net than Social Security provides, but the benefits decline down to zero once you get above the poverty level. And to help people above that level save for retirement, everybody is enrolled in a 401k-type account. What that says is, if everybody’s participating in retirement plans as they should, the government’s job becomes easier. Their Social Security system costs about two percent of GDP. Ours costs about six percent. It’s a third as costly, provides a better safety net, and it comes because they’re actually thinking about what they’re doing.

Susan Pendergrass (28:18):
Mm-hmm.

Andrew Biggs (28:26):
We’re literally not thinking about what we’re doing. There’s a saying in business: the worst reason to do something is because we’re already doing it. That is literally how Social Security policymaking works. Nobody knows why our benefit formula is what it is or why the tax max is what it is. It’s all just stuff we inherited from the 1970s from people who were not in any way thinking clearly about what they were doing. It was people in the 70s trying to win elections, and we end up with the bag.

Susan Pendergrass (28:52):
Speaking of 2005, there was an attempt to offload a small portion of people’s contributions into the market, right? That failed.

Andrew Biggs (29:09):
That was the Bush proposal. I was in the White House then, kind of in a number-cruncher role, so I knew that stuff pretty well. I did a lot of events with President Bush around the country. When we came up on the 20th anniversary of Bush’s proposal in 2025, I started thinking to myself, what if his plan had passed? What would have happened? So I built a model. Back then they were saying, okay, you’re going to have some reductions in traditional Social Security benefits for middle and high-income people, and then you’re going to have a personal account where you can invest part of your existing payroll tax in stocks and bonds. The total benefit you get at retirement is a combination of those two. People were speculating. Well, we don’t know what the stock market’s going to do. But 20 years later, we’ve got some data, so let’s just see what happened. The results were that for people

Susan Pendergrass (30:01):
Now we do.

Andrew Biggs (30:07):
retiring today, low and middle-income people would have had higher total benefits by a little bit. The very highest-income people, their benefits would be down by a couple percent because the cuts to their traditional benefits would be larger than the gains from their personal account. But even they would be fine; it’s not a big deal. Going forward, it looked like people would do a little bit better with the Bush plan than with the traditional system. But here’s the important thing: the traditional system is broke. We just talked about how it goes broke in 2032, with huge deficits. The Bush proposal wouldn’t have made Social Security totally solvent, but it would have addressed half or two-thirds of the long-term funding gap. So you’d get a system that would have paid you benefits around the same as, or maybe a little bit better than, Social Security, but would be in much more solid financial shape. Today the times are different, and I don’t think personal accounts are really viable. But the point is, if they had done something back then, everything could be easier today. But members of

Congress were just too afraid. Republicans were afraid of taking the political hit. For Democrats, it was too tempting to give the political hit. They knew they had to do something, but they couldn’t swallow hard and say, look, let’s just go in on this thing together. They didn’t want to give Bush the win because by that point Iraq was going badly and they really didn’t like him. So they beat him up. But the problem is Bush served his term and is happily retired in Texas. The people who really got screwed were the ones who depend on Social Security, because we didn’t fix it. And you just hope that’s not what we do again.

Susan Pendergrass (31:42):
Yeah. Somebody not us in 2045 could be having the same conversation, right? Like, if only in 2025 or 2026 we’d gotten serious. And I do think people mix up the trust fund with the whole program. A lot of people think all of Social Security is going to be bankrupt in six years, versus the reality that we’re still taking in a trillion dollars, we just need about 22% more than what we’re taking in.

Andrew Biggs (32:14):
Yeah. If you go back 20 or 25 years, there were all these arguments about whether the trust fund is real or fair or whatever. The trust fund is essentially IOUs written from one side of the government to the other. I thought at the time the trust fund is not real in an economic sense. It doesn’t make it easier for the government to pay Social Security benefits. It is a pledge that we will pay them, but it doesn’t make it easier to pay them. But here’s the interesting thing:

Susan Pendergrass (32:25):
Right. Al Gore. The lock box.

