Friday, December 3, 2004

Could A Whisper Campaign Improve Our Image?

First came the Hollywood expedition that hoped to trap "Beverly Hillbillies" in their native habitat. Then came the Abercrombie & Fitch safari that mocked us with their incest jokes. Our leaders were shocked that the civilized world perceived us this way. So shocked, that they decided to spend millions on an ad campaign to improve our image.

A committee of tribal elders summoned mumbo-jumbo shamans from all across the territory. Four of the five who came failed to make it through the gauntlet run. As demanded by tradition, the survivor won the ad contract. But later on, the elders had a change of heart and she was boiled in the soup kettle. Now we must wait for the new king to take the throne before we can beat the drums.

During this regal interlude, I thought I would just go ahead and lay out the best marketing plan for West Virginia. This way, King Joe won’t have to waste time next year by making mumbo-jumbo gumbo from scratch.

I call my plan "The Whisper Campaign."

Simply put, West Virginia does not have Niagara Falls. We have Blackwater Falls. Both waterfalls are awe-inspiring, but in completely different ways. Standing before Blackwater Falls in late summer, when just a trickle of water splashes across its craggy face, is a religious experience.

To market Niagara Falls, you’d want to capture the deafening roar of the waterfall. To market Blackwater Falls, you have to capture its near-silence in the dry season. Blackwater Falls might just be quietest waterfall in the world and it is certainly a secret place to most people. Whispers, I think, convey the Blackwater’s message.

Here’s the pitch.

Scene: A family loads up in their SUV. Camping and fishing gear are prominent as is the camping trailer. Off they go. Across the street, their neighbor asks his wife, "Where are they going?" The wife cups her hand and whispers in his ear. We can’t hear a word she says but the subtitle at the bottom of the screen reads, "They’re going to West Virginia."

Scene: The CEO of Toyota boards his corporate jet. Off to the side are two ground control guys with red flashlights. One asks the other, "Where’s he going?" The jet’s engines fire up so you can’t hear the other man’s reply. The subtitle reads, "He’s going to West Virginia."

Scene: The Super Bowl. St. Louis wins. Marc Bulger doesn’t walk off the field yelling, "I’m going to Disney World!" No, he walks off the field and one of those floating "I’m thinking" balloons reads, "I’m going to West Virginia!"

The message is that West Virginia is a secret. Indeed, a well-kept secret. Whispers emphasize these "state secrets." The ads also have to convey the sublime message that these secrets are worth discovering. And this leads to the second phase of the promotion.

Scene: A climber dangles by a rope on the face of Seneca Rocks. His whisper (subtitle) reads, "I’m glad I discovered West Virginia!"

Scene: A patriotic parade, perhaps on Independence Day. A little boy waves his flag and his whisper reads, "I’m glad I was born in West Virginia!"

Scene: A young woman in her home office types at her computer. The camera pans away from her and to the window. We see that she lives on a small farm in the country. The camera pans back to the computer monitor just as this IM pops up: it must be nice working in wv :-)

Well, what do you think? Will the Whisper Campaign work?

In the past, the state has produced some good tourism ads. Then it got cheap. Rather than pay out-of-state media to run the ads, and thus actually attract visitors, the state hammered local media to run the tourism ads as part of their public service commitment. If West Virginia intends to change its image, then the state better spend the money to do it right. The current plan to spend a few million dollars probably won’t turn enough heads to make it worthwhile.

Given the mindset of committees and bureaucrats, we’ll probably end up with inane signs carrying moronic slogans. "Certified Business Location" highway signs are a good example of this mentality. If that’s all they can come up with, then we might as well have road signs that read, "Emergency Toilet Paper Dispenser-1 Mile Ahead." At least the Canadians will appreciate us twice yearly.

Personally, I hope my Whisper Campaign is a success. It might keep me out of hot water for awhile.

Friday, November 12, 2004

The Internet's Role Has Grown in U. S. Politics

The presidential election of 2004 was especially noteworthy because of two events that transpired in cyberspace.

In ordinary times, there is no possible way for the governor of a tiny, out-of-the-way state to mount a credible campaign for the nation’s top office. This is especially true when the state in question is Vermont.

Vermonters have proven just how different they are from other Americans by previously electing a crackpot as their governor and a second, even more-incredible crackpot (Bernie Sanders-I) as their lone representative in Congress. The aforesaid governor who ran as a 2004 presidential candidate is Howard Dean, a creature conjured from Green Mountain sap by the bloggers.

Howard Dean became the darling of left-wing bloggers and that is how his campaign got noticed. It did not take him long to become a known entity in all 50 states. And with his notoriety came a substantial number of campaign contributions. At the beginning of the race, Howard Dean was not only raising millions but he was outpacing all of his competitors. As important, the Internet became his avenue to the grass roots of the nation’s cities and suburbs.

The second Internet event came when Dan Rather announced that he had in his possession actual copies of the Dead Sea Scrolls typewritten in English and verified by handwriting expert Marcel Matley. (I’m sorry; make that George Bush’s service records.) This time, the right-wing bloggers came into play. They quickly realized that Dan’s document expert sounded a little too Vichy. In the space of a few hours, Memogate became the front page story in the blog world. The Drudge Report even put up its flashing light as if to say, "Extra! Extra! Read all about it!"

These two events suggest dramatic changes in future elections. First of all, Howard Dean challenged the hierarchy of the Democratic National Committee (DNC) in a frightening way. I am sure that Terry McAuliffe wanted no part of the uncontrollable Vermonter leading the Democratic ticket. When Howard "I have a scream" Dean threw an inevitable tantrum in Iowa, the DNC made sure that its friends in the media covered the outburst in excess.

