The Bronx Water Treatment Plant -- Unbelievable Bumbling At All Levels

Here is a story that you have not been following, but you should be.  The main villain in the story is the Federal EPA.  The City administration (current and prior) and contractors do not come out well, although perhaps not villains.  The Manhattan DA looks like a complete fool.  The New York Times comes off as clueless, accepting whatever they are told by people in authority without ever asking even a semi-intelligent question.

We begin with an article from the NYT of Monday, January 13:  "Inquiry Is Said to Find Fraud at Bronx Water Plant."   It seems that the Manhattan DA has been conducting an investigation of financial problems at the Bronx water treatment plant under construction, and has uncovered (drum roll) fraud!  The main accused perpetrator is Schlesinger-Siemens Electrical, an affiliate of the German engineering giant Siemens AG.  A so-called "deferred prosecution agreement" with Siemens is in the works.

Well, this is the NYT parroting some kind of publicity out of the DA's office.  Can they tell us some of the background?  Basically no, other than that it is a "troubled $3.2 billion"  project, and then this line:  "The federal Environmental Protection Agency has fined the city $5 million for delays on the project, which was mandated by a 1998 consent decree."

We can learn some more by turning to Bronx Week of August 16, 2012.  Turns out that although the City signed a consent decree agreeing to build the plant in 1998, the original EPA order was in 1993.  Also, according to a quote from former City Comptroller (and current candidate for mayor) William Thompson, "The DEP told the public that this project could only cost $992 million,"  So the cost has well more than tripled. 

Bronx Week also tells us that the alleged purpose of the plant was that the federal EPA "fear[ed] water from the Croton water shed. . .  was in danger of contamination."  It is a filtration plant, designed to remove harmful bacteria -- $3.2 billion to remove bacteria.  OK, here we are in 2013, 20 years after the original EPA order, and the plant still isn't done and hasn't filtered a single drop of water yet, and we've been drinking away at the Croton water for all these 20 years.  Are the bacteria levels elevated in the slightest?  Of course they are not -- if they were, it would be big news.  Has even one single person ever gotten sick?  Not that I've ever heard of, and again, if it happened it would be big news, and I've been following this one closely. 

Here is the statement from the NYC Department of Environmental Protection as to why they are engaging in this gigantic project.  Lots of gobbledygook, but this looks to me like the key quote:

The Croton System has provided high quality water to consumers for many years. Although Croton water currently meets all existing health-based water quality regulations, it frequently violates the aesthetic standard for color. Water quality problems have resulted in the Croton System being removed from service on numerous occasions, typically during the summer and fall months (in four of the last several years – 1992, 1993, 1994 and 1998). The entire system was shut down for most of 2000-2001 because of contaminants that leaked into the [aqueduct].

Hmmmm.  $3.2 billion because of non-health-related "color" problems, most recently 12 years ago?  If the color level gets a little high in the Croton water, why isn't it a far better solution to switch over for a while to water from the other systems, as they did in prior years, instead of blowing $3.2 billion on a filtration plant?  Oh well, but if the cost went from under $1 billion to over $3 billion, it's not so surprising that there could be some fraud involved.  Or is there?  Back to the New York Times to learn what the "fraud" is supposed to be:

In one, the company essentially used smaller minority-owned subcontractors as fronts to make it look as if they had provided roughly $10 million in labor and equipment, when it was really provided by Schlesinger-Siemens or other companies, the people said. By doing so, the company evaded city contract requirements that it hire a certain percentage of contractors owned by minorities or women, or certified by the government as disadvantaged.

The second arrangement, the people said, involved fraudulent filings with city agencies that made it look as if the company, as required for bidding and the contract, had a licensed master electrician on site overseeing the work: installing the systems that will run the huge plant.

That's right, in a plant where they are blowing $3.2 billion to achieve no meaningful result, the only alleged "fraud" the prosecutors can come up with consists of failing to hire enough of the mandated politically connected cronies for the job.  Shouldn't we be happy that they are at least using some competent German engineers?

Meanwhile, is it anybody's job to ask whether this plant is delivering any value and whether there are cheaper ways to assure the quality of the drinking water -- namely, the ways that the quality has in fact been assured for the past 20 years with no plant?

