Roger Baker : Have We Turned the Corner on Peak Driving?

A window on peak driving. Image from The Auto Channel.
Coming soon:
Peak oil, peak driving, peak cars

Part II: Have we turned the corner on peak driving?

By Roger Baker / The Rag Blog / June 23, 2011

[This is the second part of a series by Roger Baker on transportation, centering on the issue of peak oil and its ramifications.]

Tell the average U.S. car owner that total driving in the USA might have already peaked forever, and they are likely to think you're crazy. That possibility goes against a lifetime of personal experience, living as we do in a country dependent on personal vehicles for work trips and various other vital functions.

It doesn't seem possible that total driving could peak and decline in our lifetimes, especially given an ever increasing population. Cars and their social and economic implications might be said to be the primary basis for the prevailing U.S. lifestyle and culture.

We see evidence for a shift in driving behavior in many places. Indeed, evidence for a driving slowdown clearly predates the big 2008 run-up in fuel prices. There are a number of factors at work. High unemployment cuts down on work trips. Intractable traffic congestion associated with suburban commuting in most U.S. metropolitan areas plays a role. As the U.S. population ages, it is driving less.

According to the best data, collected by hundreds of stations around the USA by the Federal Highway Administration, the total amount of U.S. driving, called VMT or vehicle miles traveled, hit a peak of about 3.04 trillion miles of travel in 2007. Since 2007, travel volume has been making a sluggish recovery, but U.S. driving is still over 1 percent below the level of four years ago.

The chart below offers my expanded version, including the latest month available, the VMT for April 2011, and extending back for each month since 2004. We can see there were several years of a weaker increase, beginning about mid-2005. As gas prices rose during 2008, total driving took a nosedive and then made a slow bumpy recovery during 2009-2010. In early 2011, driving has dropped again, likely in response to sharply higher fuel prices.

Rag Blog chart by Roger Baker.

CLICK ON IMAGE TO ENLARGE.

The reason for this slow recovery in U.S. driving is not hard to understand. The most recent data show that the cost of transportation (mostly driving) in the U.S. has been rising with increasing fuel prices. It has now recovered and exceeds the previous 2008 peak, even as household income continues to fall behind due to inflation.

If we are optimists, we can look at this chart and argue the VMT numbers might keep rising at the current sluggish rate. Purely by eyeballing the chart, it looks like U.S. travel volume might possibly recover to reach its old 2007 peak in two years or so. But the likelihood of higher oil prices and the slow replacement of the existing vehicle fleet suggest that this is unlikely to happen.

The U.S. vehicle fleet of cars, light trucks, etc may already be past its peak. The total number of private vehicles reached a high of about 250 million in 2008.

An excellent analysis of the changing economics of U.S. transportation has been provided by Worldwatch Institute founder Lester Brown. He points out that In 2009 alone, car ownership declined by about 4 million vehicles, or about 2%.

Future U.S. fleet size will be determined by the relationship between two trends: new car sales and cars scrapped. Cars scrapped exceeded new car sales in 2009 for the first time since World War II, shrinking the U.S. vehicle fleet from the all-time high of 250 million to 246 million. It now appears that this new trend of scrappage exceeding sales could continue through at least 2020.

The basic case for peak driving and peak cars is that driving is becoming increasingly unaffordable for the steadily growing ranks of low income drivers, in a nation where vehicle ownership is highly correlated with income. Annual car ownership cost is now estimated at $9,000.

Meanwhile, many experts now believe that we are very near or past peak global oil production. Given a steadily growing demand for a shrinking global oil supply, the lack of practical alternatives is bound to make driving in the U.S. steadily less affordable. This is doubly the case when rising fuel prices act like a tax that competes with, and depresses, consumer spending in other sectors of the economy.

Until the U.S. economy recovers, it is hard to see how driving and car sales can recover. Assuming the U.S. and global economy do recover, it is just as hard to imagine a scenario in which basic supply and demand will not raise the cost of fuel high enough to kill the economic recovery, much as we saw in 2008 when the price of oil reached $147 a barrel.

If we knew the state of the U.S. economy a year from now, and an average driver's fuel costs, we would be in a good position to predict the level of driving. Since the economy is unlikely to recover much the next year, in terms of the part of family income that can be devoted to driving, the wild card, the biggest source of economic uncertainty, is the cost of motor fuel next year and beyond.


The Road Lobby:
Why public planners hate the concept of peak driving

The reality of peak driving and peak cars on the road is guaranteed to be seen as unwelcome, and to be unpopular among planners. Planning for peak driving deeply disturbs the basis for business as usual, an unpopularity it shares with measures to limit global warming. Peak driving is subversive of existing interests since so much existing investment and infrastructure is based on the status quo.

There are a constellation of powerful financial interests tied in one way or another to the automobile, all sharing in common an interest in the continuation and expansion of a car-centric and oil-addictive U.S. suburban lifestyle. These interests include the car building industry, the road construction industry, the home products industry, and also include the various suburban sprawl and home-building beneficiaries.

Most transportation planners and their allies -- ranging from Exxon, to Walmart, to General Motors -- are inclined by the nature of their existing investments to favor roads and driving as the way to serve a profitable continuation of the prevailing pattern of suburban development.

It should come as no surprise that there is an active road lobby with many branches, including here in Austin, dedicated to perpetuating the privately profitable aspects of driving. The road lobby has its own stable of active driving promoters like Wendell Cox and Randal O'Toole, both stridently pro-road and anti-transit. If there is a toll road lobby it is probably centered around Peter Samuel and Toll Roads News.

The Texas Transportation Institute is essentially the academic think tank of the Texas road lobby. It offers an academic fig leaf of respectability to the active promotion of roads and cars and driving as unchallenged core values and infrastructure funding assumptions.

One of their current projects is to study, and prove the necessity for, a new tax on miles driven to replace or supplement the current fuel tax. The fact that the road lobby would be suggesting what is guaranteed to be such a highly unpopular kind of tax only underlines the deteriorating economics of driving.

The road lobby, in its more overtly and stridently political manifestation, often maintains that the ability to drive anywhere is a basic civil right under attack by transit advocates and urban planners inside government. At any rate, this outlook applies when the planners are not primarily trying to build more roads. Especially the roads that subsidize the suburban growth surrounding major U.S. metropolitan areas, where most state and federal planners are still focusing their attention.

The ultimate futility of subsidizing suburban sprawl development with more roads comes as no surprise. The case was already solidly made in 2004 in the classic peak oil documentary, The End of Suburbia.

The degree to which supposedly near-universal car ownership is threatened by a relatively declining U.S. household income is a factor that U.S. transportation planners are especially reluctant to admit. The reality is that rising fuel prices and a stagnant economy are fundamentally changing the economics of transportation and forcing the growing ranks of the poor to give up their cars.

Next time: A deeper look at what is by now an overwhelming body of evidence that U.S. driving behavior is fundamentally changing in response to our changing economy. The closer you look, the more apparent that a basic shift is really taking place. But what will the public transportation alternative look like by the time the public widely appreciates how much they really need it?

[Roger Baker is a long time transportation-oriented environmental activist, an amateur energy-oriented economist, an amateur scientist and science writer, and a founding member of and an advisor to the Association for the Study of Peak Oil-USA. He is active in the Green Party and the ACLU, and is a director of the Save Our Springs Association and the Save Barton Creek Association in Austin. Mostly he enjoys being an irreverent policy wonk and writing irreverent wonkish articles for The Rag Blog. Read more articles by Roger Baker on The Rag Blog.]