Andrew Biggs (32:50):
if having a trust fund doesn’t make it easier to pay benefits, then not having a trust fund doesn’t make it harder. The trust fund runs out, we still have taxes coming in, we can still pay 80% of what is owed. If we retarget that, you can maintain the safety net. It’s not like you’re totally insolvent or broke. All those long debates over whether the trust fund is real get resolved because the trust fund itself is gone in six years. So that doesn’t matter very much anymore. But I do hope that, as you said, we’re not in 2045 looking back on a solution of just borrowing $500 billion a year or whatever it’s going to be. People in 2045, when the federal government is bankrupt, the dollar is dropping, and all these financial crisis things we think only happen to other countries are happening to us, they would look back and say, I wish those people were more responsible. The Social Security problem, in a sense, if we went back 25 or 30 years ago, was a manageable problem. The real issue is not the demographics or the benefit growth or whatever. The real issue is just poor stewardship of this program by Congress and respective presidents. It is absolutely a governance problem. It is not a problem of economic or demographic fundamentals. All of that can be handled.

Susan Pendergrass (34:19):
Everyone wants to be Santa Claus, right? No one wants to be the Grinch.

Andrew Biggs (34:22):
It’s very true, but leadership is about giving people bad news. Good news kind of tells itself. Bad news has to be told and people have to be convinced that this is going to hurt, but we’ve got to do it. And we just didn’t have the willingness. President Clinton in the late nineties tried to do some stuff, but he didn’t deliver much bad news because we had surpluses. President Bush was willing to tell people, okay, look, you’re not going to get every penny you’ve been promised. Beyond that, the level of leadership has been very poor.

Susan Pendergrass (35:01):
Hasn’t been good. All right, well, next year when the trustees report comes out, come back and give us more bad news.

Andrew Biggs (35:09):
Yeah, until then, things are looking up. But no, it’s something people want to be aware of, and I think that’s the key thing.

Susan Pendergrass (35:13):
Well, I think one of the more important things you said is that no one understands it. People are upset and arguing over something they don’t understand the mechanics of. I do know people who think they have an account with their name on it that their Social Security taxes went into, and they’re just going to start taking the money out.

Andrew Biggs (35:23):
I have some bad news for that. Your taxes go into Social Security and go straight out the door to pay for your grandmother’s benefits. If you want to know where your taxes are, they’re in your grandmother’s bank account. So go ask her.

Susan Pendergrass (35:45):
That’s right. That’s right. All right, thank you so much. I really appreciate the time.

Andrew Biggs (35:51):
Thank you, Susan. It’s a pleasure to be with you.

Produced by Show-Me Opportunity

The post The Social Security Crisis Is Worse Than You Think with Andrew G. Biggs appeared first on Show-Me Institute.

Education is more than teaching the three Rs; it is inherently value-laden. Education gets at our deep-seated values. Schools touch on these explicitly in what they choose to teach or not to teach. They also touch on these values in the little things they do. When we insist students call teachers Mr. or Mrs., for instance, we teach them to respect authority. When we recite the pledge of allegiance, we are inculcating reverence for our country. In almost every action, whether little or big, our schools are imparting values to our children.

This connection between schools and values is a problem in our public education system, which typically assigns students to schools. It means that if I want my values taught in the school, I must impose them on everyone else. As Vance Randall, an education professor at Brigham Young University, has written, “A major cost inherent in the establishment of state-sponsored schools in America was an educational program with conflict built into the system.”

But not every country has designed their system like ours. In Australia, Ireland, Belgium, and most other industrialized nations, the government provides some funding to non-governmental (private) schools. They allow for broader choice.

In the United States our system developed differently. Beginning in the mid to late 1800s, there was a push for the Common School. The leading lights of those days, however, such as Horace Mann, looked at the waves of immigrants coming into the country, the isolated rural villages teaching students in Polish or German, and thought that this decentralized system was chaos. They devised plans for a new system – a Common School System. As historian David Tyack put it in his 1975 book, “They tried to design, in short, the one best system.”

