NYC | Congestion Pricing

Traffic congestion is a costly problem for New York City residents, workers and visitors. The problem originates from inadequate pricing mechanisms for the use of roadways and railways in NYC. It is an aspect of the Tragedy of the Commons.

A new report on Alternatives to Traffic Congestion Mitigation in the Manhattan CBD, by the Committee to Keep NYC Congestion Tax Free, provides a list of alternative ways to use pricing to reduce congestion in Manhattan's three CBDs. The list is good and the opening up of options to the committee looking at these issues is even better.

A broad approach to congestion pricing and mitigation is provided in Professor William Vickrey's 12 Principles posted at http://tinyurl.com/29vz7n. Vickrey recommended maximizing use of railway tracks by upgrading signal systems to permit shorter headways between subways and using a skip-stop system for local trains to shorten travel times for most travelers with a minimum of inconvenience to a few travelers.

WEBSITES | Best Five City/County Sites

New York City's web site - http://www.nyc.gov/ - is by far the most popular local government web site in the United States, based on visits to the sites. As of August 2007, New York City's site had a 7.3 percent market share. It is more than three times as popular as the next-most-visited site, according to Hitwise.

The next most popular was Miami-Dade County, with 2.2 percent. Next, surprisingly, is not the City of Los Angeles but rather its Sheriff's Department. The City of Chicago ranks fourth and the Maricopa County (Phoenix) court system is fifth.

Rank. Name of Locality - Web Site - Market Share
1. City of New York - http://www.nyc.gov/ - 7.32%
2. Miami-Dade County - http://www.miamidade.gov/ - 2.20%
3. Los Angeles Sheriff's Department http://www.lasd.org/ 1.65%
4. City of Chicago http://www.cityofchicago.org/ 1.62%
5. Maricopa County, Arizona - Superior Court of
Arizona - http://www.superiorcourt.maricopa.gov/ 1.52%
Source: Hitwise

NYC Speaker Quinn's Five Fiscal Reforms

The New York State Financial Control Board (FCB), created in 1975 to oversee New York City's finances, sunsets in less than a year. City Council Speaker Christine Quinn this morning addressed the City's fiscal reporting (full text here). She has a five-point fiscal-reform program. All of her points are good ones. She is making one of them effective on her own authority (#4) and is recommending the others to the Mayor, Governor, state legislature and her own City Council colleagues:

1. More accountable independent public entities. The Transit Authority, the Health and Hospitals Corporation, the Economic Development Corporation and the NYC Housing Authority have increased their reporting. Oversight should be even stronger.

2. More accountable budgeting. Short-term debt should be watched because in 1975 the City had $6 billion of it. Oversight over City borrowing should be the responsibility of the City Comptroller. In addition, the city’s tax collection and spending numbers should be reported by the Mayor to the City Council, City Comptroller and the Independent Budget Office.

3. A “rainy day fund.” Surplus revenues can be diverted in good times for use in leaner ones. years. State legislative approval is needed for this. (The averaging of property assessments over five years is in itself a form of rainy day fund. The problem with actual rainy-day funds historically is that they are tempting - they get used up fast at the first sign of morning dew. The criteria for adding to and drawing from the fund need to be automatic.)

4. Disclosure of sponsors of capital projects. Names of council members will now be disclosed along with the capital projects they sponsor. Speaker Quinn is introducing this reform on her own authority.

5. Program budgeting. Department budgets need to be informative and linked to the Mayor's Management Report. This fifth proposal is of particular interest to me. When I was Chief Economist at the NYC Comptroller's Office, I attempted a reorganization of the City's budget - with the help of the Chief Accountant - to conform to the categories of the Mayor's Management Report.

September Job Numbers

The stock market rose significantly today on the much-awaited September employment situation release from BLS, which said: "Nonfarm payroll employment rose by 110,000 following increases of 93,000 in July and 89,000 in August (as revised)." These figures are not such a drop from the first half of 2007 as was previously reported. The markets were pleased.

But the "as revised" parenthetical comment refers to a major swing in the August numbers. The BLS's August employment situation release had reported a decline of 4,000 jobs, and the revision is to a growth of 93,000 jobs. What happened?

Philip Rones, the Acting U.S. Labor Commissioner, in his accompanying statement reports the revision as follows: "The estimates of payroll employment change for July and August were revised upward. The July change rose from +68,000 to +93,000 and the August change from -4,000 to +89,000. After incorporating these revisions, average monthly job growth for June through September is 90,000,compared with an average of 147,000 for the first 5 monthsof the year. Nearly all of the August revision reflected an upward adjustment to government employment, particularly local education. As noted last month, employment estimates for local government education can be volatile, particularly during the summer months. Initial estimates of employment in local education typically are based upon a smaller percentage of survey responses than in other sectors. This lower initial response can make estimation more problematic in months when school sessions begin and end."

Agora Financial in its 5-minute report today isn't satisfied with this explanation and wonders whether the preliminary August numbers somehow landed on the weak side to help justify the September 18 cut in the Fed's target rate by 50 basis points. With such a large revision, the question is inevitable. Future revisions will surely be watched closely.

Predatory Credit Card Issuers?