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NUTRITION : The Pros and Cons of "Organic" Food Revisited

Yesterday The Rag Blog posted an article by Roger Baker in which he contended that the types of food you eat can be more important than eating food labeled “organic.” [NUTRITION: Are Organic Foods Just a Marketing Trend? by Roger Baker / The Rag Blog / September 29, 2008.]

In the article below, Roger expands on this argument.

It is obviously important to distinguish between what is trendy and what is genuinely better nutrition, and this question strikes a vein of contention with many of those committed to health and sustainability.

The Rag Blog urges it’s readers to join in this discussion. Please post your opinions by clicking on “comments” below.

Thorne Dreyer / The Rag Blog / September 30, 2008

There’s ‘organic’ and then there’s what passes as ‘organic’
By Roger Baker / The Rag Blog / September 30, 2008

When you call something "organic" you may have to make a distinction whether you are referring to what passes for organic under the official USDA certification process under the Bush administration or something else entirely:

ALERT - USDA Announcement: Foods Carrying the USDA '95% Organic' Seal Are Now Allowed to Contain Factory Farmed Intestines, PCBs, and Mercury / Organic Consumers Association.

The organic foods industry has become a hugely profitable concentrated business in the last decade. Go to this link and look to the right column "Who owns what" to show how a few giants now dominate the industry.

All About Organics - OCA's Organic Resource Center / Organic Consumers Association.

Then go below to read how organic does not mean sustainable but may often be less sustainable due to energy inputs like transportation. As energy costs rise, farming will have to become more local and labor intensive, which are probably good trends, and will discourage meat consumption, but that has little to do with organic labeling.

The intelligent focus, I think, should probably be more on the KINDS of foods and their health implications and the sustainability of production and energy inputs rather than what can get organic certification nowadays under weakened federal standards. There is not much science involved these days to allow consumers to evaluate alternatives, so it ends up like arguing religion:

Organic food 'no benefit to health' / Guardian, U.K.

Also the term organic does not really mean the use of no pesticides, but primarily seems to imply a lack of chemical fertilizers:

History of the National Organic Program / Rainbow Grocery.

. . .What originally started as a system of farming, whereby the soil and the ecosystem around the plants cultivate a healthy environment, now big business farmers can purchase the organisms and other organic inputs that allow them to qualify as USDA Organic without developing a sustainable ecosystem. Rick and Kristie Knoll don't need to purchase healthy organisms for their soil, or bugs that will eat the pests on their plants because the land they've developed already hosts a natural organic ecosystem. They also don't chlorinate their salad greens or use sodium nitrate, practices that are acceptable by the new USDA standards.

And there are other issues beyond pests and soil conditions. "Most of the original organic farmers are out of business. Nobody is thinking about what cheap prices means to the farmers," said Knoll. Paying workers a livable wage and offering affordable healthcare is often unheard of in agribusiness, but is another important goal of sustainable farmers. Food miles or how far a product travels before it reaches the retailer and eventually the consumer is another major concern. . .

Here is the conclusion from one recent review:

The findings of this study have revealed that the trend in the level of significance with respect to vitamin C, calcium and potassium in organically and follow a regular and consistent pattern. It was observed in this study that there were no significant differences in vitamin C content between organically and conventionally grown cabbage, Cos lettuce and carrots while significant differences were observed in organically and conventionally grown Valencia oranges with the organic Valencia oranges showing a higher values.

From the results as well as other previous findings, it is very evident that there is still controversy on nutritional superiority of organic and conventional produce because there are numerous confounding factors that make it difficult to establish a standardized environment in which to produce the two food sources. It is therefore highly recommended that future studies on organically and conventionally grown produce should attempt to address confounding factors such as climate, soil type, crop type, fertilizer application, post harvest handling and others before valid conclusions can be made.

Research Paper / African Journal of Biotechnology

I think the jury is still out on nutrients due to the many factors involved in soil types, etc.

Meanwhile it is clear, to me at least, that eating healthy kinds of foods like lots of grains, vegetables, and fruits is more important health-wise than the typical choice between organic and inorganic foods. The "organic" choice is largely cultural -- and very controversial and heated as I have learned. I think things are going to have to move in that direction, but driven less by corporate influence and more by energy economics.

As the energy crisis worsens in the next decade, food will become more expensive, the number of farmers will have to increase, human labor and carbon rich soils will have to be substituted for fuel and nitrogen fertilizer and pesticides, and agriculture will have to become more local. More foods will be eaten in season, and the big organic food corporations will have to decline in influence after expanding hugely in recent years.

The number of farmers will have to increase because farmers are now aging and the average age of farmers is now over 55 and only about 6% are under 35 so farming knowledge is itelf disappearing. We have only 3-4 million farmers for a population of 300 million, or slightly over 1%. Meanwhile, water supplies are shrinking and the planet is warming.

But mainly world oil production is peaking. So is natural gas, meaning that nitrogen fertilizer made from gas will decrease agri productivity. And the mechanized farm equipment and shipping ability will decrease and thus require more human labor and more local production.

All this is spelled out in detail in Richard Heinberg's latest book "Peak Everything", Chapter 2, titled "Fifty Million Farmers". Heinberg thinks the only alternative that will possibly feed the nation is for local gardening everywhere like we had in the USA during the world wars. Maybe suburban lawns will have to be farmed.

Already rising energy prices are raising the cost of food. From 20% of our national income in 1950 to a recent low of 10%, which is probably as low as it can go.

In 1900, 40% of the USA population farmed, but now with cheap mechanized energy to operate equipment it is close to 1%. After the Soviet Union cut off the oil to Cuba, the farming population in Cuba had to rise to 15-25%. If we extrapolate to the USA, this means about 50 million farmers, which is where Heinberg gets his estimate.

Of course meat production is a wasteful use of corn and soybeans compared to direct human consumption, so the nature of our diet will have to change too. Trucking food to distant processing facilities will have to be largely eliminated too. When the price of oil rises to $200 a barrel and higher, it will change the economy. There are probably good analysis pieces about this on The oil Drum and Energy Bulletin.

As well as references in Paul Robert's book "The End of Food" (he is hip to peak oil; see page 222-225) and Heinberg's chapter 2 references.

"The End of Food" is a good source on many of the current trends (largely unhealthy and unsustainable) within what has become an increasingly corporate-dominated food industry that kills many by promoting poor food choices, the organic issue aside.

[Also read Roger's earliter article, NUTRITION: Are Organic Foods Just a Marketing Trend? by Roger Baker / The Rag Blog / September 29, 2008.]

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Texas Toll Roads : Feds Must Take Lead

Texas Sen. Kirk Watson at public meeting on toll roads in Austin, September, 2007. Photo by Kelly West, Austin American-Statesman.

Our national transportation infrastructure crisis is now so serious and the funds are so short of the scale of the problem that it is absolutely going to take a comprehensive federal approach rather than a state approach to get anywhere.

By Roger Baker / The Rag Blog / December 1, 2008

See 'Time is Now to Fix Transportation' by Texas senators John Corona and Kirk Watson, Below.

There are a number of questionable assertions in the op ed piece by Texas senators John Corona and Kirk Watson, below, and also some good ones. The devil is in the details.

In essence the article says we need to change our transportation policy, which is true. But the editorial misses its target in one important respect; in light of energy (oil supply and climate-related) constraints and credit market constraints, the change is going to have to be deeper and more dramatic than portrayed here, and should properly be initiated at the national level. A bankrupt Detroit and a frozen bond lending market signify anything but business as usual.

The feds need to take the lead, rather than Texas politicians, who will predictably do too little, too late. We can muddle through at the Texas level, apply band aids, talk about these problems, and anticipate needed changes.

Our national transportation infrastructure crisis is now so serious and the funds are so short of the scale of the problem that it is absolutely going to take a comprehensive federal approach rather than a state approach to get anywhere. A more comprehensive approach which is likely to be coming, in some form, from our new Congress and the new Democratic Administration, whether we like it or not.