Hurricane Sandy Relief Bill Passes The House

Despite my best efforts to point out the reasons why it was a bad idea, the House went right ahead and passed the ridiculously over-priced $50.7 billion Hurricane Sandy relief bill.  Don't count on the Senate to stop it at this point.

Thanks to the 179 Republicans and one Democrat (Rep. Andrew Harris of Maryland) who voted against this monstrosity.  Of course, even the nays were not really standing up for the proposition that the Federal government shouldn't be involved in disaster relief at all.  Instead, for the most part they were trying to establish only either (a) that massive disaster relief expenditures should be offset by cuts somewhere else, or (b) that they shouldn't just vote the maximum amount of every wish list that the governors could come up with, and instead should at most only vote piece by piece for expenditures that could be justified.  

Basically, this bill has a little to do with Hurricane Sandy relief, and a lot to do with bailing out the even bigger disaster of the budgets of New York, New Jersey, and to some degree Connecticut.  There's so much money in this bill that I'll bet it will make the budgets look good for the whole remaining terms of Governors Cuomo and Christie.  As for the 20 or 30 hurricanes in the Gulf that we will have to pay for as our quid pro quo for this one, well that's not Cuomo's or Christie's problem. 

Somewhere out there there must be someone other than myself who has figured out what a terrible idea this Federal disaster relief thing is for New York and New Jersey, but I haven't been able to find it. 

Fake Keynesianism On Full Display On The WSJ Op-Ed Page

Does any reader out there think that people in the government actually know what they are talking about?  If so, you can just disabuse yourself of that idea by reading the op-ed by Alan Blinder in today's Wall Street Journal.  Sorry it's behind the pay wall, but the link will take you to where you can get in if you are a subscriber.

Who is Blinder?  Currently a professor of economics at Princeton, but just recently Vice Chairman of the Federal Reserve.  Shouldn't somebody with those kinds of titles know at least a little something about basic public policy?  OK, here are a few key quotes:

At current rates of spending and taxation, federal receipts cover less than 74% of federal outlays.  So if the government hits the debt ceiling at full speed, total outlays . . . will have to be trimmed by more than 26% immediately.  That amounts to more than 6% of GDP, far more than the fiscal cliff we just avoided. . . .

Bad things will surely happen, one of which will be a swift descent into recession.

Blinder is completely ignorant of economic history, which shows that sharp cuts in government spending and in the size of the government are the cause of economic booms, not recessions.  Read my previous post here and the linked article by David Henderson for more detail.

It is beyond breathtaking that our top government officials operate at this level of ignorance.  And if you think that anyone at the Fed in Washington, or in the Treasury Department, or in the White House (including the top guy) knows any better, you are wrong.  (A few people in some of the regional Feds do know better.  They are a small minority and their voices are at present barely being heard.)

Greece, Latvia, And "Austerity" As An Economic Policy

The incompetent conventional wisdom sees the two poles of economic policy as "austerity" and "stimulus."  Exemplifying the incompetence is the IMF, which put out a report back in October comparing countries engaging in "austerity" to those following programs of "stimulus."  The conclusion (no surprise here from these fools) :  "stimulus" is better!  Summary of the IMF report and link here.

What's amazing to me is how many news organizations and bloggers buy into this terrible terminology, which seems specifically designed to obfuscate the only important issue, namely the relative size and growth of the state sector versus the private sector.  Here is really everything you need to know about economic policy:  large private sector, small state sector, successful economy;  small private sector, large state sector, unsuccessful economy.

The term "austerity" just completely confuses the issue.  "Austerity" means some combination of government spending decreases (usually not very much) and tax increases (generally onerous) -- a totally muddled mess.  So the state shrinks maybe a little for a while, but gets more revenue to keep the private sector from growing and let the government grow more as soon as the heat is off.  The chance that will work is about zero.  The thing that will work is massive spending cuts and no tax increases.  But the dopes like the IMF, New York Times, Krugman, et al. will cite the poor results of "austerity" in support of their preferred program of a blowout of government spending.