The second phenomenon has to do with the blogs challenging the franchise of the mainstream media (MSM). Although the campaigns and the 527’s spent record amounts for advertising, the impact of those ads was minimal-just a net of eight electors changed color from 2000. Had Sen. Kerry challenged the Swifties head-on instead of letting them run negative ads for a month, then the Swifties ads would have been nothing more than an annoyance. The blogs were much more effective than the MSM in cultivating partisans.

It is fair to say that CBS News endorsed John Kerry and that Fox News endorsed George Bush. As Memogate developed, CBS and Fox were always a day behind the blogs in the news cycle. The blogs forced the networks to cover this story on a fast track, a position which they were not comfortable with. Then on Election Day, the networks were ever-so-cautious in declaring a state. The blogs again kept the pressure on-they went for the scoop.

The 2008 election will be open to all comers. Obviously, Dick Cheney won’t run. This leaves the door wide open for a complete unknown to capture the New Hampshire primary and still have plenty of cash (and the organization) to campaign in other early primaries. The DNC and RNC will undoubtedly counter this renegade scenario by choosing their leaders early on. Sen. Hillary Clinton and Gov. Jeb Bush might be their respective draft picks. But will the renegades start their own parties if squeezed out by the majors?

Consider what we’ve just seen. That Howard Dean could even mount a national campaign defies the laws of politics. In the span of a few hours, Dan Rather and CBS News were totally humiliated by a blogger with the most unlikely of pen And George Soros spent millions of his own money for ads that produced no favorable results.

Make no mistake about it; the Internet will be the dynamic in 2008. As the grass roots turnout demonstrated this year, the Internet’s impact will only increase four years hence.

Friday, October 15, 2004

Marketplace 'Elbows' Can Help Solve Energy Problem

Jay Leno recently displayed the new $50 bill to his "Tonight Show" audience. The fine print next to President Grant’s portrait said, "good for one barrel of oil". Jay got his laughs.

A few days later on October 7th, Robert Samuelson wrote in his Washington Post column that Americans suffer a fantasy about oil. Namely, that we believe we have a birthright to cheap fuel. He goes on in the style of Thomas Malthus and cites a "ground-breaking study" that concludes: "the world already uses about 12 billion more barrels a year than it finds."

I can’t believe he used the term "ground-breaking" to introduce his sky-is-falling, Malthusian conclusion about oil reserves.

Robert Samuelson is a journalist by education and by trade. He gets away with economic commentary in his articles because (I think) there is a genuine confusion among his readership with Paul Samuelson. Paul Samuelson, the Nobel economist, most probably wrote the economics textbook that you studied.

I will agree with one thing that Robert Samuelson wrote: "We need to face these realities; neither George Bush nor John Kerry does. Their energy plans are rival fantasies." In this regard, Paul Samuelson probably agrees because he once said, "Politicians like to tell people what they want to hear – and what they want to hear is what won't happen."

Robert Samuelson believes that our country needs a steep gasoline tax to solve our energy problems. He recommends a tax of $1 to $2 per gallon so that gasoline prices will stay high and radically change driving habits while encouraging a shift to hybrid-powered automobiles.

I do not know Paul Samuelson’s position on such a consumption tax. However, Paul Samuelson believes that David Ricardo’s famed treatise on comparative advantage is the one great truth in economics. Because of comparative advantage, we have a trade deficit in oil. In our favor is the fact that the US dollar is the currency of choice in the world. Because of this fact, Dr. Samuelson argues that we are better off to export the pieces of paper that Jay Leno makes fun of and import real goods-barrels of oil in this case.

But let’s put economic theory aside for a moment. If you paid a $2 tax per gallon of gas to the government, then what would the government spend it on? Does the government drill new oil wells? Does the government explore the subterranean world for pockets of oil? No. More likely, Congress would spend the tax on new highways or expensive subways to nowhere. Boston’s billion-dollar downtown expressway and L.A.’s subway are prime examples of what government spending buys.

On the other hand, if oil supplies tighten and consumers drive the price of gas from the current $2 to $4 per gallon, then ExxonMobil will hire every geologist on the planet. If there’s a pool of oil inside Mount Everest, they’ll find it and the higher price will make it worth extracting.

And amid this $4 gas bonanza, there will emerge a genius who invents a practical photovoltaic cell. Another genius will invent a practical hydrogen fuel cell. And a third genius will discover in the science lab how to genetically modify bacteria to convert organic matter directly into hydrocarbon fuel. If you doubt this, think of the Cuisinart attachment on the DeLorean in "Back to the Future, II."

In the end, David Ricardo’s treatise on comparative economic advantage will decide who makes what, where it’s made, and what it sells for. This was a hard sell back in 1972 when Richard Nixon opened trade with China. But look at how the world has changed. There are now just a handful of small nations that are run by die-hard communists or obtuse socialists. France qualifies as both.

The chances are probably good that we’ll pay $100 for a barrel of oil within the next decade. The changes we face will be painful in the short term. Paul Samuelson said it best: "The problem is no longer that with every pair of hands that comes into the world there comes a hungry stomach. Rather it is that, attached to those hands are sharp elbows."

We cannot now calculate the price at which oil peaks in the next few years. But it will peak and then it will recede. We will do what we always do. We will become more efficient, we will discover more oil, and we will invent alternatives. Provided, of course, we let the "sharp elbows" in the marketplace do their job.

Friday, September 17, 2004

What about Bob? He’ll need a job soon.

Treasurer John Perdue periodically advertises that his office might be holding money that belongs to us. It’s called "unclaimed property." To learn if your money is laying about in a file cabinet in Charleston, all you have to do is send a search request to Mr. Perdue’s staff and they will promptly take a look-see.