On to some details:

The DPS helps keep the big roads safe (everyone passes you on IH 35 if you only drive 5 MPH over the 70 MPH speed limit). What is bad about using our gas tax rather than the general revenue to keep the big roads safe? We end up paying the same no matter where it comes from. Let’s focus on how many dollars we really need rather than which
taxpayer pocket it comes from.

We cannot afford to solve congestion problems by building big new toll roads. Especially if we say, as the editorial does, that we are going to reduce car dependence. We need entirely different and financially constrained planning strategies; at least Detroit can't afford to call the shots so much anymore.

There is certainly no transparency the way the CTRMA is running things, yet Sen. Watson seems to support them and whatever toll road "system" they have in mind in regard to US 290 E, and the other roads they propose.

"Regional financing tools" seems to mean more local bonding authority, but the credit market to supply long range speculative toll road debt has largely collapsed. What then are these tools?

Indexing the gas tax to inflation would have little effect unless it were increased a whole lot, like maybe doubled, which would be VERY unpopular.

"Explore new alternatives" is commendable -- but it should not mean CAMPO-proposed sprawl growth as usual, with roads or even using rail. We can't afford to provide publicly funded infrastructure out to low density suburbs and wherever the land speculators have bought land. We need to shift to either more compact urban growth or perhaps clustered
growth along whatever passenger rail corridors we can actually afford, while increasing rail service with the urban area too. The "rail relocation fund" may not be affordable or make sense in light of current finances. I believe it was proposed to move rail hubs out of the urban areas which might not be wise. We need to preserve our rail lines and restructure its uses, since new rails will not be cheap.

Reforming TxDOT is another good goal. But does that mean supporting the specific TxDOT reforms outlined by the Sunset Commission report on TxDOT or what?

For those who have not seen them yet , here are some additional comments of mine that apply more specifically to the proposed policy changes on US 290 E and the "system" of other Austin-area toll roads initiated by the CTRMA. Changes which CAMPO will consider and perhaps vote on this coming Monday:

Texas Toll Road Soup : The Environment, Federal Funding and Peak Oil by Roger Baker / The Rag Blog / Nov. 28, 2008

COMMENTARY
Carona and Watson: Time is now to fix transportation
By John Carona and Kirk Watson, Texas Senate / November 26, 2008

Texas highways were once the pride of the state — and justifiably so. Our extensive infrastructure allowed generations of farmers and ranchers to feed the state and the world, and it turned our cities into economic powerhouses. Our transportation networks allowed generations of Texans to charge into a prosperous future without having to catch up with the present.

But for a generation, the state has approached old and new transportation challenges in a very different way. We have struggled simply to keep up with our needs. This has left Texas at a critical intersection, and the choices the Legislature makes over the next several months will determine both how we live in the short term and what opportunities our children will inherit.

Texas now faces a transportation crisis. We spend more and more of our lives in traffic instead of with our families. We seldom, if ever, see major roads built without toll booths. And the rail lines and highway lane miles we know we need are being scaled back or scrapped in the face of a hopeless inability to pay for them.

It is only becoming harder to address these needs. The costs of concrete, steel and other basic road building materials have risen by 60 percent over the past five years. However, the state motor fuels tax — our primary source of transportation funding — has been frozen at 20 cents per gallon since 1991. The disparity has left the state facing 21st century challenges with a 20th century tool.

The Texas Lyceum, a group of the state's top thinkers and policy makers, will focus on this issue at its annual public conference in Houston on Dec. 3 (for more information, see http://www.texaslyceum.org/). And in January, the 81st Texas Legislature will begin weighing opportunities to make a meaningful investment in transportation. Here are alternatives that we believe the state must explore:

• End transportation funding diversions. The State Highway Fund has long provided money for the Department of Public Safety and other priorities. We must focus this money on roads and other transportation projects.

• Use bond funding transparently. A year ago, Texans voted to dedicate $5 billion in tax-supported bonds to transportation projects. The Legislature should appropriate this money for its intended purpose and commit to using it with complete transparency and accountability.

• Support regional financing tools. Other than toll roads and privatization schemes, the state has provided few options for cities, counties and other local jurisdictions to pay for transportation. The Legislature should offer voter-approved funding mechanisms for regions to plan and pay for roads, rail lines and other projects.

• Rewrite the gas tax. Texas' primary source of transportation funding cannot provide for the state's transportation needs. The Legislature must have a serious debate about restructuring the motor fuels tax to reflect the enormity of our tasks by indexing it to inflation.

• Explore new alternatives. Texas must move past a 20th century model that relies so heavily on single-occupancy vehicles and work to create a truly comprehensive statewide system for moving people and freight. This should begin by funding the Rail Relocation Fund that voters overwhelmingly approved in 2005.

• Reform the Texas Department of Transportation. With its overt advocacy of privatization and occasional disregard for the Legislature, the department has rightly incurred the wrath of Texans and their representatives. Though we applaud the department's recent efforts to be more transparent and accountable, the Legislature must fundamentally reform the agency so that Texans are fully aware of its activities and never question its objectives.

These changes will not be easy, and they will confound the frequent promises of something-for-nothing. But they are necessary if we are to address the needs we see every day at rush hour — challenges that will only become greater. Our children must not be the first generation of Texans to inherit an inadequate transportation infrastructure with nowhere to grow.

[Carona, R-Dallas, and Watson, D-Austin, are members of Texas Senate.]

Please see Source / Austin American-Statesman

Texas Toll Road Soup : The Environment, Federal Funding and Peak Oil by Roger Baker / The Rag Blog / Nov. 28, 2008

For additional Rag Blog material by Roger Baker on toll roads in Texas, go here.

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ExxonMobil and the Oil Supply : The Bigger Picture

ExxonMobil CEO Rex W. Tillerson: What, me worry? Photo from Getty Images.

The good news and the, well...
Exxon says: No need to worry

By Roger Baker / The Rag Blog / February 17, 2010

Here is the good news as seen through the eyes of Texas-based global energy giant Exxon:

ExxonMobil is an industry leader in reserves replacement,” said Rex W. Tillerson, chairman and chief executive officer.“We have replaced more than 100 percent of production for 16 consecutive years, reflecting our strategic focus on resource capture, a disciplined approach to investment and excellence in project execution. Adding new reserves ensures that ExxonMobil will continue to develop new supplies of energy to meet future demand and support economic growth and improved standards of living.

This sounds like we don't need to worry very much, at least about Exxon's oil. But let us read between the lines.

We need to know that the world's cheap conventional oil on dry land probably peaked in 2005, whereas most of the new oil being added is very expensive. The average price of adding new oil is thought now to be about $70 a barrel, which doesn't leave much profit (today's Nymex price is $77). The new oil reserves being discovered and produced are mostly deep underwater, or arctic, or heavy crude, or tar sand oil etc.; this is the kind of oil you go after only when you run out of the easy reserves to produce.

Exxon now produces only about 3% of world oil production. It used to be called "big oil" but a better term nowadays would be "baby oil." Exxon already produced its main reserves in Texas etc., long ago.

The Mideast, OPEC politics, and, increasingly, Saudi production are now what really count in determining global oil price. They can keep the global price from sinking so much in a slack market, but they can't hold price down very well when the world is demanding and producing at maximum, as the world saw in mid-2008.

There are several ways that Exxon's news release paints too rosy a picture. First of all, what they carefully don't say is the degree to which they are replacing their old cheap reserves on dry land with much more costly oil and gas offshore, etc. Anyone can drill for and find some oil in certain known areas, but to what degree is it profitable?

