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The Lighthouse is the weekly email newsletter of the Independent Institute.
Subscribe now, or browse Back Issues.

Volume 7, Issue 33: August 15, 2005

  1. New Spending Amounts to Highway Robbery
  2. House Price Surges Caused by Restrictive Laws
  3. Streamlining Federal Airport Security

1) New Spending Amounts to Highway Robbery

President Bush last week signed into the law the $286.4 billion highway bill, which Sen. John McCain (R-AZ) and a few other legislators rightly criticized for its 6,371 "special projects" -- e.g., funding for a $330 million highway loop in Bakersfield and a $231 million bridge near Anchorage. (With $941 million in pet-project funding, Alaska is the fourth largest recipient of the bill's pork. Not coincidentally, its new bridge will be named after House Transportation Committee Chairman Don Young of Alaska.)

Unfortunately, many of the bill's critics have underestimated its vices and have failed to identify a sound alternative, as Research Fellow Gabriel Roth explains in his latest op-ed, "Time for States to Finance Their Own Roads?"

The development of the internal combustion engine, Roth explains, brought the possibility of financing roads through dedicated fuel taxes, although the taxes often were diverted to non-road projects. "As a result, road users in all countries lost control of the revenues raised by central governments in road-use charges," writes Roth, editor of the forthcoming Independent Institute book, STREET SMART: Competition, Entrepreneurship, and the Future of Roads.

Fortunately, electronic vehicle identification technology is now available to ensure that road-usage fees are used exclusively for roads, Roth explains. "Road owners, whether private firms or government agencies, can now charge directly for the use of their own roads, both to recover costs and to finance the expansion needed to eliminate excessive and growing congestion."

To maximize the benefits of the new technology, however, the federal-government middleman must be eliminated from the highway-funding equation. Federal financing is a bad deal not only for "donor" states (e.g., Arizona, California, Colorado, Florida, and Texas), it's a bad deal for "recipient" states (e.g., Alaska, Hawaii, New York, Pennsylvania, and the District of Columbia) because the federal government diverts so much money toward non-road purposes.

See "Time for States to Finance Their Own Roads?" by Gabriel Roth (8/8/05)
http://www.independent.org/newsroom/article.asp?id=1546
SPANISH TRANSLATION:
"¿No Será el Momento de que los Estados Financien Sus Propias Carreteras?"
http://www.elindependent.org/articulos/article.asp?id=1546

For more on transportation, see
http://www.independent.org/issues/search.asp?subID=45

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2) House Price Surges Caused by Restrictive Laws

Has the U.S. housing market become a speculative bubble in danger of imploding? Although some news stories have claimed there are strong parallels between today's housing prices and the technology-stock bubble that peaked in the spring of 2000, such comparisons have obscured more than they have illuminated, according to Research Fellow Benjamin Powell in his latest op-ed, "Making Sense of High Housing Prices."

Many observers have committed what logicians call the fallacy of composition, in this case mistakenly ascribing the characteristics of one housing market to the totality of housing across the United States. In fact, only eight states have seen real housing prices "increase by 50 percent or more from 1999 until the beginning of 2005," according to Powell.

"From 1999 to the end of 2004 the median sales prices of a home appreciated at a rate of just under seven percent," writes Powell. "That's good growth, but it does not signal a nationwide bubble. In fact, after adjusting for inflation, 12 states actually had lower prices at the end of the five-year period than they had at the beginning."

Miami and Las Vegas housing markets may be undergoing a speculative housing bubble, but that's not the case in the San Francisco Bay Area, where houses appreciated an astounding 18 percent over the past year. The cause for the Bay Area's housing price increases, according to Powell, are the numerous restrictions that prevent housing supply from keeping pace with housing demand.

"Sixty percent of Bay Area cities are not producing enough new housing to meet the state's guidelines for their 'fair share.'" More than one million acres are protected parkland that is off limits to developers. Furthermore, "cities around the region impose large lot zoning, limit building permits, impose long wait times and delays, and enforce urban growth boundaries to limit development."