For over a hundred years now, America has been trying to build and refine this one best system. But it won’t work—because there is no single, best system. We disagree on which values we want imparted to our children. We also disagree on which instructional practices we want in our schools; I want direct instruction, you want discovery learning. We cannot both have our way in the traditional system. Either I win and you lose, or vice versa.

That is why school choice is good in and of itself. It recognizes that in our pluralistic society, we do not need to force one set of values and instruction on children. Instead, we can allow people—even people we disagree with—to voluntarily associate with one another and to choose the type of school that fits their child and their values.

We should not have to check our values at the schoolhouse door as a condition for receiving a public education. If we cherish freedom of thought, of expression, and of association—if we care about diversity—it hardly seems possible that we can cultivate those values by denying families the opportunity to pursue diverse educational opportunities that shape the thoughts and develop the minds of their children.

The post School Choice Is Good appeared first on Show-Me Institute.

More specifically, Kansas City leaders have not adopted land-use policies that have made cities like Portland and Denver so expensive. To demonstrate the impact of these regulations, Cox uses a “median multiple,” which he calculated by dividing the median house price by the median household income:

In 1990, the three metropolitan areas [Denver, Portland, and Kansas City] had similar housing affordability. The median multiple in both Denver and Portland was 2.4. Kansas City’s median multiple was 2.3. By 2015, the median multiples in Denver and Portland had more than doubled to 5.1. By comparison, the increase in the median multiple was much less in Kansas City, at 2.9.

Other cities also saw housing prices rise without a commensurate increase in median household income:

Sydney, Australia, which was among the earliest to adopt urban containment policy, now is among the least affordable housing markets internationally, with a median multiple of 12.2 in 2015, while San Jose and San Francisco have median multiples of 9.7 and 9.4, respectively. In these metropolitan areas, which had median multiples of under 3.0 before adopting strong land-use regulation, residents now face median multiples that are more than three times as large as those in Kansas City.

Kansas Citians are constantly told that we need to be like Portland and Denver by streetcar aficionados,  Dallas for folks who want a new airport, or Indianapolis by people pushing a new convention hotel. But Kansas City is not those places, thankfully. And our greatest strength—housing affordability and the cost of living it allows—exists exactly because we didn’t follow their lead on land use regulation.

Kansas City needs to be Kansas City, and Cox’s paper is required reading for anyone who wants to understand how we can promote ourselves to the world.

The post When Kansas City Leaders Got It Right appeared first on Show-Me Institute.

Here’s a story we’re familiar with in Missouri: Government officials propose a multimillion-dollar project. They sell the plan to taxpayers as a way to meet future needs and generate substantial economic growth. After the project gets built and the contractors get paid, it turns out rosy projections were dead wrong and the local residents are left holding the bag.

But what if the situation was reversed, so that when the project fails to meet expectations, the contractors are left holding the bag. Impossible? Well, it just happened in Indiana — thanks to privatization.

Recently, the Indiana Toll Road Concession Company (ITRCC), which operates the Indiana Toll Road, declared Chapter 11 bankruptcy. The ITRCC is a 50-50 partnership between Cintra SA (an international toll road operator) and Macquarie Infrastructure Group (an Australian investment bank). In 2005, those partners paid the state of Indiana $3.8 billion for the right to operate the Indiana toll road for 75 years. As part of the agreement, ITRCC had to make significant capital improvements to the toll road; from 2006 to the present the company invested $458 million.

ITRCC investors expected steadily rising highway traffic to generate returns that would exceed these upfront costs and justify the many stipulations under which the company had to operate the toll road. However, post-recession highway utilization has made the original traffic projections, and hence the debt repayment plan, untenable. This is what forced the company to declare bankruptcy.