These additions are based on the corporation’s definition of proved reserves, which utilizes the long-term pricing basis that the corporation uses to make its investment decisions. This is a different price basis than the SEC basis, which uses 12-month average prices for the 2009 year-end reserves calculation.

Exxon says that their analysis does not comply with SEC practice. Perhaps one reason is that they seem to be considering gas as an equal replacement for oil. Gas as a fossil fuel is very expensive (~10X) to move around when compared to oil; this is why they used to flare it in West Texas. Oil is inherently more valuable than gas as a liquid fuel. It is irreplaceable in powering the world's transportation, and it will be for a long time to come.

At year-end 2009, ExxonMobil's proved reserves base, utilizing the corporation’s definition of year-end reserves, increased to 23.3 billion oil-equivalent barrels, split approximately evenly between liquids and gas (51 percent liquids, 49 percent gas).

The third way Exxon can try to look good is by exploring the edges of their big old fields, which are some of the only rich areas left. There are certain tax advantages to the majors in underestimating their true reserves. When prices get high they can keep drilling and producing the dregs in their fields that are left over from their golden era:

The corporation’s reserves additions in 2009, the highest in the decade, reflect new developments with significant funding commitments as well as revisions and extensions of existing fields resulting from drilling, studies and analysis of reservoir performance.

This is not to say that Exxon reserves are not worth its stock price, whenever the global market tightens up and the global oil price soars again. However, Exxon's best days as an energy producer are numbered, and it doesn't like to admit that, or to discuss the implications of peak oil.

For those who want to understand the big picture, the sites Energy Bulletin and The Oil Drum are excellent places to go for the smart analysis needed to penetrate the cloud of corporate BS, as well as the popular oil addiction denial.

[Roger Baker is a long time transportation-oriented environmental activist, an amateur energy-oriented economist, an amateur scientist and science writer, and a founding member of and an advisor to the Association for the Study of Peak Oil-USA. He is active in the Green Party and the ACLU, and is a director of the Save Our Springs Association and the Save Barton Creek Association. Mostly he enjoys being an irreverent policy wonk and writing irreverent wonkish articles for The Rag Blog.]

• See "Roger Baker : Is America Already a Failed State?" by Roger Baker / The Rag Blog / January 23, 2010

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Fixing the Economy? Like Filling a Leaky Bucket

"Old tin bucket." Photo by {JO} / Flickr.
Bucket's got a hole in it:
Can we revive the U.S. economy?

By Roger Baker / The Rag Blog / December 13, 2009

Is trying to fix the U.S. economy like trying to fill a leaky bucket? So it seems. The money the U.S. government is printing is not getting down to the grassroots to create jobs. The lack of liquidity and credit is creating a deflationary spiral, a self-perpetuating economic contraction.

The financial tools being used to revive the domestic economy are having little effect. The main tools being tried are the Keynesian stimulus aimed at creating domestic jobs; the guaranteeing of existing commitments like bad home loans and social security; and the very low prime rate accessible to major bank lenders for both domestic and international loans.

Keynesian stimulation is primarily a domestic stimulus effort, a policy which by itself and used alone on a large scale could be quite effective in doing things that need to be done. However, the Congressional Republicans are trying to block more stimulus at a time when much more is needed to stop the deflationary spiral. Here is how Nobel prize winning economist Joseph Stiglitz sees the current situation:

Nobel Prize-winning economist Joseph Stiglitz urged U.S. lawmakers to use “overwhelming force” to cut a 10 percent unemployment rate that is forecast to rise...“Unless action is taken, we risk facing a vicious cycle: unemployment contributing to a weak economy, more mortgage foreclosures, more bad debts, lower demand, and possibly more, but certainly not less, unemployment.” Stiglitz said priorities for spending should include extending unemployment benefits, aiding states facing revenue shortfalls, giving tax credits for weatherizing homes, government jobs programs and research and technology initiatives...

The Keynesian stimulus package is at the same time dwarfed by a much bigger pot of money: the global finance system, largely managed by the bankers who got us into trouble. Here is what Stiglitz goes on to say about that:

...Stiglitz, 66, also said the Federal Reserve contributed to the financial crisis by failing to supervise banks or stem the housing bubble. He questioned proposals to give the central bank more authority to supervise firms whose failure might threaten the financial system. “Giving more power to an institution which has failed so miserably, with results that have imposed such costs on all of us, cannot be the right solution unless there are deep and fundamental reforms in the institution, of a kind that are beyond those currently being discussed,” he said.

In other words, the net effect of the amount of Keynesian stimulus we are likely to get is unlikely to do much good if we are not also reforming the banking system. All the money the U.S. government obligates should be pulling in the same direction. At least the immediate prospects for deep reform of the financial system are not good. Matt Taibbi, who just wrote a devastating critique in Rolling Stone titled "Obama's Big Sellout,” documents the incestuous relationships between the bankers and their government regulators, who are now increasingly associated with the Obama administration.

Why aren’t the bank failures being followed by reform, with bank nationalization as an option? The problem is more one of politics than of economics. The U.S. government through its bailout policies is in real control of the banks through our legal system. This Atlantic article explains the same situation from a slightly different perspective.

And here's an overview of the economic situation by an IMF banker. It explains how the U.S. adopted a system of political control by the banking oligarchs; the U.S. is beginning to resemble a third world country in its pattern of entrenched corruption. The thesis is that the current entrenched banker-ocracy will do anything to block reform. The bankers and their political allies are unwilling to step aside, thus blocking adoption of a rational economic cooperation policy based on the needs and desires of the vast majority of the public.

Why do we not take full charge of their management in the public interest? Do we want to keep pretending the banks are solvent using phony profits and non-transparent financing? Or do we have the courage to face reality, to declare the likely bankrupt banks like Citibank insolvent, and then get to the heart of fixing the problem with strict controls, much as prominent Keynesians like Krugman and Galbraith advocate?

The TARP bank bailouts greatly favored the banks while obligating future taxpayers to bear the burden, but there as little reform to benefit the taxpayers in return. The policy of cheap and easy Federal Reserve credit remains, with a prime lending rate down around zero percent. Bernanke says he is going to try to keep this going. Meanwhile, the U.S. government, the big investment banks, and the multinational corporations are first in line for low interest rate loans. This is the Wall Street Journal complaining about the situation:

The Federal Reserve implemented an emergency monetary policy after the 2008 Lehman bankruptcy to salvage the world financial system. In his testimony yesterday... Ben Bernanke said, 'We must be prepared to withdraw the extraordinary policy support in a smooth and timely way as markets and the economy recover.' This leaves all-out emergency monetary stimulus in place, but with a different, much weaker justification.

With the system stabilized, the Fed hopes that artificially low interest rates and its purchases of mortgage-backed securities [MBS] will spur growth. Instead they are pushing dollars abroad and wasting precious growth capital in asset and commodity bubbles... more than a year after the heart of the panic, the Fed is still promising near-zero interest rates for an extended period and buying over $3 billion per day of expensive mortgage securities... Capital is being rationed not on price but on availability and connections.

The government gets the most, foreigners second, Wall Street and big companies third, with not much left over. The irony of the zero-rate policy, coupled with Washington's preference for a weak dollar, is a glut of American capital in Asia (as corporations and investors shun the weakening U.S. currency) and a shortage at home... Much of its current stimulus is being diverted to commodities and foreign economies - hence Asia's complaint about bubbles ... Wall Street will threaten a tantrum if the Fed even thinks about damping the air-raid sirens. The Street utterly loves the Fed's largess ...