I recently did just that, and to my surprise, the Treasurer’s office informed me that they were holding money in my name. They promised a speedy remittance and the check arrived in the mail in timely fashion.

This is the honest to God truth-my windfall amounted to $3.75!

There has to be a cheaper, more efficient way to deliver checks written on the state’s bank account. Postage alone amounted to 30% of my claim. So I have been thinking, and thinking, and thinking. And here’s my recommendation.

Mankind has yet to invent a system as efficient for delivering government checks as our governor, Bob Wise. Give the man credit. The inside breast pocket of his suit coat has held thousands of checks written for all possible amounts and he has meticulously and perfectly dispensed said checks in a glorious fashion to every city, town, and community in the state. His clever prestidigitation once transformed a pocket-sized check into a replica the size of a sheet of plywood which he then presented to lottery winner Jack Whittaker during a live television broadcast. (Despite rumors to the contrary, no trick photography was involved.)

Why, then, doesn’t John Perdue offer the soon-to-be-unemployed Bob Wise the job of delivering checks? Checks could be delivered faster and cheaper than relying on the mail. This is a no-brainer!

Of course, there would have to be some gimmickry involved-steak just isn’t steak without the sizzle.

The Wise Fargo delivery concept would have Bob Wise, our ubiquitous teamster, drive a chuck wagon pulled by miniature horses. Or call it the Money Stampede. Regardless, what rural community wouldn’t love having its grant check delivered in a strongbox. If bandits are lurking in the hills and hollers, then Lynndie England could ride shotgun. She’d also be helpful in pointing at certain things along the way.

Or how about the FedEx concept? I got this idea after watching a FedEx truck float down Greenbrier Street during last year’s flood. Let’s paint a sternwheeler to look like a FedEx truck, but instead, call it State-Y’s. This would be a crafty way for Cap’n Bob to deliver checks to our riverfront towns.

There are times when blockbuster checks have to be delivered. The Cabela’s check comes to mind. The best way to deliver a check like Cabela’s is on a Porker Run. Let’s suit up Biker Bob in leather and studs and buy him a Harley. We’d all be in Hog Heaven when he roars into town!

Senator Byrd is always getting checks for our state. One derisive lobbying group calls these checks "Byrd Droppings." Despite that connotation, these checks have to be delivered. But sometimes, Sen. Byrd’s duties in the senate prevent him from coming home to hand them out. Couldn’t Bob Wise be of help? Why couldn’t he pilot Senator Byrd’s hot air balloon, the Guanosphere, and make these deliveries?

The state hands out millions of dollars for sewer grants every year. But the public never attends the ceremonies. Who wants to celebrate sewers? Well, the Rotoclogger routine could change attitudes. Bob Wise could come through the old sewer, pop open a manhole cover, and leap to the street where he’d clog his way to the grandstand and hand over the money. Not only does this routine have entertainment value but it also offers a subliminal message that the old sewer is unclogged.

And last but not least, the PROMISE scholarship fund keeps shrinking and eligibility standards will have to be further tightened. In just a few years, a student will need straight A’s to get one of these grants. Bob Wise likes to hand out PROMISE checks and what better way to emphasize the importance of earning straight A’s than by his wearing a Killer Bee costume?

John, thanks for sending me that check. I appreciate your finding my lost money. Now then, what about Bob?

Friday, August 13, 2004

When It Comes to Power, Reliability Matters Most

IBM consultant Jeff Pratt was working in Detroit on August 14th, 2003.  He was on a conference call to New York and Toronto when, at 4:11 pm, the lights and telephones went out in all three cities.  Some ten minutes later, he and his colleagues reestablished contact using their cell phones.  That’s when the trio discovered what we in West Virginia already knew-the northeast power grid had inexplicably shut down.

With his workday over, Mr. Pratt called home to Doddridge County and asked his wife to search the internet for the cities nearest to Detroit that still had power.  Using his vehicle’s onboard navigation computer, he quickly calculated that he did not have enough fuel to drive out of the blackout zone.  With no electricity to run the pumps, buying gas was hopeless.  The trip home to his Doddridge County farm would have to wait.  

NASA Image

Twenty-five years ago, James Burke introduced his award-winning series, Connections, by holding up the failed relay that caused the 1975 New York City blackout. He began episode one, "The Trigger Effect", by listing all of the technologies that failed when the power went out. Mr. Burke needed only the next five minutes to take his viewers some 7,000 years backwards in time to the invention of agriculture in the Nile Valley. This was his starting point for the series--the logical conclusion of not having electricity and the technologies that we have come to rely on.

During the ten episodes of Connections, Mr. Burke illustrates the thousands of observations, inventions, and coincidences that it has taken to build our modern civilization. Here in West Virginia, we take steam-generated power for granted. But Mr. Burke points out that our first knowledge of the physics of steam came from Scotch whiskey distillers, not scientists. Following those discoveries, it was only by coincidence in 1763 that Scotsman James Watt was given the task of modifying one of Thomas Newcomen’s steam engines. Watt’s improvements ushered in the age of steam power.

Just think--it took well over 6,000 years from the invention of agriculture to the invention of steam-powered threshing machines. From James Watt’s invention, it then took another 200 years to build "Big Allis", Con Ed’s 1,000-megawatt steam turbine. As the wily James Burke shows us, we really are just 5 minutes away from the beginning of time.

On first reading, this may seem a convoluted segue to the topic of electric power deregulation. But first, I wanted to emphasize just how dependent we are on electricity. So I challenge you to name one job that does not rely on electricity, either directly or indirectly. And please, don’t answer "Learnéd Hippie" or "Amish Farmer."