While it is unfortunate to see any company fail, Indiana taxpayers have made out like highway robbers on the deal. The state invested its $3.8 billion windfall in a 10-year, statewide transportation improvement plan. The privatized toll road received $458 million in upgrades courtesy of ITRCC, making it a better road now than when Indiana privatized it. And even though ITRCC has declared bankruptcy and must be restructured, the investors, not the taxpayers, will take the hit for overly optimistic traffic projections.

When the highway was privatized in 2006, critics in Indiana and other states, including Missouri, were apprehensive of a foreign, private consortium buying state infrastructure. One Indiana legislator said that Cintra-Macquarie “got a heck of an unbelievable deal. We got a bad deal.” Now that it appears the results are exactly the opposite, infrastructure privatization critics argue that ITRCC’s bankruptcy shows privatization does not work.

But in reality, private toll companies already are succeeding in the United States and internationally, a prime example of which is the Chicago Skyway. Moreover, the important lesson for Missouri from this bankruptcy is not the inability of Cintra-Macquarie to recoup its investment, but rather that privatization can tap into significant capital for infrastructure improvements and transfer risk to the private sector.

In the case of Indiana, we can retrospectively say that the buyer overpaid, but that was (and still is) a risk investors are willing to make when there is a reasonable prospect of profit. Indiana residents did not share the investors’ risk, but they have benefited from more than $4 billion of investments to their transportation infrastructure. With the Missouri Department of Transportation (MoDOT) slowly running out of the money necessary to maintain the Missouri state highway system, the fate of Indiana’s highway privatization deal should not make Missourians wary. It should make them jealous.

The post A Lesson for Missouri: Indiana Toll Road Bankruptcy Highlights Privatization Advantages appeared first on Show-Me Institute.

ITRCC is a 50-50 partnership between a Spanish toll road operator and an Australian investment bank. In 2005, those partners paid the state of Indiana $3.8 billion for the right to operate the Indiana toll road for 75 years. As part of the agreement, ITRCC had to make significant capital improvements to the toll road; from 2006 to the present the company invested $458 million.

ITRCC investors expected steadily rising highway traffic to generate returns that would exceed these upfront costs and justify the many stipulations under which the company had to operate the toll road. However, post-recession highway utilization has made the original traffic projections, and hence the debt repayment plan, untenable. This is what forced the company to declare bankruptcy.

While it is unfortunate to see any company fail, Indiana taxpayers have made out like highway robbers on the deal. The state invested its $3.8 billion windfall in a 10-year, statewide transportation improvement plan. The privatized toll road received $458 million in upgrades courtesy of ITRCC, making it a better road now than when Indiana privatized it. And even though ITRCC has declared bankruptcy and must be restructured, the investors, not the taxpayers, will take the hit for overly optimistic traffic projections.

The important lesson of the Indiana Toll Road bankruptcy is not that a private company failed to make a profit, but rather that privatization deals can tap into significant capital for infrastructure improvements and transfer risk to the private sector. In the case of Indiana, we can retrospectively say that the buyer overpaid, but that was (and still is) a risk investors are willing to make when there is a reasonable prospect of profit. Indiana residents did not share the investors’ risk, but they have benefited from more than $4 billion of investments to their transportation infrastructure. With MoDOT slowly running out of the money necessary to maintain its state highway system, the fate of Indiana’s highway privatization deal should not make Missourians wary. It should make them jealous.

The post The Bankruptcy of Indiana Toll Road Highlights Privatization Advantages appeared first on Show-Me Institute.

We would encourage others, both inside and outside of the profession, to contact your legislators and ask them to support the MDA agenda. Working together, we are confident we can bring common sense solutions that will improve the oral and overall health of our state.

The MDA suggests other factors, like Medicaid reimbursements, that may be contributing to the problem of providing access to dental care for Missourians. These are valid points, but they do not provide an adequate reason for their offhand dismissal of the value of dental therapists. The MDA implies that dental therapists “would compromise the safety” of patients. I’ve addressed the issue of the quality of dental therapists in the comment section of previous posts, and within the op-ed itself. The studies of dental therapists, from New Zealand, Australia, the UK, and Alaska, have so far shown that they provide quality in patient outcomes that is comparable to that of professional dentists, and studies show that altering licensure rules to allow dental therapists to practice could improve access to care for children in the United States.

