Author Archives: James A. Bacon

Living with Slow Internet in a Broadband World

Ashley Fisher (left) and Vickie Barker run an independent insurance company in Halifax County. Their slow Internet connection, which frequently goes out, hampers customer service. (Photo credit: Roanoke Times)

If you don’t live in a small town or rural community, you probably don’t have a clue how difficult it is to participate in the 21st-century economy. But a Roanoke Times article paints a vivid picture of life in South Boston and Halifax County in Virginia’s Southside region.

Television producer Kevin Peade started his business when everything was on film and a remote location was not a handicap. But the rest of the world has moved to digital, and local broadband connections are so slow during the day, when others are online, that he literally works at night.

Brenda Short got rid of her computer years ago because there wasn’t any point in keeping it around anymore. If she absolutely, positively needs to access the Internet, she drives six miles to her office to get a connection.

A local church canceled its internet service when a pastor left, only to find out it couldn’t get back online later because the network was so overloaded that it wasn’t taking new customers.

Roanoke Times reporter Jacob Demmit compiles other examples of how a small town struggles when the rest of the world does business with a faster, high-broadband metabolism.

There’s a local DMV Select office that struggles with a connection so slow that it often can’t process credit cards. A farmer said he tried satellite internet for a while but ultimately decided he was paying too much for a connection that was hardly usable. One Halifax County resident runs an entire lumber business, including billing for international orders, from his cellphone.

Nationally, only four percent of urban dwellers lack access to a 25 Mbps connection, according to 2016 data from the FCC, the Roanoke Times says. In rural America, the number is 20 percent. But in the Halifax County community of Nathalie (population 183) it’s closer to half. Laying fiber optic cable doesn’t make economic sense in sparsely populated areas. But the improving economics of wireless provides reason for hope.

The county has engaged SCS Technologies, a local Internet Service Provider, to cobble together a network using the small amount of fiber in the ground with a series of antennas mounted on cell towers, water towers, church steeples and anything else tall enough to see above the trees. SCS plans to offer 10 MBS (megabytes per second) service – about five times the speed most people are getting — for $35 a month. Halifax County is contributing $103,000 for phase one of the project.

Meanwhile, Microsoft has selected Halifax County as the proving ground for a service built upon the unused frequencies between television channels known as TV white spaces. One white-spaces tower could in theory cover a 10-mile radius with up to 400 MPS connections. The technology giant, which is partnering with Salem-based B2X Online to provide the local service, hopes to connect 1,000 homes in Halifax and neighboring Charlotte counties by early next year. Microsoft’s goal is to reach 2 million people across the country by 2022, beginning with 12 test sites like Halifax.

Bacon’s bottom line: It’s hard to imagine rural communities pulling themselves out of their economic doldrums if they lack the high-speed broadband connections to communicate with the rest of the business world. It is tempting for local boards of supervisors to consider subsidizing broadband service under the theory that, like electricity, telephone, water and sewer, broadband is indispensable for modern life. On the other hand, new technologies and business models are emerging that could render any existing rural-broadband solution obsolete.

Should the  Halifax Board spend thousands of dollar subsidizing a broadband service that is marginally superior to copper-line connections when Microsoft might introduce a vastly superior service that could roll out county-wide within a couple of years? Tough question.

Teenagers and the New Taboos of Race


When a handful of white Short Pump Middle School football players in Henrico County engaged in a racial bullying — simulating anal rape upon black peers in the locker room and posting video on social media — the community understandably erupted in outrage. The behavior was reprehensible. It had to be chastised.

It’s not clear from media reports what punishment, if any, the perpetrators of the acts themselves have suffered. As minors, the boys are entitled to privacy protections. But let’s make one thing clear: The bullies were responsible for the actions, and they are the ones who should be punished for their behavior, not their teammates.

But the Henrico County Public School system was not content to merely punish the offenders. School authorities canceled the rest of the team’s season, thus affecting kids who did not participate in the bullying. Instead of attending practice the team assembled for mandatory discussions on racial tolerance and ethics. Also, according to the Richmond Times-Dispatch, one football coach is said to no longer work for the county. The reason for his departure is unclear, although we are probably safe in assuming that it was related to the bullying incident.

It’s one thing to punish individuals who deserve it. It’s another thing to punish the collective (the football team), sweeping innocents into the net. Now Henrico schools are using the episode as an excuse to bureaucratize the enforcement of the dogma of the day on matters of race.