Seven years ago, the Public Service Commission appointed a task force to study electric restructuring (deregulation.) The task force generally approved of restructuring and listed several benefits to consumers. But the report also contains several nagging questions, not the least of which was how to compensate AEP and Allegheny Power for $1.5 billion in stranded costs.

My take on this report is that the task force talks out of both sides of its mouth. At one point they say that we should deregulate the existing electric industry because it is beneficial to consumers. Then they whisper hints that we will likely need to implement a whole new set of regulations in order to guarantee adequate supply and fair pricing once the industry has been "restructured." Deregulation, indeed!

We’ll never know where all of this was headed because the California power crisis and Enron changed everyone’s mind about deregulated electric service. We should thank Gray Davis for diving on the grenade or, in the alternative, Ken Lay for lobbing it in his direction.

As you know, I am a crusader for free and open markets. In the case of the electricity market, I must confess that I have never understood any of the arguments in favor of deregulating the electric industry. But then again, I’m an idiot. I go from room to room during a power outage flipping light switches and have to remind myself each time why the lights don’t come on.

And this is my point. The price of electricity means little. Reliability means everything. If you doubt me, then ask Jeff Pratt. He’s a consultant.

Friday, July 16, 2004

What We Have Here Is A Failure To Communicate

If you’ve read your local newspaper lately, then you are aware that the Budget Digest is out in print. The Budget Digest is a popular way for a select group of legislators to micromanage every department of government. Because the Budget Digest recommends a spending plan to the Executive branch rather than direct it, the Digest is able to skirt the constitution’s budgeting and spending requirements.

Although the Digest is the most unrestrained form of government spending that we have, none of the line items are particularly large when compared to line items in the state budget. In fact, most Digest grants seem trivial, ranging from $500 to $10,000. But as long as checks are written, the money has to be accounted for.

In the July 1 edition of The Exponent Telegram, staff writer Jennifer Biller reports on Budget Digest allocations for Harrison County schools. Here is an excerpt:

"Robert C. Byrd High was awarded $10,000 in Budget Digest funds. But it’s unclear how the funds will be used. Neither [Harrison County Schools Superintendent] Friebel nor Principal Leon Pilewski requested the money and are not aware of who did."

This transaction defines micromanagement better than Webster’s.
mic-ro-man-age: verb, to control or direct every aspect or detail of a situation

The school system has extensive management. From the State School Superintendent at the top and all of the way down to each school’s Principal, there exists a sophisticated management structure. The professional administrators that we pay to run the system also receive extensive public input.

The parents and teachers who form each school’s PTO are invaluable. Their wisdom comes from being in the trenches. The publicly-elected county Board of Education was conceived to balance the taxpayer’s interests with the school system’s wish list, and while these Boards have lost much of their original authority, their oversight is still important for the community as a whole.

With this structure in place, you would think that the entire budgeting system for public schools would start at the Principals’ offices rather than in a committee room in the capitol building. Unfortunately, the Budget Digest tells us different story. Although the Digest is just an asterisk to the budget bill, that asterisk looms large and highlights who really makes spending decisions, both large and small.

There is a great story that gives credence to the notion of running public education from the bottom up rather than from the top down. Homer Hickam tells it in Rocket Boys, his best-selling book about growing up in Coalwood.

In case you haven’t read Rocket Boys, here’s a synopsis. Homer and his friends-Sherman, O'Dell, Sonny, Quentin, and Roy Lee-started building model rockets. They kept improving with each model. But then the team, known as the Big Creek Missile Agency, came to the point where they could progress no further. The rocket boys needed to learn calculus, a course not offered at Big Creek High.

Because a teacher, Miss Riley, and her principal lobbied on their behalf, the calculus course was taught. The rockets got better and flew higher once the boys learned this new kind of math. And in the end, Homer took their model rocket to the 1960 National Science Fair where it was awarded the top prize.

When you read the Budget Digest to learn if its largesse benefits your school, I hope you will remember the rocket boys. Then ask yourself how the Miss Rileys of today can inspire and teach the next generation of rocket boys when even the most trivial of spending decisions are made behind closed doors in Charleston. Just who would Miss Riley lobby to request a calculus class if she were teaching in today’s environment? Apparently not her principal or county superintendent.

The legislature should concern itself with solving big problems like paying off the $5 billion pension debt. The debt is, after all, the cumulative result of past legislatures trying to micromanage the state.

Friday, June 18, 2004

Asking Uncle Sam to Clean Up Our Trash

Sub-title:  Milk Jugs--a popular term meaning white trash.

James J. "Spike" Haley, the long-time Business Manager of the WV Department of Highways, traveled to Mingo County in 1977 to survey flood damage. The county had been particularly hard hit by heavy rains that year. Spike took one look at the scene and exclaimed, "It’s true! Milk jugs do swim upstream to spawn!"

I always thought that Spike’s observation about milk jugs should go down as one of West Virginia’s greatest anecdotes. He was an eyewitness to Nature’s devastation but he was more taken aback by manmade trash dangling from the trees.

If Spike were with us today, I would ask him to survey Morgantown’s trash problem. I am certain he could amuse us with something just as clever.

It used to be that you descended into Morgantown on two-lane University Avenue with the hillside on your right and the riverfront industrial district on your left. It was this welcoming sight that gave Morgantown its nickname, "Morganhole."

In the last decade, however, University Avenue has been transformed into the Wharf District. Developers began remodeling old buildings and building new ones to create a majestic waterfront that is the envy of every mayor in America. In the same way that the Inner Harbor eliminated Baltimore’s "Block", the Wharf District has done just as well in removing "Morganhole" from our lexicon.