This opposition by the dental lobby despite the lack of evidence to support their position, evidenced in op-eds like these from the MDA, or in legislation to prevent teeth-whitening in kiosks, is an attempt to keep market share by using government power rather than by providing a better service at a better price. Artificially protecting a profession from competition — especially high-quality competition — does not help keep patients safer. Arbitrary rules that prevent qualified mid-level professionals from entering the market only hurt the people they are purporting to help: the patients.

The post Missouri Dental Association Promotes Its Agenda appeared first on Show-Me Institute.

So here’s a scenario that’s a result of force-feeding the U.S. economy through the tube of federal agencies: While $12.5 million in stimulus money will fund projects on French Island and Brice Prairie, projects that local contractors say they could handle, only a handful of out-of-state firms are allowed to bid them.

In one case, a Kansas City, Mo., company got the nod to build a $6.1 million district office on French Island for the U.S. Fish and Wildlife Service. And only three firms, all out of state – one them a Missouri-based subsidiary of an Australian steel company – are in the running to handle two projects at the Upper Mississippi Environmental Sciences Center.

It’s rare that I read an article that interests me on a both a biographical and a public policy level. Initially, I feel compelled to pick sides — but which should I support: the state in which I lived for 20 years or the state in which I live presently? Ultimately, I must decide that my conflict of interest is false, because I disagree that the subject of the editorial is even an issue.

The purpose of the fiscal stimulus was to incite economic recovery on a national level, not for certain states on an individual level. Therefore, the La Crosse Tribune shouldn’t lament the fact that a project wasn’t awarded to a Wisconsin-based firm — instead, it should celebrate the fact it went to an American firm. Furthermore, federal money comes from taxpayers in all states, not just those who live in Wisconsin or in Missouri. State officials and residents shouldn’t feel that their companies are entitled to federal stimulus money simply because a project lies within its borders.

States win and lose business from each other all the time in response to supply and demand — this is the beauty of the interstate trade. Wisconsin lost at least one free-market research analyst to Missouri in the last year, along with other business, but the editorial board at the La Crosse Tribune didn’t write about that. Why, then, does it bring this particular project to light? There are probably many public works projects in Missouri that are bid on by out-of-state vendors, perhaps even from Wisconsin.

As some readers point out in the comment section, awarding the project to a Missouri-based firm may not result in as many lost jobs for Wisconsin individuals and families as suggested in the article. This is because the Missouri firm could use local laborers, including perhaps the employees of the Wisconsin-based firms that were outbid.

The practice of soliciting bids from many contractors, regardless of their origin, is very good because it encourages competition and its positive consequences. If many contractors bid for a single public works project, it drives down cost and taxpayers get more for their money.

The post Is the Federal Stimulus Benefiting Missouri at the Expense of Wisconsin? appeared first on Show-Me Institute.

Missouri’s oral health is among the worst in the nation. The Centers for Disease Control ranked the state 47th in terms of the percentage of the population that visited a dentist last year, and 50 of Missouri’s 114 counties have a shortage of dental professionals. In response to this public health crisis, the Missouri Department of Health and Senior Services (DHSS) released its 2009 statewide oral health plan, which addressed the difficulty of recruiting dentists to rural areas. Although the plan points out that enabling improved oral hygiene and regular visits to a dental practitioner would narrow the disparity, it fails to address an underlying cause of Missouri’s dental predicament: the professional licensing law, and its restrictive definition of who can provide dental care in Missouri.

Alaska had a similar dental problem in its tribal areas, which had the worst rates of oral health in the country. Alaskan dental therapists — trained to do most basic dental work, like drilling and cleaning, but not oral surgery — became a much-needed solution to the problem. The American Dental Association (ADA) sued the Alaskan Native Tribal Health Consortium (ANTHC) as a result, and the two groups ultimately reached an agreement that limited the program’s scope. The ADA argued that dental therapists cannot adequately provide health care. However, a 2008 pilot study of the Alaskan program, funded by Texas A&M University, did not find any significant differences between the quality of care provided by dental therapists and dentists.