Under current unreformed and unregulated conditions, no matter how much cheap low interest rate money is available for loaning out, the banks try to seek out their highest profit. Bankers are, after all, in business to make as much money as possible on their loans. A fast return, high profit loan by a bank is always going to win out over a slow return, low-profit-anticipated loan. This will be so until banking is made to change by externally imposed laws and regulations.

The consumer spending portion of the U.S. economy is continuing to deflate with no obvious recovery stage in sight. Consumers spend most of the total U.S. GNP on personal goods, but the high unemployment and consumer debt mean that there are few profitable domestic loan opportunities in the USA anymore, especially for small businesses catering to the consumer economy.

People are only buying what they really need and not much else. Contraction in this Main Street sector is indeed holding wage inflation down, but at a high social cost in what has become an increasingly service-based U.S. economy. Cheaper U.S labor, delivered through increasing poverty and wage competition, does not translate into more profitable bank loan opportunities so long as U.S. wages remain far above Chinese wages.

A new banking reform bill has just made its way through the House of Representatives. However, on close inspection it looks like token reform, falling far short of the reforms suggested above by Stiglitz. As one example, the bill calls for an audit of the Federal Reserve system, but not for another two years. Another mismatch stems from the fact that we live in a world of international banking. A world that needs international banking reform to coordinate the global economy properly, as Financial Times points out here. The U.S. doesn’t dominate the global economy any more, nor can we fix it on our own.

The leaky bucket

Back to the leaky bucket syndrome. Since the domestic economy is no longer a lucrative source of profit, bank loans are no longer attracted toward domestic investments that might create jobs and help restrain deflation. The opportunities for banks to make much profit on traditional domestic investments involving average people are rare.

Given this situation, we can see why making easy money available through the Federal Reserve is like trying to pour money into an old tin bucket. The theory is that the dollars circulate and stimulate additional general consumer demand, called the "multiplier effect.” The problem is that the money tends to head offshore. Not enough stays to revive domestic demand alongside the relatively insufficient Keynesian stimulus.

The easy money and stimulus the government creates is tending to leak outside of the country into foreign loans, equities and commodities. The guys managing private money watch the fed and the treasury extend credit to prop up all sorts of bad investments and government entitlements. They realize that the total accumulation of U.S. treasury debt is so large that it may never be paid back by the aging population of taxpayers. It looks like U.S. debt may have to use shrunken, devalued dollars as a likely alternative to government default.

The banking investment outlook is different with regard to bank investments in foreign debt, foreign equities, and commodities. The biggest U.S. banks often make loans to corporations that then use the money for profitable investments abroad. A lot of production in the U.S. biotech industry is now relocating to China, with the parent companies evolving into domestic sales outlets. Loans to such companies tend to stimulate foreign economies rather than the domestic economy.

If you buy commodities, you are often stimulating foreign mining and manufacture in the country of production; most commodities (where are we competitive except wheat soybeans, and Boeing airliners?) are largely produced outside the USA. We are now seeing broad price inflation of many commodities since about March 2009, with a rise of about 30-40% so far in just this year.

Those who see this handwriting on the wall are clearly buying metals and commodities which tend to preserve wealth, while dumping their dollars. The rising gold prices is a fundamental sign that people don’t trust dollars to hold their value, so they buy gold, which has always held its value and preserved wealth.

This is an obvious sign that the psychology of the rich guys who run the world is shifting away from the U.S. service economy, to favor the emerging economies of Asia, etc. There is now a global asset bubble that attracts speculative investments in commodities.

This applies to oil too. With annual global oil depletion of about 5%, and a production cushion of perhaps 5 million barrels a day of spare capacity (we have to guess the number), we are probably due for another economy-crippling oil price spike within just a few years. This will happen sooner if the global economy "recovers.” However oil dependence is so basic to the global economy that a tight market and another oil price spike probably cannot be delayed much in any case.

Hope for change?

Not facing reality with regard to the finance system and turning to printing money and phony bank profits could be extremely destructive before long, probably within the next few years. This will most likely be reflected in higher federal interest rates. Why not simply mandate that the banks that get government bailouts must do the stuff that really needs to get done, like setting up nationwide medical clinics, or cooperative community gardens, or homeless relief centers?

The public is now figuring out some of the right answers on its own. People say what they want when they are asked in the polls. The fact that the politicians, who determine how the banks are regulated, are resisting making these changes points to the heart of the problem.

Americans want their government to create jobs through spending on public works, investments in alternative energy or skills training for the jobless.

They also want the deficit to come down. And most are ready to hand the bill to the wealthy.

A Bloomberg National Poll conducted December 3-7 shows two- thirds of Americans favor taxing the rich to reduce the deficit.

Even though almost 9 of 10 respondents also say they believe the middle class will have to make financial sacrifices to achieve that goal, only a little more than one-fourth support an increase in taxes on the middle class. Fewer still back cuts in entitlement programs such as Social Security and Medicare or a new national consumption tax...

If this is what most of the public wants, why is bank nationalization not an option? The problem is more one of politics than of economics.

The government through its bailout policies is in real control of the banks, so why do we not take full charge of bank management in the public interest? Do we need to keep pretending that the banks are solvent or do we have the courage to face reality? Why not declare key banks insolvent, and get to the heart of fixing the problem through strict bank controls, much as prominent Keynesians like Krugman and Galbraith advocate?

If by some political miracle progressives had been put in charge of dealing with the U.S. economic crisis in mid 2008, what might they have done differently? Probably the initial acute part of the current crisis should have been treated with an injection of liquidity and deficit spending along Keynesian stimulus lines to prevent a chain reaction banking panic. This did happen. But there was little followup in terms of fixing the policies that caused the problem.

Given a U.S. political system polarized between two parties, and one in which political influence peddling and lobbying influence plays a large and ongoing role, the bankers have been able politically to resist banking reform. This is now widening into a deep and fundamental conflict between a wealthy oligarchy, with its power centered on finance, and the broad economic interests of the American public.

Why no trials for the most culpable bankers? If Citibank cannot survive without phony profits, why not nationalize it? Unreformed, poorly regulated banks too big to fail are probably a bigger threat than foreign terrorists. I think the proper smart solution is either to break up or to nationalize too-big-to-fail banks so the money gets spent on the low profit things we need in this country. This would send a sign that the public is in charge, and not the banker-ocracy that caused the problems.

If Karl Marx were still around as an observer, I think he would see this as the historically defining class struggle of our times. A conflict between the bankers and their private but destructive interests, in opposition to the public interest of the vast majority, both domestic and globally.

Call it what we will, there is a deep and fundamental problem that our current political institutions seem unable to resolve. This situation is unlikely to change. Not without broad public pressure and political organization generated by most of the 6 billion of us trying to survive in a world run by bankers; those taught to profit by trying to perpetuate infinite growth on our finite planet.

[Roger Baker is a long time transportation-oriented environmental activist, an amateur energy-oriented economist, an amateur scientist and science writer, and a founding member of and an advisor to the Association for the Study of Peak Oil-USA. He is active in the Green Party and the ACLU, and is a director of the Save Our Springs Association and the Save Barton Creek Association. Mostly he enjoys being an irreverent policy wonk and writing irreverent wonkish articles for The Rag Blog.]

Also see:

• Roger Baker: Can the Economy Recover? by Roger Baker / The Rag Blog / December 4, 2009
• Economy and Unemployment : Real Recovery a Long Shot by Roger Baker / The Rag Blog / December 6, 2009

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Roger Baker : Which Side Are You On, Austin?

Most Austin City Council members are elected from four affluent zip codes, in red above.
Which side are you on?
The people's plan versus the politicians' plan

The struggle for populist control of the City of Austin government by means of 10 independent district elections can be seen as the 1960s struggle for civil rights brought up to date.