But there remains a problem lingering upstream in the Monongahela River basin. The milk jugs are still spawning!

The Morgantown Lock and Dam traps all kinds of debris. At times, an acre or more of flotsam and jetsam builds up behind the dam and the Corps of Engineers, the dam’s operator, opens a gate to flush it through. This freed school of trash, swimming vigorously to the sea we presume, can be an annoying sight if you’re booked into the 15-story Radisson Hotel or enjoying a concert at the McQuain Pavilion along the rail trail.

The trash problem has led to a letter writing campaign. West Virginians write to Congressman Mollohan. Congressman Mollohan writes to the Corps of Engineers. And the Corps replies to all that their agency is not funded to remove river trash. Their mission, they tell us, is to maintain navigation on the waterway. Rightly so, the Corps has pointed out that if people didn’t throw trash into the streams in the first place, then it wouldn’t collect behind the dam.

But what West Virginian wants to hear that? We already know we cause the problem; we just want the feds to pick up our trash for us! We have sunk so low that we write letters to Congress demanding that federal taxpayers in the other 49 states make amends for our sloth!

Morgantown (as do our rivers) deserves our respect. Morgantown is the one successful, growing city that we have in West Virginia. Business, government, and West Virginia University have joined together to make ‘Motown’ a showcase. Nowhere else in the state do we see this kind of progress.

Morgantown also has a growing international population. Representatives of foreign nations and businesses routinely visit to pursue research ventures. How can we expect Morgantown to be our beacon to the world when we use the Mon River as a sewer? Software Valley, the Mon’s catchy moniker, might soon be heralded as "Vallée de Tupperware" if a French reporter comes to visit.

During his two terms, Governor Gaston Caperton pushed the Adopt A Highway program in order to mitigate our trash problems. I also recall his "Make It Shine" ad campaign which kept this message in the forefront. It is sad and ironic that the rail trail passing by the Morgantown Lock (and the trash) is named in honor of former Governor Caperton.

Congress will likely cajole the Corps of Engineers into removing the Monongahela’s trash. The job will be expensive, perilous for the boathands, and absolutely impossible during the icing season. Were milk jugs more like cicadas, the plan might actually work. But milk jugs spawn 24/7/365.

In the final analysis, the attitudes of West Virginians will not have changed. Once again, we will prove to ourselves that if we whine and cry loud enough and long enough, then Uncle Sam will come hither to pamper us.

Friday, May 28, 2004

Roadwork Orange-Your Highway Taxes at Work!

This is orange season. As you travel the highways, you’ll see orange barrels, orange signs, and orange-clad people waving orange flags.

You will be interested to know that all of this roadwork orange can sometime cost more than it does to resurface the pavement and replace the guardrails. Maintaining Traffic, as it’s called in the trade, is a very expensive component of the cost of renovating roadways.

One reason for this exorbitant cost is the fact that construction laborers-the people who move the orange barrels and wave those orange flags-are paid $30.01 per hour. When the contracting company adds its margins for overhead, taxes and profit, the cost to you, the taxpayer, can grow to over $60.00 per hour.

Most paved roads in West Virginia qualify for some degree of federal aid and on federal aid construction projects, the Davis-Bacon Act requires that workers be paid not less than the local prevailing wage rates for similar work. In 52 of our 55 counties, the US Department of Labor (USDoL) has determined that the prevailing wage rate for a laborer who works as a Flag Person is $30.01 per hour.

The average hourly wage of all American non-farm workers is something over $15.00 per hour. So it is fair to ask how the USDoL came up with a prevailing wage of $30.01 per hour for the most common of labor in the nation’s second-poorest state.

The Davis-Bacon Act was passed in 1931, a time when every third man was looking for work. The law’s purpose was to protect organized labor’s wage pacts. This purpose has not changed in 73 years. Guess where the $30.01 comes from?

Libertarian economists have long argued that market forces need to be employed throughout the economy in order to accurately and fairly price goods and resources. On the other side, Liberals have thrown up the argument that only government can do certain tasks, such as road building in this example. By arguing from this vantage, they then expand the venue to justify the central planners’ role in determining local wage rates, prevailing or otherwise.

If you are an advocate of Labor, then you would view the Davis-Bacon Act as a victory for the common laborer. And victory it is, if you are prone to declare victory when day laborers are paid more than nurses. You would also argue that the Davis-Bacon Act prevents unscrupulous, out-of-state contractors from coming here with truckloads of Mexicans and taking jobs away from our local workforce. (This continues to be the preferred sound bite because it resonates so well.)

A student of history would disagree with these conclusions. Davis-Bacon has often been called the last of the Jim Crow laws. In 1931, the jobs of white union men weren’t threatened by Mexicans and NAFTA. Back then, the unions feared that black men would take their jobs. Davis-Bacon served Jim Crow well.

The Davis-Bacon Act has been both cruel and inept as social legislation. But rather than reverse it, seven decades of congressmen, senators and presidents have allowed it to stand so as not to alienate Labor.

What is the cost of a Flag Person? You can read highway project bid tabulations at the Contractors Association of WV website ( And once there, you will find bid prices ranging from $45.00 per hour and up. To put this in perspective, you now pay about 45¢ per gallon in gasoline taxes that fund road construction. You will have to buy 100 gallons of gasoline to pay enough tax to cover one hour of the Flag Person’s time. To pay this laborer for one regular 40-hour week, then plan on pumping 4,000 gallons. For most of you, this works out to six years of driving.

In its latest wage determination ruling, the USDoL decreed that the local prevailing wage for a Flag Person in Berkeley, Jefferson and Mineral counties is $21.71 per hour. Given all of the population growth and the construction boom going on in Berkeley and Jefferson counties, I would have thought that the central planners had applied their wage formula incorrectly. Especially so, since the unemployment rates there are negligible.