Who's at fault for the high level of credit card debt and the high fees that are being charged? The credit card issuers, who make it so easy to borrow, or we American consumers who run up five and six-figure credit card bills we can't afford, until the credit stops?

A blog posted on the Motley Fool web site says that both are at fault. Americans borrow too much, it is made too easy for them, and the implications of their borrowing are not fully understood.

This is a broader perspective on the subprime loan crisis. The predatory subprime lenders focused on housing-secured loans. Predatory credit-card issuers make up in high fees what they may lose in credit-card debt that is not repaid.

What do you think?

U.S. DEBT | If and When It Matters

October 2, 2007–Congress has just approved raising the U.S. federal debt ceiling to a tad short of $10 trillion. What happened to the virtue of thrift and foresight exemplified by the fable about the ant and the cricket? The ant works all summer to save for the winter, while the cricket just sings his heart out. Come fall, the cricket begs in vain for food and starves to death, not having figured out the America Buys on Credit solution – buy what you want and put it on Uncle Sam's credit card until it maxes out at $10 trillion.

The debt ceiling had held at under $6 trillion from August 1997 to June 2002, when after 18 months in office President Bush asked for a higher ceiling. Three more increases took the ceiling to nearly $9 trillion, which was reached on October 2, according to the national debt clock, i.e., nearly $30,000 per U.S. citizen. The latest increase raises the ceiling more than 60 percent above what it was when the President took office in 2001.

A CIA table updated as of September 20, 2007 shows the national debt of France, Turkey and the United States clustered around 64.7 percent of GDP.

Debt, External Debt and Deficits. If Americans owe $30,000 to one another, some argue, it's just a wash. Perhaps the burden of the debt is shifted to the next generation. Perhaps the debt service encumbers future budgets. Perhaps the President is setting a bad example as Borrower in Chief. That's the way Mayor Bloomberg feels: “Too many of our conservatives in the United States want to run up enormous deficits and hope that some way, somehow, someone else will pay for it. That’s not conservatism, that’s alchemy at best, or if you like, lunacy.”

On the other hand, if the money is spent for investment, the next generation is benefiting from this investment and U.S. debt itself provides the buyers with a low-risk asset. The problem is that the money is not being spent for investment. The increases are for wars in Afghanistan and Iraq that are not going well and are dubious investments. The U.S. debt has been bought heavily by foreign central banks, allowing them to neutralize the extra dollars and keep the local currencies strong, at the expense of the dollar. A weaker dollar is not necessarily bad, because it means Americans can export more overseas. It also means that imports will cost more. This could well contribute to inflation. It also provides some hope that U.S. consumers will spend a smaller share of their income of imports and the enormous annual U.S. current account deficit will start to shrink.

U.S. external debt, i.e., public and private debts repayable in foreign currencies, shows the extent of the cumulative overhang. Debt obligations are calculated in U.S. dollars at current exchange rates. While U.S. external debt is the highest at $10 trillion, it isn’t much higher than the $8.3 trillion figure for the UK.

Top Five Cricket Nations by External Debt
1. United States $10.0 trillion
2. United Kingdom, $8.3 trillion
3. Germany, $3.9 trillion
4. France, $3.5 trillion
5. Italy, $2.0 trillion
Source: CIA, The World Factbook , updated as of 9/20/07.

To rank the cricket nations on a current basis, we can use current-account deficits, i.e., a country's net imports in goods and services, less net earnings from rents, interest, profits, and dividends, and less net transfer payments (such as pension funds and worker remittances) from the rest of the world during the year, calculated on an exchange-rate basis. The U.S. current account deficit in 2006 of $862 billion is nearly 15 times the UK's $58 billion.

Top Five Cricket Nations by Current Account Deficits, 2006
1. United States, -$862.3 billion
2. Spain, -$98.6 billion
3. United Kingdom, -$57.7 billion
4. Australia, -$41.6 billion
5. France, -$38.0 billion
Source: CIA, The World Factbook , updated as of 9/20/07. The Trade Balance is the net exports of goods and services, i.e., exports less imports. Examples of services would be legal and consulting services to overseas clients. The Current Account Balance (ranked for 163 countries) is the Trade Balance + net factor income from abroad (such as interest and dividends) + net unilateral transfers from abroad (such as foreign aid, pension payments from overseas or workers’ remittances from overseas). When the trade or current account balance is positive it is called a surplus. When the balance is negative it is called a deficit.

Why Do Debts and Deficits Matter? Americans owing money to one another is not worrisome. But Americans selling public debt to foreign countries, and adding to the debt at a rapid clip, is worrisome. Those who are holding dollar securities must be noticing that the value of these securities has declined seriously.

Meanwhile, U.S. consumers must eventually pay substantially more for imports. That must put an upward pressure on the CPI. We could be back to the 1970s problem of simultaneously rising unemployment and rising inflation, and therefore a rising Misery Index. The U.S. Misery Index hit a high of 22 percent in June 1980. Right now it is down to 5.6 percent.

Postscript - October 2008. One year later, asset values have plummeted. That should take care of the inflation pressure for a while, until balance sheets of financial institutions, businesses and individuals are back in some kind of order.