By Roger Baker / The Rag Blog / October 18, 2012

[I make no claim to be unbiased. I fully support and have worked for Proposition 3, which I believe to be the best option to bring more democratic government to Austin. (I also recommend The Austin Bulldog -- Austin's current gold standard for local political reporting -- as the best source to learn more about this issue.) Those who want to participate in what can be a historic victory should contact the 10-1 office -- to make sure that the advantage of people power gets translated into distributed door hangers and yard signs. -- R.B.]

AUSTIN -- Which side are you on? A historic grassroots fight for district representation in Austin, supported by an amazingly broad coalition of citizen groups, has emerged.

It's about money power versus people power. If Proposition 3 is approved by the voters in November, it will be arguably the most meaningful and important Austin populist political victory in decades: a no-holds-barred fight for democratic control of Austin government.

Currently, Austin government is in the hands of six council members plus a mayor, all elected citywide by all Austin voters. As such, Austin is now the biggest city in the United States without districts to bring representative government down to the local level. With Austin's current at-large system, big money tends to dominate Austin City Council elections. This is because non-wealthy candidates who might locally be very popular can't afford the hundreds of thousands of dollars of media buys needed to run big citywide media campaigns.

One result of this is that almost all of the Austin City Council since the 1970s has been elected by a small affluent part of Austin centered in four zip codes -- 78701, 78703, 78731, and 78759 -- which together comprise only 10% of Austin's population. Fifteen out of 17 Austin mayors in the last 40 years have come from this area, as have 50% of the City Council members. Meanwhile, the large numbers of voters in the lower income areas of South and East Austin have elected few Council members.

The struggle for populist control of the City of Austin government by means of 10 independent district elections can be seen as the 1960s struggle for civil rights brought up to date. With 10 districts, there would likely be at least two Hispanic seats on the Austin City Council, plus the high probability of an African-American seat.

It all boils down to a populist battle for control of Austin city government that directly challenges Austin's entrenched political and consultant establishment, largely comprised of Democrats, who have an interest in maintaining control of those who profit from weak development restrictions and growth subsidies. The prevailing interests in Austin government have long favored a banker/developer/land speculator group who profit from suburban sprawl development.

Austin's "growth at any cost" promoters have been in a political alliance with the Texas Department of Transportation  (TxDOT) and the Texas road lobby, building roads with public money to subsidize private growth, often in satellite cities like Round Rock within easy commuting distance.

There is no economy of scale with growth for a sprawling city the size of Austin. Rapid growth of low density sprawl outside the city limits tends to benefit land developers at the expense of existing city taxpayers. There is a lot of money to be made by perpetuating current pro-developer growth policies, both inside and outside Austin city limits. If snubbed by city growth regulations, developers can sometimes get Austin development restrictions weakened or overturned by the threat of going to the Republican-controlled Texas legislature.


Why now?

The people's plan, Proposition 3 on the November ballot, got its start as a result of the fact that the Austin City Council set up a new citizen Charter Review Commission. This group can meet as often as every two years to suggest possible changes to Austin's city charter form of government, subject to subsequent voter approval. When city politicians want to change some basic governance policy, they appoint such a Commission. However there is no guarantee that it will do what they want, or tell them what they want to hear.

Supporters of the 10-1 City Council plan at meeting of Austin's 2012 Charter Revision Committee, Feb. 2, 2012. Image from Trust Austin.
A core group of mostly liberals and political reformers saw this as an opportunity for reform, including veteran political strategist Peck Young and veteran organizer Linda Curtis, and many others (including the author). This citizen group was later known as Austinites for Geographical Representation (AGR), recently renamed "Trust Austin."

AGR started meeting about a year ago in response to this citizen input opportunity. Eventually the group agreed to support a 10-district plan, and urged its members to lobby before the Charter Review Commission. The Charter Review Commission itself, including its chair, former Texas Senator Gonzalo Barrientos, finally, approved the 10-1 citizen plan by a narrow vote They then sent their 10-1 majority recommendation to the City Council.

The City Council, however, saw the 10-1 citizen plan more as a threat than an opportunity for reform. What amounts to an Austin shadow government fought back. Support from the Real Estate Council of Austin (RECA) soon led to the submission of a competing 8-2-1 charter proposal by Mayor Lee Leffingwell, who told the Charter Review Commission that this had to be accepted as a compromise. The battle lines were thus drawn.

The same 8-2-1 plan was decisively rejected by the voters 10 years ago, as had been a number of other attempts to get district representation passed over the last several decades. This spurred the effort to gather at least the 20,000 citizen initiative signatures needed to force the Austin City Council to place the 10-1 plan on the ballot. AGR worked from January and way into the summer this year getting the signatures, ending up with over 33,000 signatures, comfortably more than were required.

The citizen plan, Proposition 3, calls for 10 districts plus the mayor. It is being supported by an amazingly wide-ranging coalition of 29 organizations, including the NAACP and LULAC, the League of Women Voters, the Austin Firefighters and Police Associations, and the Austin Neighborhoods Council. Political support ranges from the Travis County Greens, to Democratic Hispanic groups, to the Travis Republicans and the Austin Homebuilders Association. At least two ex-mayors, Frank Cooksey and Bruce Todd, support it.

Political spending on elections is now largely conducted by political action committees or PACs. It costs a lot to get the word out -- more than $100,000 to do it right. The Populist 10-1 plan has its "Trust Austin" PAC. The politician's plan, 8-2-1, is being promoted by the "Austin Community for Change" PAC .


Why doesn't Austin already have districts?

Austin's current system of at-large elections originated during the era when Austin was much smaller, and has its roots in a racist past. The near win of a city council seat by popular community leader Arthur B. DeWitty in 1951 caused the city to adopt an at-large system. This was then seen as the best way to keep an African-American from winning a seat on the then effectively segregated Austin City Council. This link tells the story.

During the 1970's the on-going conflict between the land development interests nnd the environmental community heated up. Groups such as AARO, the Austin Area Research Organization, were organized to promote business and real estate interests that felt threatened by populist politics. Beginning in 1977, and as part of their program, the business interests that benefited from rapid growth provided enough money to make sure that both an African-American and a Hispanic were always elected to the City Council.

This was the basis of the "gentlemen's agreement," still in effect. Failing to elect at least one African-American and one Hispanic would trigger federal intervention under the 1965 Voting Rights acts. Since Austin was and still rather narrowly is a white majority city, it took a well-funded effort to always elect two minorities to the City Council in order to legally protect the at-large voting system. Retaining business community control of Austin government required the politically active business interests to always promote the two minority campaigns sufficiently to make sure one of each minority would remain in office.

According to KUT, Austin's public radio station,

Ed Wendler and Bill Youngblood were two big players in Austin politics in the ’70s. Peck Young says Youngblood was afraid if there wasn’t Hispanic or African-American presence on the council, the city would be open to a federal lawsuit that might force single-member districts. So they came up with an unspoken rule that the Place 5 council was the “Hispanic seat” and Place 6 was the “African-American seat.” But the agreement wasn’t aimed at encouraging council diversity -- it was aimed at controlling that diversity. “You have minorities, but you don’t have minorities elected by minority voters,” Young said.

In a number of ways, the current fight recalls the earlier epic "Battle for Barton Springs" in 1991. This earlier citizen-led environmental rebellion also led to a grassroots petition effort that succeeded in forcing the issue of environmental reform onto the ballot. Then, as now, an innocent-sounding proposal was placed on the ballot as competition to try to kill the citizens' initiative. Despite the business community's opposition, the 1992 citizens' initiative won big, with the help of united environmentalist support. This led to a successful ordinance to protect the Edwards Aquifer, Austin's fragile recreational and groundwater supply aquifer.