Consider Greece.  You would have to be in a cave for the past couple of years not to know that government of Greece is undertaking a program of "austerity" in order to earn bailouts from the various European bailout providers.  Greece's economic performance is, of course, terrible.  Do you have the impression that Greece has been engaging in big cuts in government spending?  The answer is that there have been some cuts, but not enough to actually shrink the state sector meaningfully as a percentage of the economy.  From Anders Aslund writing at Bloomberg News on January 7, 2013: 

Greece . . . maintained high public expenditures of 50 percent of gross domestic product in both 2010 and 2011, when it was supposed to be pursuing austerity.

According to the New York Times here, in the current budget passed in November, Greece has promised government spending cuts of about $10 billion, which would be about 3% of gdp.  That's maybe something, although in my view not nearly enough from a start of 50%.  Also, I don't believe that they will actually follow through and do it.  But meanwhile, how about taxes?  Oh, those are going up, and a lot. The Telegraph reports that on Friday the Greek parliament voted for tax increases to raise revenues by 2.5 billion euros -- that's also about 3% of gdp.   The corporate income tax rate is going from 20% to 26%, a sure economic killer.  The top personal income tax rate is going from 40% to 42%.  Well, that's what it means to do "austerity."  I think we can count on continuing economic failure in Greece.

It's actually hard to find a clean example of a country that has cut government spending massively without also engaging in destructive tax increases, but probably the best recent example is Latvia.   Again from Aslund's article at Bloomberg:

In 2009, Latvia carried out an arduous fiscal adjustment of 9.5 percent of GDP. . . .  Cuts in public spending accounted for two-thirds of the Latvian fiscal adjustment. It decreased government expenditures from a high of 44 percent of GDP in the midst of the crisis to a moderate level of 36 percent of GDP this year. Latvia has kept a flat personal income tax now at 21 percent and a low corporate profit tax of 15 percent.

Latvia did raise their VAT somewhat, so they are not as clean a case as one would like.  According to Anne Applebaum in the Washington Post here, Latvia's economy shrank 24% in 2008-09, but has been growing at a rate of about 5% since.  To the extent that some of that 24% shrinkage reflects the cuts in government spending, keep in mind that gdp accounting records a dollar of government spending as equivalent to a dollar of private spending, which it is not.

How's It Going With The High Tax, High Spend, High Debt Model

Just checking around to see what I can find in the way of the latest data on how it's going with the high tax, high spend, high debt model of how to run a government.

Europe certainly qualifies for that category.  At ZeroHedge today, there is a collection of discouraging recent economic statistics from Europe.  Some of the most relevant:

• The unemployment rate in the eurozone has now risen to 11.8% – a brand new all-time high.
• The unemployment rate in Greece is now 26%.   A year ago it was only 18.9%. The unemployment rate in Spain has risen to 26.6%.
  

• .The unemployment rate for workers under the age of 25 in Italy is 37.1%; in Spain, 56.5%; in Greece, 57.6%.
  

Back in the U.S., Brian Barry at Bloomberg News reports on the contrast of the economic conditions of the blue and red states:


[L]eaders of both parties . . . should also think about the path of state finances. The prospects should unnerve Democrats, in particular: The 26 states that Obama carried in November tended overwhelmingly to have lower credit ratings than the 24 where he lost.   The most obvious examples are California and Illinois, two big states that are deep-blue politically and deep in the red fiscally.

Aside from credit ratings, how are the blue states doing versus the red states in economic performance?


Checking in on Illinois, we find that efforts to get some control over the worst-funded pension system in the country are going nowhere:.  Again, from Bloomberg News:

Illinois lawmakers missed another chance to restructure the worst-funded state retirement system in the nation, officially ending their 2012 session yesterday without acting on measures to shore up pensions.  In failing to deal with a $97 billion unfunded liability that rises by $17 million each day, Illinois risks more downgrades from bond-rating companies, which have urged the state to stem the ballooning deficits.

Meanwhile, down in low tax (and no income tax) Texas, the New York Times on January 8 finds that their big problem is how to deal with a suddenly emerging $8.8 billion budget surplus:

A boom in revenues from sales taxes as well as taxes from oil and natural gas production have given Texas a budget surplus that the state comptroller has estimated at $8.8 billion.