But, hey, I was never cut out to be a central planner. They are all-knowing gods and I am just a writer waving a red flag.

Prevailing wage rates for flag persons:

Morgan County, WV          $30.01 per hr.
Berkley County, WV          $21.71 per hr.
Jefferson County, WV        $21.71 per hr.
Frederick County, VA           $6.75 per hr.
Clarke County, VA               $9.25 per hr.
Loudoun County, VA            $9.25 per hr.

Friday, May 7, 2004

Common Sense Could Have Saved Our Nation More Than Money

When your business depends on defying gravity, it is appropriate to concern yourself with the cost of doing so. And that’s why Robert Crandall, the former CEO of American Airlines, became the sage of the modern air travel industry.

Crandall was dining in mid-flight when he noticed that his dinner salad had three olives. He went back to the office and calculated that his airline could save $40,000 per year in fuel costs just by eliminating one of those olives. And why not? It costs just as much to fly olives as it does cargo and passengers never booked flights based on salad garnishes.

Unfortunately, the airlines succumbed to this degree of frugality and missed seeing the big picture. In-flight hijackings of passenger planes have been going on since at least 1931. And there have been repeated cases of Arab terrorists hijacking planes in the jet age. That four aircraft were hijacked by Arab terrorists on 9/11 shouldn’t have come as a surprise.

Both common sense and the General Accounting Office had recommended fortifying cockpit doors for many years. But the industry and its regulators consistently rebuffed the idea. First of all, there was the cost of flying heavier doors. And the issue of safety came second. In the event of a crash, cockpit doors had to be pliable lest the flight crew be trapped in the wreckage.

Prior to 9/11, the airlines, the regulators, and law enforcement agencies all believed that prior hijackings would be the model for future ones. In other words, they thought that hijackers would force the plane down and bargain a ransom for the hostages. Flight crews were trained to go along with these ploys with their primary mission being to land safely. No one thought that hijackers would kill the pilots and attempt to fly the plane.

Now we know different. But did we have to learn the hard way?

In the aftermath of that terrible day, protecting pilots became a no-brainer, even among the bureaucrats. The desk pilots at the Federal Aviation Administration submitted a plan for replacing existing cockpit doors with bulletproof doors that would also prevent entry to the flight deck. The old doors weighed 25#. The new ones would weigh in at 50#. FAA estimated it would cost the industry some $11 million per year to fly the extra weight. Adding in the installation cost, FAA derived a life-cycle cost of well under $100 million.

Had we relied on common sense instead of the experts who work inside the beltway, the industry could have spent $100 million ten years ago and averted a disaster that has already cost over $100 billion. Now that the new cockpit doors have been installed, the airlines have been reimbursed to the tune of $100 million by the US taxpayer. The $100 million got spent anyway-just unwisely and untimely.

When the Rogers Commission investigated the Challenger shuttle explosion, commission members almost bought into NASA’s doubletalk and cover up. But then, the unexpected happened. The late Dr. Richard Feynman, a Nobel physicist, put a piece of the booster’s O-ring in his ice water glass. A few minutes later, he pulled it out and snapped it in half, thus demonstrating the effect of cold weather at launch. NASA reluctantly said, "Mea culpa!" and then went about changing launch procedures.

Sadly, there is no Dr. Feynman sitting on the 9/11 Commission. The commission consists of partisan snipers and its two co-chairmen are placaters. In this election year, the 9/11 Commission has distinguished itself as a failure even before it has written its report.

At a time when we desperately need a sober analysis of our national security procedures, we sold ourselves out to an impotent commission rather than demand truthful answers to the tough questions. Our vanity, like that of the Greek’s Icarus, let us believe that we could defy gravity forever. Yes, it’s hard to admit that we were so foolish for so long. But we need to get over our hurt feelings now. We know that there will be more attacks and we also know that they will coincide with the November election.

We are at war. But I am unconvinced that the American people understand this.

Friday, April 2, 2004

History Repeats Itself. First As Tragedy, Second As Farce.

In West Virginia, the 1960s are often referred to as the Barron Era. Several prominent members of Governor Barron’s administration, Attorney General Robertson, and State Treasurer Kelly were all convicted on kickbacks or extortion charges. Governor Barron was acquitted at his trial but only because he bribed the jury, the crime for which he was later convicted. During this era, every possible way of trading government service for under-the-table payments was exploited. Even state employees were given coupon books and "asked" to contribute (in cash) two percent of their salary to the flower fund.

If state government ran like an organized crime syndicate in the 1960’s, the wide-open corruption of the 1980s took the form of Haitian looting. The players went their separate ways to find storefronts of their liking. Governor Moore, Attorney General Brown, three Senators and two Delegates were prosecuted by the Feds. The reason I refer to this period as "Haitian looting" is that the US Attorney’s office convicted nearly 100 public officials for various crimes. And beyond that, you can add the impeachment of State Treasurer Manchin.

It can be claimed, then, that West Virginia politicians fulfilled at least one of Karl Marx’s philosophies-that of history repeating itself. The Sixties were tragedy, the Eighties farce.

Though the Eighties may seem ancient, it would do well for us to remember that only a decade has passed since the last round of public corruption trials concluded. We are a long way from being out of the woods. Nevertheless, we have arrived at a turning point and the time is right to ask ourselves, "Are we due for another embarrassing, bidecadal housecleaning?"

I posed this question to my 8-ball and the black orb cautiously replied, "Better not tell you now."