San Antonio already has its own 10-1 system of city government in place, and it works to promote popular leaders of modest means. Having districts doesn't necessarily guarantee good government but it helps. San Antonio's Democratic Mayor Julian Castro was the keynote speaker at the recent Democratic Party convention in Charlotte NC.


The politicians' plan, Proposition 4, has a few problems

The 8-2-1 plan, Proposition 4 on the November ballot, is conspicuously less democratic than 10-1. It was put on the ballot with no signatures, and without much popular support. The photo of a racially diverse group of "supporters" featured on their website is a stock photo they bought.

The politicians' 8-2-1 plan has support from RECA, professional consultants, and political power brokers; it amounts to a full employment act for a handful of campaign consultants. One reason that the current City Council voted to put the politicians' plan on the ballot is the pressure brought about by political strategist David Butts, a top strategist in the 8-2-1 campaign, who makes his living largely from City Council and other local political races. The way Prop. 4 is written it would allow the council to draw and gerrymander the 8-2-1 districts in such a way as to keep their seats. The current City Council members live relatively close together, and without some creative design of the new districts, many would likely end up within the same districts.

The main Austin media have not been neutral. In July, the Austin Chronicle featured a story by news editor Michael King titled "Point Austin: The Usual Suspects; The argument over council districting takes a nasty turn." King's biased political coverage in this case elicited a strong rebuke from UT law professor and national expert on election law, Steve Bickerstaff. He had been a pro-bono adviser for 10-1 on its legality, but had remained otherwise neutral, declining to advocate for either ballot Proposition. Prof. Bickerstaff does believe in fair reporting, however, and the Chronicle spin was too much.

...the Chronicle story was catty, cynical, biased, and poorly reasoned -- unlike most articles written by Michael King. AGR has secured more than 33,000 voter signatures on its petition, the support of many different community organizations, and the recommendation of the Charter Revision Committee. Whether or not Mr. King or the Chronicle supports the group's 10-1 proposal, they should respect this outstanding achievement and laud the vision and hard work evidenced in this exercise of democratic rights.

Council Member Mike Martinez explained his vote in favor of putting this proposal (unchanged) on the ballot as a means of recognizing this group's achievement. Supporters of an 8-2-1 election system could have used a petition drive to show the degree of public support for their plan; they did not.

Also, I was surprised that the Chronicle, which has been so critical of the gerrymandering and self-interest shown in redistricting by the Texas Legislature, could be dismissive of an independent redistricting commission at the city level. Independent commissions have operated successfully in California at the state level and in a number of cities, such as San Diego and Minneapolis. They can take much of the self-interest and politics out of redistricting.

The Chronicle should be supporting the need for an independent commission in Austin as an essential part of any charter amendment changing from our at-large system. The Charter Revision Committee (13-2) politically endorsed creation of an independent commission. Many of the members of the City Council that the Chronicle identifies as preferring an 8-2-1 plan have voiced support of such a commission. Election district lines should not be drawn by the same politicians who seek election in those districts, or by committees appointed by such politicians.

It might be argued that as a halfway step in the direction of democratic district government, 8-2-1 is better than what we have now. However, its real impact, and the reason for the City Council putting it on the ballot very late in the game, is to act as a sort of a poison pill proposal. It was placed on the ballot in response to wide support for 10-1, with the hope of attracting enough votes away from the 10-1 plan to kill the latter.

The politician's plan, the 8-2-1 plan, would appear to have one important flaw. It invites a legal challenge since it seems to be incompatible with the Voting Rights Act of 1965. Proposition 4 would be subject to legal challenge because Austin's African-American population -- which is about 7 percent of the city's total population -- has largely been forced out of its historic areas of concentration in East Austin over recent decades by a combination of gentrification and high property taxes.

This means that it will take a lot of districts of equal size, at least 10, to be able to draw one with sufficient African-American concentration to make it reasonably easy to win an election without outside support, particularly from the business community. With any fewer than 10 districts, according to recent census data, no contiguous district can be drawn that would give Austin's remaining African-American population a legally defensible ability to elect their own representatives.


Bottom Line: Reasons to support Proposition 3 in the November 2012 Austin election, 10-1, the People's plan:

1. Citizen Districts: The 10-1 plan would establish a Citizen Redistricting Commission which would exclude city politicians, lobbyists, and consultants. The record shows that political insiders tend to draw gerrymandered district maps that favor their own interests.
2. The 10-1 plan makes all neighborhoods equal, and ends the current concentration of power in a small part of Austin.
3. Every vote becomes more important. The more districts, the more the candidate’s merit and local appeal become important.
4. It is supported by 29 major organizations and 33,000 petition signatures gathered following a year-and-a-half-long transparent process (fully reported in The Austin Bulldog).
5. At least 10 districts are required for a geographic representation system to be legally defensible for Austin under the Voting Rights Act.
6. The 10-1 plan ends Austin’s racist “gentleman’s agreement” because minorities can best choose their own representatives.

Reasons to oppose Proposition 4, the 8-2-1 Politician's plan

1. Lacking the safeguards in the 10-1 plan, the 8-2-1 plan allows Austin districts to be gerrymandered by politicians, lobbyists, and consultants.
2. The two at-large districts retain the unequal legacy of the four privileged ZIP codes.
3. Having only eight districts denies African-Americans an opportunity district, meaning it will very likely be challenged in court.
4. The mayor and the two at-large council seats will tend to remain controlled by the special interests.
5. It perpetuates the “gentleman’s agreement” by which African-American and Hispanic seats can be chosen by power brokers.
6. As a ploy to defeat the people's plan, the 8-2-1 plan was put on the ballot by politicians with very little grassroots citizen input, even though the same plan failed by a wide margin 10 years ago.

For those who wish to follow the populist fight for Austin district representation in depth, to understand how we got to this point of decision over the past year and a half, the outstanding source is veteran investigative reporter Ken Martin's pro-bono, online Austin political journal, The Austin Bulldog. There are several dozen Bulldog stories on the citizen meetings that led to the People's 10-1 district representation plan, dating back to March 2011, linked here.

By contrast, Austin's daily newspaper, the Austin American-Statesman and Austin's sporadically liberal alternative weekly, The Austin Chronicle, have offered sparse and politically slanted coverage of the Austin district issue.

[Roger Baker is a long time transportation-oriented environmental activist, an amateur energy-oriented economist, an amateur scientist and science writer, and a founding member of and an advisor to the Association for the Study of Peak Oil-USA. He is active in the Green Party and the ACLU, and is a director of the Save Our Springs Association and the Save Barton Creek Association in Austin. Mostly he enjoys being an irreverent policy wonk and writing irreverent wonkish articles for The Rag Blog. Read more articles by Roger Baker on The Rag Blog.]

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Roger Baker : How High Gas Prices Are Putting the Hurt on Average Drivers

Cartoon from The Smoking Jacket.
How high gas prices are hurting
average drivers (and voters)

By Roger Baker / The Rag Blog / March 22, 2012

[This is the first of a two-part series.]

High gasoline prices are probably hitting the average driver and voter harder than most people think. The numbers indicate that typical adult wage earners, meaning average voters, are already being hit hard by a combination of a depressed economy and stagnant pay, while having little choice but to pay higher gas prices.


Income distribution and trends

The wage trends here show that average U.S. earned wages (with the average being distorted upwards by the high income end) have been almost stagnant since 2007. This means that if the bottom half of wage earners were hurting in 2008, they are probably still hurting about as much now.

Most people who own their homes have seen their homes, as their major investment, decline in value. Also most other savings and investments have not prospered, with interest rates on banked savings remaining at near zero. "Core inflation" is said to be only a few percent, but inflation is being officially underreported with non-discretionary prices, which are a bigger part of low income household budgets, rising faster than discretionary costs.