Other groups have argued that there are too many dentists already, and that opening the market to paraprofessionals is unnecessary. If dentists are so accessible, though, why are Missouri’s oral health outcomes so much lower than other states? Cost and access are both issues; even those who can conveniently reach a dentist may deem dental services to be too expensive when money is tight. Dental therapists, because they require less training, are able to provide comparable care for a wide range of dental services, at a more affordable rate. Those who need more than basic drilling and cleaning can be referred to a professional dentist. Dental therapists would not replace dentists; already, dental hygienists provide the majority of basic dental care before patients see a dentist. Also, in the same way that some people prefer to see a general practitioner rather than a nurse practitioner, some will always prefer a professional dentist to a paraprofessional. Dental therapists merely provide a less expensive alternative for those who cannot afford a professional dental checkup.

Dental therapists have been successful in England, Canada, and Australia at providing quality dental care. In Australia, dental therapists are proving their worth beyond the provision of basic oral care. A recent study found that nearly 94.6 percent of restorations performed by dental therapists were successful, and that patients were satisfied. Another study demonstrated that dental therapists can improve children’s oral health, especially in areas without proper coverage. Throughout the United States, new legislation is capitalizing on the international success of dental therapists; in the spring of 2009, Minnesota passed a bill creating a bachelor’s degree program in dental therapy.

Opening the market to dental therapists provides more than just quality, affordable health care. It also provides jobs, especially in depressed rural economies that have trouble attracting professional dentists on a permanent basis. A change in the law would benefit both those newly employed therapists and their patients, who would have significantly better access to dental care. This is an important contributing factor to general human welfare, because improving oral health helps to improve overall health. Recent studies have indicated that gum disease is correlated with increased risk — and is potentially a contributing factor — for other health problems, like heart disease.

Dental therapists provide an economical way to combat tooth decay, and public health officials have already suggested plans to implement training programs in the United States. The only obstacle to their introduction in Missouri — and to subsequent improvement in the oral health of Missourians — is the regulatory barrier of Missouri’s professional licensing law.

Caitlin Hartsell is a public health graduate student at Washington University and an intern for the Show-Me Institute.

The post Filling the Cavities in Missouri’s Dental Care appeared first on Show-Me Institute.

On the other hand, not having a cap can encourage too many lawsuits and add to medical cost inflation. However, it is important to keep the costs of excessive lawsuits in perspective. The Congressional Budget Office estimates that the savings for instituting a typical set of tort reforms (including but not limited to a cap on damages) saves 0.5 percent on total medical spending. This is not completely insignificant, but those savings would be totally swamped by a single year’s medical inflation.

There is a way to reform the tort system without giving anyone special privileges. Outside of the United States, most of the developed world uses what is usually referred to as the “loser pays” system, whereby whoever loses the lawsuit must pay both sides’ legal expenses. This system would have the salutary effect of eliminating frivolous lawsuits and lowering total lawsuit expenses. A 2008 Manhattan Institute study found that when compared to countries with the loser pays system (e.g. Britain, Australia, Germany), the United States spends at least twice as much on tort litigation as a percentage of GDP. If Missouri instituted loser pays, we could reap the benefits of lower litigation costs without creating a privileged legal class.

The post Real Tort Reform appeared first on Show-Me Institute.

Oral health is a huge public health issue in Missouri: The state is 47th in the nation for the percentage of the population that visited a dentist last year. The St. Louis Post-Dispatch recently ran an article highlighting the lack of dentists in rural Missouri and its effect upon dental health.