One could argue that my trusty psychic errs because democracy is alive and well in the state. There are record numbers of candidates running for office in the upcoming primary election and, on its face, broad competition for public office is a good thing. But are a multitude of candidates, by themselves, enough to avert another disaster? Not unless they are nearly unanimous in overhauling state government.

Our state has used the same business plan since anyone can remember. Government has grown despite promises to shrink it and taxes have soared to unimaginable heights. Next year, over $8 billion will be spent on a population that has shrunk to fewer than 2 million. Yet the answers given for our current problems are the same as they were for our past problems-grow the government by taxing or borrowing and all will be well.

When it comes to funding a centrally-planned society, all roads lead to Rome. And like the Roman model, our capitol has sucked dry the lifeblood of the provinces in order to maintain its grip on power. Our cities risk bankruptcy because of antiquated taxing authority and growing pension debts. Our counties are relics from antebellum days and, aside from their judicial function, courthouses are not much more than clerical offices that cost a small fortune to operate. In the mean, the powers to tax, to spend, and to decide the fate of the economy are concentrated at the state level in the hands of a select few autocrats. The provinces be damned, render all tribute unto Rome!

Lord Acton said, "Power corrupts and absolute power corrupts absolutely." His observation is as timeless as it is true. And it is this very same observation that Hayek used to introduce the chapter, "Why The Worst Get On Top."

What more could I add other than "Three strikes and you’re out."?

Friday, March 12, 2004

The Steel Tariff! It's Deja Vu All Over Again!

John Deere did not invent the green & yellow riding lawn mower. Should your children ask you what he did invent, be careful in answering. If you tell them (correctly), "The steel plow.", then they will surely ask you, "What’s a steel plow?" This is a trick question.

Although we are living in the Golden Age of Carbohydrate Consumption, precious few farmers now plow the land and harvest the crops. When Deere invented his plow in 1838, quite the opposite was true. Most Americans were farmers--by necessity, not by choice. Our modern era, nevertheless, does have one thing in common with the agrarian past--import tariffs. No invention--not even the plow--has been able to uproot this vile weed.

Before I begin, let me point out that iron is a metal element. Steel, on the other hand, is a manufactured alloy containing mostly iron and about 1% carbon. Iron and steel are not the same. Iron is weaker and softer than steel. In simplest terms, steel makes your lawn-mowing experience possible.

Prior to the Civil War, America was not a steelmaker. Steelmaking was the domain of England. Although we were the 3rd leading producer of iron, our technology lagged 50 years behind the steelmakers at Sheffield, England. We were only capable of producing cast iron and wrought iron, neither of which made for a durable, long-wearing plow.

John Deere, a Vermont blacksmith, moved to Illinois in 1837 and soon learned from local farmers that the standard iron plow would not turn over the sticky, Midwest soil. Further, it is said that it took an 8-oxen team a week to plow just one acre. Deere solved the tillage dilemma by fabricating a plow from a piece of Sheffield steel. The prairie earth didn’t cling to steel like it did to the softer iron and agriculture changed forever.

Imagine if you will, that all of a sudden it no longer took 8 oxen a week to plow one acre but instead, two oxen could plow that acre in a day or so. This moment in history is far more significant than you have been taught. And it almost didn’t happen.

Politicians in that era were keen on protecting our primitive iron industry and keeping it primitive. At times, the tariff doubled the price of imported iron. With such a cushion, the ironworks proceeded with business as usual. American iron mills continued to fill orders for low-end products rather than innovate. Wheeling, WV earned its nickname, "Nail City", during this period.

When the iron tariff was substantially reduced in the 1840s, English goods flooded the market and American iron mills took a hit. By focusing on efficiency and developing a reputation for unmatched quality, the English were able to import pig iron from Sweden, finish it at Sheffield, and transport their manufactured goods to America cheaper than our protected iron industry could produce locally.

As we look back in history for answers to today’s questions, there are two lessons to be learned here. First, it was innovation that created vast new markets for steel. The steel plow led to the development of other steel farm implements as well as Henry Ford’s farm tractor. And just try and count the railcars and cargo ships that have transported Illinois corn and Kansas wheat to the far reaches of the globe. All of this because of one man’s idea.

Second, and perhaps more salient, is that America was a third-world nation in the early 1800‘s. Third-world nations expect to be coddled and sheltered by tariffs. Today, we are the world’s superpower. If we want to keep that title, we need to stop building fences and start plowing new ground.

Friday, February 6, 2004

Geckos? We Don't Need No Stinking Geckos!

A program whose basic thesis is, not that the system of free enterprise for profit has failed in this generation, but that it has not yet been tried.
        Franklin D. Roosevelt, Message to Congress on the Concentration of Economic Power, April 29, 1938 

Leo Goodwin had a brilliant idea in 1936. He decided that insuring the personally-owned automobiles of government workers would be a sure-fire success. After all, government workers tend to be responsible people who have stable employment. Leo’s idea became the Government Employees Insurance Company, which you know better by its acronym, GEICO.

GEICO was chartered as a publicly-owned corporation. GEICO was not a New Deal government agency.

GEICO remained a solid performer until the 1970s when it began writing policies for high-risk customers to achieve growth. The strategy backfired and the company was soon on the ropes. Enter Warren Buffett.

The Sage of Omaha saw an opportunity and his Berkshire Hathaway Co. began acquiring GEICO stock. Warren Buffett understood what Leo Goodwin knew-that government workers, GEICO’s core customers, were good risks. Buffett returned the insurer to its root philosophy and GEICO was soon profitable again.

I suppose GEICO chose the gecko as its marketing mascot because of the similarity of pronunciation. But I wonder sometimes if the firm chose the gecko as a playful jab at Oliver Stone who created Gordon Gecko, the corporate raider in the film "Wall Street." If that’s the case, I am sure that Warren Buffett laughs about it on his way to the bank each morning.