We see here that the median 2010 household income in the United States was about $50,000, with half of household total earnings less. We can also see a big household income bulge at the low income end, with the largest percentage of household incomes centered on about $20,000 total per household.



This shows how many must be struggling to drive when the cost of driving is considered. If we assume two adult wage earners in many households, this would mean that each would be earning or receiving through benefits only $10,000 on average. Perhaps this is due to the unemployment of one, or part time or minimum wage jobs, or relying on social security or pensions as their primary income.

If the household consists of a single mother with an income of $20,000 and a child or two, there are the added costs of raising children. Whatever the reason, car ownership is increasingly dependent on income for a large portion of U.S. households.

In 2008, the Brookings Institution provided further evidence that the lowest income third of the population in particular seems to be struggling to drive at all. See the chart showing the highly significant correlation between income and car ownership.



These numbers, although a few years old, indicate the degree that low income households live in an economic twilight zone, an income level where a major lifestyle barrier determines whether or not they can afford to own and maintain a car.

How does income compare with what it costs to drive?

Here we see that the typical cost of owning and driving a family car was nearly $8,800 in April 2011.

The average annual cost to own and operate a sedan in the USA, based on 15,000 miles of driving, rose 1.9 cents per mile to 58.5 cents per mile, or $8,776, says AAA’s 2011 “Your Driving Costs” study. The increased costs to own and operate a vehicle were driven mainly by large increases in fuel prices, depreciation costs and tire prices, says John Nielsen, AAA national director of auto repair, buying and consumer programs.

Below is an expanded five year chart of aggregate U.S. urban transportation costs, a Saint Louis Federal Reserve FRED chart. Transportation costs in U.S. urban areas, where most folks live, have now exceeded mid-2008 costs and are crowding out other living costs at the lower earnings end of the wage spectrum. We see the total cost of getting around in U.S. cities by all means (which means predominantly cars) rose rapidly to end 2011 at a new record high level.


This series is charted monthly, but stops in December 2011. Looking at fuel price increases since then, and judging from the impact of fuel prices in recent years, it appears that the current cost index would probably be nearly 230, assuming the graph were continued to show the effect on driving costs of the big fuel price increases in the first few months of 2012.

In other words, since April 2011 of last year, the cost of owning and driving a car has increased roughly by a ratio of 205 to 230, or about 12%. That means that if the total driving cost was almost $8,800 a year ago, the urban travel cost consisting mostly of cars would now have risen to roughly $10,000 on average.


A recipe for frustration

For the many households with about $20,000 in total income, there is likely at least one adult who would want to own a car and drive, much as adults in the wealthier households do. However, even if a wage earner earns $20,000 a year, the $10,000 cost of car ownership and maintenance would now require about half their income.

There is no way to avoid the conclusion that many wage earners at the lower end are struggling hard to pay for food and rent and still drive a car to work, and that higher driving costs are forcing them to shed cars. This probably accounts for the current political focus on gasoline prices.

Among people in the lower 50% of household income level, many of whom can manage to afford to drive, fuel price increases must necessarily involve difficult choices, with a strong tendency for fuel costs to crowd out and depress other spending. Once discretionary spending -- like eating out and entertainment -- has been eliminated, life becomes a matter of balancing frustrating choices.

For many, the cost of the fuel needed to commute to work in aging cars (who can afford a new electric car, as opposed to keeping the old one running as long as possible?) has become a symbolic high-profile political issue.

For lower income residents in particular, it is easy to see why fuel price increases have become a source of anger; a red flag for so many average voters. (Part 2 of this series will look at what the public opinion polls are saying, and how and why rising fuel prices are becoming such a hot topic for the upcoming presidential race).

A large part of the new residential housing in recent decades has been suburban in nature, assuming a lifestyle that almost demands the use of the private automobile. Suburban sprawl development on the fringe of U.S. cities has tended to be low density, non-mixed-use development. Such development is intrinsically hard to serve with transit when compared to the denser core city, which generates many more trips per mile of service.

This means that the end of cheap oil is bound to have a major impact on U.S. land use, and its habitation potential. (See "The End of Suburbia.") Whereas poverty was previously concentrated in the core city while the suburbs were more affluent, the suburbs have now gotten poorer; most poverty is now in the suburbs.

In some areas, there are entire suburban neighborhoods full of abandoned homes. Many of the newer jobs have also moved out toward the suburbs. This means that getting to work increasingly requires commuting between suburbs to get from home to work, a type of travel which transit, by its nature, is ill-suited to handle very effectively.

Transit to the rescue? Yes, but not very fast, since it has been lacking significant new investment in recent decades. U.S. transit ridership peaked in 2008 and has since recovered modestly -- but it has still not yet reached this previous peak.

Looking at the graph to the left at this link, it appears that the poor economy largely led to the 2009 ridership decline, while increasing fuel prices are now helping to lead to a modest U.S. transit rider recovery. 2011 transit ridership is now up about 2.3% over 2010. However in some areas harder hit by high gas prices and and a poor economy -- like San Diego -- transit use is up a lot more.

The trend of mass transit growing more and more "in" with the public can be seen all over the country. The American Public Transportation Association reports that Americans took 10.4 billion public transportation trips in 2011, the second-highest total since 1957. That figure is bettered only by 2008's total, when gas prices soared to over $4 a gallon.

Transit faces several challenges, including a class-image problem, with so much U.S. suburban development being car-addictive by nature. In urban areas, those who use transit -- and who are willing to trade the convenience of driving for the time savings benefit of public transit -- are often identified as being among the poor. This often makes transit a hard sell politically.

The other problem is that transit -- like roads -- is unprofitable and requires a lot of public money up-front, especially for rail. Government money is increasingly in short supply these days. By the time the politics swings in favor of transit, as a result of peak oil and soaring fuel prices, transit might well be unaffordable.

Those left stranded in the suburbs can try to carpool, telecommute, combine or eliminate trips, or drive slower to save on gas. If all else fails, they can move to less gasoline-intensive locations. By last year a distinct home-buyer avoidance of suburbs with long commutes could be seen.

The other transportation option that appears to hold promise for preserving the habits of suburban commuters, struggling on a limited budget to drive, would appear to be the widespread acceptance of smaller personal vehicles like bicycles, electric bikes, motorbikes, and motorcycles, especially for commuting -- and despite the risks that come with their use. There is good evidence that public support for downsized travel alternatives is steadily increasing, even electric motorcycles.

However, most suburban highways are not designed to safely accommodate slower or smaller vehicles. For example, TxDOT builds wide shoulders on its high-speed highways, supposedly for the benefit of bikes -- despite the fact that the large speed differential makes bikes sharing lanes with cars unsafe when the cars are going more than 30 MPH. The evidence indicates that many drivers try to shift to motorcycles to save on fuel costs with sometimes deadly results.

Our findings suggest that people increasingly rely on motorcycles to reduce their fuel costs in response to rising gasoline prices. We estimate that use of motorcycles and scooters instead of 4-wheeled vehicles results in over 1,500 additional motorcycle fatalities annually for each dollar increase in gas prices. Motorcycle safety should receive more attention as a leading public health issue.

[Roger Baker is a long time transportation-oriented environmental activist, an amateur energy-oriented economist, an amateur scientist and science writer, and a founding member of and an advisor to the Association for the Study of Peak Oil-USA. He is active in the Green Party and the ACLU, and is a director of the Save Our Springs Association and the Save Barton Creek Association in Austin. Mostly he enjoys being an irreverent policy wonk and writing irreverent wonkish articles for The Rag Blog. Read more articles by Roger Baker on The Rag Blog.]

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