Alaska had a similar dental problem in the tribal areas, which had the worst rates of oral health in the country. Alaskan dental therapists — trained to do most basic dental work, except for oral surgery — became a much-needed solution to the problem. The New York Times ran a story last year about that program:

After two years of training in a program unique to Alaska, Ms. Johnson performs basic dental work like drilling and filling cavities. Some dentists who specialize in public health, noting that 100 million Americans cannot afford adequate dental care, say such training programs should be offered nationwide. But professional dental groups disagree, saying that only dentists, with four years of postcollegiate education, should do work like Ms. Johnson’s.

The American Dental Association (ADA) sued the Alaskan Native Tribal Health Consortium (ANTHC), and they ultimately reached an agreement that essentially ended the program. The ADA argued that dental therapists cannot adequately provide health care. Some groups have argued that there are too many dentists already; this site features a quote from a dentist in Missouri who argues that a dentist is at most an hour from all rural areas.

But, if dentists are so accessible, why are Missouri’s oral health outcomes so low? Cost and access are both issues; even if a person can get to a dentist, they may deem dental services to be too expensive when money is tight. Dental therapists, because they need only two years of training rather than four post-college, are able to provide comparable care at a more affordable rate. Anyone who needs more than basic drilling and cleaning can then be referred to a professional dentist.

Dental therapists have been successful in England, Canada, and Australia at providing quality dental care. Dental therapists in Australia are proving their worth beyond just basic oral health care. A recent study found that 95 percent of restorations done by dental therapists were successful, and patients were satisfied.

Dental therapists provide more than just quality, affordable health care. They also provide jobs, especially in depressed economies in rural areas that have trouble attracting professional dentists on a permanent basis. Unemployment in Missouri, while lower than the national average, is still higher than 9 percent. A change in the law would benefit both those newly employed therapists and their patients, who would have significantly better access to dental care.

The health care reform debate has focused primarily on health insurance. The majority of people who have health insurance, though, still do not have dental coverage. The best way to improve the dental health of Missourians is to lower the cost in order to improve access. Dental therapists provide an economical way to combat tooth decay, and plans to implement training programs in the United States have already been suggested. The only obstacle to their introduction in Missouri — and to subsequent improvement in the oral health of Missourians — is the regulatory barrier of professional licensing.

The post Filling the Cavities in Missouri’s Dental Care appeared first on Show-Me Institute.

Jessica Watson, the 16-year-old who wants to sail around the world, heard something similar from state officials in Australia:

Acting Premier Paul Lucas last night said Jessica should abandon her attempt to become the youngest person to sail solo non-stop and unassisted around the world. […]

“I’ll say this much – just because our maritime safety experts may not have any powers to stop her, it doesn’t mean they don’t have a duty to talk to her parents about any concerns and how they could be addressed.”

No, the government does not have a duty to counsel the parents of every teen who wants to participate in potentially dangerous sports. However, I’m glad the Australian government is leaving the decision up to Jessica and her family.

The post Australian Officials Comment on Jessica Watson’s Sailing Skills appeared first on Show-Me Institute.

I enjoyed reading these comments from Mike Perham, the British 17-year-old who completed his solo sailing trip around the world last month:

”Is it OK for a 13-year-old girl to sail around the world on her own?” Perham said. ”Is it OK to climb a tree? Both questions have no right answer … Age is only a number. It is what makes the person that is important.”

There’s some good news for Jessica Watson: An Australian minister stated that the government won’t try to stop her after all.

The post “We Find Also in the Sound a Thought, Hearing It By This Distant Northern Sea” appeared first on Show-Me Institute.

A spokeswoman for Child Safety Minister Phil Reeves said yesterday there was no trigger for intervention because child protection laws had been written to protect children who were either being abused or neglected rather than taking solo sailing trips […]

A police spokeswoman said as long as Ms Watson had a valid licence and her boat met safety regulations, they could not intervene.

It turns out that child welfare laws are useful when fighting abuse and neglect, which the laws were written to combat, but not when trying to prevent sailing trips, which the laws weren’t intended to do. And impartial license policies aren’t much good when you want to stop one particular person from sailing.