Government restrictions on building don't account for all high-priced housing markets in the country, but they explain many of them. "Economists Edward Glaser of Harvard and Joseph Gyourko of the University of Pennsylvania studied the effect government restrictions have on housing prices in a number of markets around the country. They found that 90 percent of the differences between physical construction cost and the price of new homes could be attributed to government restrictions on building. Only 10 percent of the differences were due to intrinsically scarce land."

See "Making Sense of High Housing Prices," by Benjamin Powell (8/8/05) http://www.independent.org/newsroom/article.asp?id=1548
SPANISH TRANSLATION:
"Entendiendo las Razones de los Altos Precios de las Viviendas"
http://www.elindependent.org/articulos/article.asp?id=1548

For more on housing, see
http://www.independent.org/issues/search.asp?subID=73

Also see, THE VOLUNTARY CITY, edited by David Beito, Peter Gordon, and Alexander Tabarrok, at
http://www.independent.org/store/book_detail.asp?bookID=17

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3) Streamlining Federal Airport Security

The federal government is considering significant revisions to some of the more irritating policies of the Transportation Security Administration (TSA), the huge agency created when the feds nationalized airport security in the wake of the 9/11 terrorist attacks. Passengers, for example, would again be allowed to bring scissors, razor blades, fingernail clippers, and small knives past airport security checkpoints -- and the shoe-search requirement would be dropped.

But although many of the proposed revisions in policy are appropriate, the revisions will likely be a mixed bag, according to Ivan Eland, senior fellow and director of the Independent Institute's Center on Peace & Liberty.

"Ending these ludicrous rules is long overdue, but the agency's effort to go even farther in its charm offensive spells trouble," writes Eland in his latest op-ed. "The agency is also considering exempting certain government VIPs, such as members of Congress, Cabinet members, state governors, and top military officials, from being screened at all."

Eland notes that 65 percent of homeland security funds are spent on aviation security, leaving few resources to help secure the country's ports, borders, and mass transit from terrorists. Aviation security took a big leap forward when the passengers of United Airlines Flight 93 -- informed of the crisis that confronted them via their cell phones -- apparently took security into their own hands and overpowered their hijackers, preventing even larger numbers of casualties.

Enabling passengers to protect themselves was the most important step toward improving aviation security; that effort could be expanded. Reinforcement of cockpit doors was the second most-needed security measure after 9/11. It was easy to see why panicky policy-makers sought so much more after 9/11: the need to appear to be "doing something" overwhelmed rational risk assessment.

Concludes Eland: "As the crisis atmosphere after a terrorist attack dissipates, however, citizens begin resenting ridiculous, ineffectual security measures and begin to hold politicians and bureaucracies accountable. That is beginning to happen, but the public should demand that the TSA be abolished and airport security be re-privatized. Perhaps this would be a first step toward ending the paranoia that has resulted in excessive emphasis on airport security to the exclusion of everything else."

See "Time to Streamline Burdensome Airport Security," by Ivan Eland (8/15/05)
http://www.independent.org/newsroom/article.asp?id=1550
SPANISH TRANSLATION:
http://www.elindependent.org/articulos/article.asp?id=1550

Also see:

"The Pretense of Airport Security," by Robert Higgs (10/23/03)
http://www.independent.org/newsroom/article.asp?id=1199
SPANISH TRANSLATION:
"El Pretexto de la Seguridad Aeroportuaria"
http://www.elindependent.org/articulos/article.asp?id=1199

To purchase THE EMPIRE HAS NO CLOTHES: U.S. Foreign Policy Exposed, by Ivan Eland, see
http://www.independent.org/store/book_detail.asp?bookID=54

To purchase PUTTING "DEFENSE" BACK IN U.S. DEFENSE POLICY, by Ivan Eland, see
http://www.independent.org/store/book_detail.asp?bookID=19

"The Way Out of Iraq: Decentralizing the Iraqi Government," by Ivan Eland
http://www.independent.org/publications/policy_reports/detail.asp?type=full&id=16

Center on Peace & Liberty (Ivan Eland, director)
http://www.independent.org/research/copal/

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