If Leo Goodwin were with us today, he just might be tempted to write health insurance policies for West Virginia government employees. After all, the state-run government insurance monopoly known as PEIA insures one-eighth of the state’s population. Goodwin would realize that a 12.5% market share in such a small state would present an attractive economy of scale. But therein lies the problem-PEIA is a government monopoly.

I cannot predict whether health insurance companies could provide cheaper or better coverage for the state’s employees than what PEIA currently provides. Only the marketplace can do that. But given the fact that some companies currently write group health coverage for private sector employers, it certainly would be worth exploring an open market and allow them to compete for the state’s business. Just as President Roosevelt remarked in his Message to Congress in 1938, we have a situation where the system of free enterprise "has not yet been tried."

The accompanying quote from FDR was selected by F. A. Hayek to introduce "The Abandoned Road", chapter one of The Road to Serfdom. Hayek and Roosevelt knew that the concentration of economic power in the hands of a few was the surest way to undermine a democracy. As well, they understood that free competition throughout the system was the best way to prevent a handful of elitists from controlling the government. It is, therefore, not an idle coincidence that Hayek and Roosevelt speak to us from the same page.

Should you ask the average West Virginian about FDR’s policies, he or she will probably tell you that FDR was all for government control of every aspect of life. This is a sad misunderstanding but, nevertheless, an accurate appraisal of our folk. Building the Tennessee Valley Authority should not be equated with administering the health insurance claims of WV public employees. But somehow, West Virginians have managed to put these tasks on par with each other-that government must do everything.

The taxpayer is the obvious loser in this equation. The taxpayer has no choice but to pay the monopoly. The real loser, however, is the person who works for government and is insured by PEIA. It is not simply a matter of money to them. It is, after all, their healthcare that is being bandied about. As to why public employees are compelled to shop at the company store in this day and age baffles me.

If PEIA does a cost-effective job at what it does, then the agency should not fear competition from the private sector. But we’ll never know how well (or how poorly) PEIA performs without the opportunity to comparison shop.

FDR also said, "We have nothing to fear but fear itself." He did not fear geckos. Indeed, from his remarks in 1938, we can see that he encouraged the little fellows.

Monday, January 26, 2004

The Paving Cycle: A Sad Tale of West Virginia

Back in the 1970s, we had double-digit inflation combined with price gouging by OPEC. And we learned a new phrase-The Paving Cycle.

Whereas in normal times our roads were resurfaced every seven years, by 1979 the paving cycle had increased to 17 years. Two actions were taken to shorten the duration. First, a 5% tax on the wholesale price of motor fuel was imposed. And second, the Legislature added a line to the Department of Highways budget for Paving.

The fuel tax, by being levied on the wholesaler, was a clever ploy because the consumer never saw it posted at the pump. On the other hand, the budget line item for Paving guaranteed our legislators that they could, in effect, micro-manage the paving cycle.

In FY 1986, the Department of Highways was short on cash. Faced with spending $77M for debt service on road bonds plus increased costs to match federal aid construction, the DOH had just over one million dollars to allocate to Paving. In other words, the paving cycle soared to 350 years!

The Legislature wasn’t about to let FY 1986 pass without some sort of paving program so it transferred $9.4M from the General Fund to the DOH budget and earmarked it for Paving. Where did the money come from? From redirecting a portion of the appropriation for payments to the state employee’s pension plan. That’s right-pension money became election year pavement.

At this point, I could load my slingshot and pick off Lilliputians with ease. But it is better to focus on the macroeconomic picture than this particular snapshot.

West Virginia cannot afford the services that it commits to. This state does not have the financial wherewithal to borrow huge sums for superhighways, re-pave secondary roads every 7 years, and promise a pension to retired state workers. And this observation does not apply just to the Highway Department. Every department of state government operates beyond its capacity.

Recently, the School Building Authority approved $1,750,000.00 for the new Pickens School. Pickens is our most remote outpost for crying out loud. And people who live at outposts should expect outhouses, not plumbing.

We have far too many colleges. But try to close just one. Politics has prevented implementing a comprehensive plan for higher education such as the one that the Carnegie Commission recommended thirty years ago. Instead, both WVU and Marshall University have been forced to cut programs and staff in order to subsidize unneeded colleges. We will, if we have not already done so, redefine our higher education institutions as being mere "13th Grades" by continuing this charade.

West Virginia has a very nice system of state parks. Though a stated goal of the park system is to maximize self-sufficiency, the system annually relies on a 40% taxpayer subsidy to pay its bills. Our parks are, quite simply, a luxury.

There is the issue of payroll. Government employees are paid well. And they have been paid with scarce cash at the expense of incurring a $5 billion long-term deficit in their pension accounts.

The "Enron of pension plans", as it is known nationally, is now making clear just how dire the situation is. But there’s more. The state has deferred maintenance on every asset it owns, including the capitol and over 1,000 highway bridges. And with so little to spend, our government has not invested in technologies that would actually improve the productivity of state workers and, thus, reduce annual operating costs. The pension debt, as astronomical as it is, comprises perhaps just half of the state’s financial black hole.

If you think I exaggerate, then consider this. Gov. Wise took office in 2001 and pledged to sell all excess state vehicles. It took two years for state agencies to inventory their vehicles and submit a count to his office. By comparison, not only does FedEx know exactly how many vehicles it owns, the dispatcher can locate each one at any given moment of the day.

This, then, is the true cost of spending pension money to pave roads in an election year. It’s the difference between knowing where you are and knowing where you’re headed versus getting waylaid in Pickens, WV with aspirations for the 13th grade.