It’s too bad Laura Dekker and Jessica Watson can’t team up and make the trip together. I guess that wouldn’t satisfy them, though, because each wants to do it solo. But at least it would reassure everyone that they’d have someone to socialize with on the journey, and they already face obstacles in common.

The post “My Boat Is on the Shore, and My Bark Is on the Sea” appeared first on Show-Me Institute.

Although the midwife didn’t take a hands-on role, I think this news item supports the case for midwives. Like it or not, some babies are going to be born outside of hospitals. It’s futile to legislate an ideal world in which every baby is born under just the right conditions.

Since we know that births do happen in homes, it makes sense to allow midwives to charge money for their services, increasing the likelihood that someone will be on hand at a home birth. I’m glad Missouri law permits the practice of midwifery.

The post Slow News Day in Australia appeared first on Show-Me Institute.

Signals that public-private partnerships to manage Missouri roads give him "deep concerns," because of the potential for foreign ownership . . . Still, Jay Nixon leaves "everything on the table."

Having co-written an entire study of this subject, let me repeat that there is no "ownership" in a public-private partnership. The private partner leases an existing asset, or obtains the right to build and operate a future asset, but does not own it. The people of Missouri, through state government, would always own any infrastructure built or operated under PPPs.

As for the "foreign" part, I can’t fathom why this bothers so many people so much in these cases. It’s just a frickin’ road. (As an aside, I can understand why potential foreign ownership of Anheuser-Busch bothers people.) There are plenty of American campanies that can bid on these projects, and the leading international companies that do this type of transportation PPP are based in Australia and Spain. If we were to decide that we needed to really finish what we started in 1898 and return to war against Spain, like Rome v. Carthage, it’s not as if a Spanish company that built and operated a Missouri bridge could take the bridge and move it back to the Iberian Peninsula. This is foreign investment in America, that could potentially provide new transportation infrastructure only at a cost to people who choose to use the asset, and unlike the AB/InBev situation, no current jobs would be at stake. Why this upsets so many people is beyond me. …

The post A Post About Foreign Ownership That Has Nothing to Do With InBev! appeared first on Show-Me Institute.

Mink writes about P 3’s that have built other major roads around the US:

In March 2004, the Government Accountability Office issued a report examining six major P3 projects in the United States. (www.gao.gov/new.items/d04419.pdf) Overly optimistic traffic and revenue projections figured in three of the six. In its planning stages, the Dulles Greenway outside Washington, D.C., projected first-year traffic at 33,000 vehicles per day; it got 10,500. Today, after 12 years in operation, it has yet to turn a profit, and, according to a story last week in the Washington Post, "its debt has nearly tripled."

Another P3 project, the Southern Connector toll road in Greenville County, South Carolina, projected first-year traffic at 28,000 vehicles per day; it got about 14,000. Two years after it opened in 2001, Standard & Poor’s downgraded its rating on Connector bonds to "junk" status.

And using a slightly different measuring unit, the Pocahontas Parkway in Virginia, according to the GAO report, projected 840,000 transactions per month (one vehicle passing through one toll point) for 2003 but got only about 400,000; its bond ratings were downgraded. Both the Pocahontas and Dulles roads have since been bought out by Australian companies.

What Eric’s article is missing is why this is such a bad thing that some of these projects, and we should carefully note that 3 of the 6 measured projects are apparently doing very well, are not doing as well as projected?  To my, this is nothing but capitallism at work.  The roads are not going to disappear because the bonds have been lowered in status.  Who cares if the highway bond is junk if the road is in good condition, and I see nothing in this article or elsewhere that says the roads in question are in disrepair.  In fact, a new compnay just purchased two of the roads above, so someone thinks they are a good investment.  A P 3 is formed, it invests in roads, some of them dont’ generate as much traffic as expected, the P 3 needs to decide what to do now: lower the toll, etc.  This happens in capitalism and the communities still have the roads that private money financed.  So that is my main question about an overall great article from Mr. Mink.

The post Eric Mink’s Talkin ’bout Bridges appeared first on Show-Me Institute.