As for California, it's too early to see how the big income tax increases are going to affect things.  My prediction:  badly.

The Climate Campaign Becomes Ever More Bizarre

Yesterday our official weather and climate bureaucrats, NCDC, came out with a big press release:  NCDC Announces Warmest Year on Record for Contiguous U.S.!!!!!!!  OK, the exclamation points are mine, but you can sense the excitement in their words.  Finally, the definitive proof of global warming!  (By the way, for those who don't know, NCDC is the National Climatic Data Center, a part of NOAA, the National Oceanic and Atmospheric Administration, which is in turn part of the Commerce Department.)

The story was immediately picked up by the press and given full play.  In the print edition of today's New York Times, it's three of the six columns in the middle of the front page at the top, complete with a big color map.  Headline:  Not Even Close: 2012 Was Hottest Ever in U.S.  Note that the word "contiguous" got disappeared from that headline.  Not good, New York Times.  (They did get the word "contiguous" back into the text of the story.)  In the print Wall Street Journal, there's a squib on page 1 followed by a full article on page A4.

It certainly sounds like something significant on its face.  Why am I just a suspicious guy?  That word "contiguous," so conveniently omitted in the New York Times headline, just catches my eye.  Could they really have left out Alaska and Hawaii?  Now Hawaii is kind of small, only 10,000 or so square miles, or well less than 1% of U.S. land area.  But Alaska is 663,300 square miles -- that's about 17.5% of the total U.S. land area, plenty to swing the result.  These people are climate campaigners.  They would not have omitted Alaska if including Alaska would lead to the same result.  The Manhattan Contrarian smells a rat.

So what went on temperature-wise in Alaska in 2012?   A little Google search promptly turns up this article from the January 3, 2013 Alaska Dispatch:   Brrrrrrrr!  Last year coldest in three decades for Anchorage.  And you probably thought it was going to be warm but just not a record.  Nope, coldest in thirty years.

But that's just Anchorage.  How about the rest of Alaska?  Well, in the Alaska Dispatch of December 23, 2012 we have this article:   Forget global warming, Alaska is headed for an ice age.  Excerpt:

In the first decade since 2000, the 49th state cooled 2.4 degrees Fahrenheit

That's a "large value for a decade," the Alaska Climate Research Center at the University of Alaska Fairbanks said in "The First Decade of the New Century: A Cooling Trend for Most of Alaska."

The cooling is widespread -- holding true for 19 of the 20 National Weather Service stations sprinkled from one corner of Alaska to the other, the paper notes. It's most significant in Western Alaska, where King Salmon on the Alaska Peninsula saw temperatures drop most sharply, a significant 4.5 degrees for the decade, the report says.

Sure enough, it's the whole state.  And would this swing the result for the United States?  Of course it would.  Now getting an average temperature for something like the United States is not a straightforward exercise (do you weight different stations differently depending on how far apart they are?) but I think we can be absolutely certain that if NCDC got the same result including Alaska then it would have included Alaska.

And what that means is that you can't trust a single word that NCDC or NOAA say on the subject of climate.  They are selectively cherry-picking data to convince you that they have a dramatic result when in fact they have nothing and are just propagandizing for more Federal dollars for themselves.

And how about the New York Times?  I'm sorry, but I can't forgive leaving out the word "contiguous" in the headline, and I can't forgive not mentioning the Alaska result in the story.  Was the omission of Alaska a mistake based on ignorance, or was it intentional?  If the first, it would show that the New York Times reporter knows nothing about his subject and is unable to ask the most obvious questions.  No, this is Justin Gillis, lead guy on the climate beat at the Times and a committed climate campaigner.  Thus, we are left with the conclusion that the article is just a deliberate attempt to propagandize and deceive the readership.

And by the way, the highly accurate satellite temperature data for the entire world are also available.  These data only exist for the 33 years from 1979 to 2012, but at least we can get an indication whether 2012 is somehow out of line.  Here are the data from UAH.   OK, 2012 is in about the top third, but well down from the peak in 1998.  No dramatic story there.