The T-D reports today that Henrico schools are creating a new office of equity and diversity, and in January will hire a director to oversee it. The goal of the office will be to implement short- and long-term cultural diversity plans. Also, the schools are planning an equity and diversity task force made up of students, parents, community members, and district staff members.

Super. Now the higher-ed practice of creating diversity bureaucracies is spreading to K-12 school systems. That’s worked out so well for colleges — they’re such beacons of ethnic tranquility these days — that I’m sure it will turn out just dandy for Henrico, too. Not.

This is just a suspicion, and I hope I’m proven wrong as Henrico rolls out its new programs. But talk of racial tolerance (a good thing) is all too often accompanied by talk of “white privilege” and guilt-tripping of white students (a bad thing). In the current environment, no one can veer from the party line without being judged a racist, so people shut up. And keep their opinions to themselves. And vote for Donald Trump.

One last thought: The United States is undergoing a redefinition of taboos. For many generations, the use of profanity was banned from the public domain. Beginning in the 1960s, it became hip to transgress against bourgeois norms of propriety. A half century later, the norms against profanity have been obliterated. Vulgar language is ubiquitous in our society today. But the old taboos have been replaced by new taboos, largely based on ethnic, gender and sexual identity. Most famously, the “N word” has replaced the “F word” as something that simply cannot be uttered publicly. (To prevent any misunderstanding, I’m OK with the taboo against the “N word.”)

When I was a teenager, it was cool and edgy to use profanity. Kids used the transgressive language of the day as a form of self-assertion, a way to cultivate an air of rebelliousness. Now, it seems, nobody outside of Sunday school cares much about profanity. So how does a teenage kid, especially a white teenage kid, stay edgy and rebellious? By transgressing the new taboos…. which these days involve racial and sexual identity.

I don’t know what drove those white middle-school football players to bully their black teammates the way they did. But I would caution against jumping to the conclusion that their parents didn’t raise them right. The kids may be acutely aware what mainstream American society considers right and wrong in matters of race — and they may be transgressing the new taboos precisely because they are taboo.

I am not making an academic distinction here. If you want to prevent a behavior (in this case racial bullying), then you need to understand the origins of that behavior. And, until I see evidence that settles the matter, I will continue to ask if Henrico school administrators are enacting initiatives based on a profound misunderstanding.

The Great Migration Breakdown

Historically, a source of American prosperity has been the willingness of workers to move from regions with poor economic prospects to regions with better economic prospects. Think Depression-era Okies fleeing the Dust Bowl to California. Think Jim Crow-era African-American sharecroppers migrating from the rural South to booming Northern industrial centers.

Since the 2008 recession, the rate of inter-state migration has slowed dramatically, observe Kyle F. Herkenoff, Lee E. Ohanian, and Edward C. Prescott in a new paper, “Tarnishing the Golden and Empire States: Land Use Restrictions and the U.S. Economic Slowdown,” published by the National Bureau of Economic Research.

Sluggish geographic labor mobility has coincided with three other trends: a spike in real estate prices in California and New York, an end to the population booms in California and New York, and a slowdown in the convergence in incomes between states. The authors think those trends are intertwined.

“U.S. economic growth has gone hand-in-hand with the regional reallocation of labor and capital,” write the authors. “The pace of resource allocation, however, has slowed. This decline has coincided with lower productivity and output growth, as well as growing home premia in high income states, including California and New York.”

Here is what they think is going on: Land use regulations create housing shortages, which drive up housing prices. Sky-high housing prices price lower-income residents out of the housing market in high-productivity metropolitan regions like San Francisco-San Jose and New York. Despite the superior work opportunities, people leave and people from lower-productivity regions are discouraged from moving in. Millions of Americans remain trapped in lower-productivity labor markets.

Herkenoff et al build an elaborate econometric model designed to gauge the effect of land-use regulations. (The model is way too complex to describe here — I’ll confess, the methodology is beyond my ken.) After running the numbers through their black box, here’s what they conclude:

Reforming land use regulations would generate substantial reallocation of labor and capital across U.S. regions, and would significantly increase investment, output, productivity, and welfare. The results indicate that too few people are located in the highly productive states of California and New York. In particular, we find that deregulating just California and New York back to their 1980 land-use regulation levels would raise aggregate productivity by as much as 7 percent and consumption by as much as 5 percent.

Deregulating all U.S. regions would raise labor productivity by 10% and consumption by 9%.

Under various deregulation scenarios, the authors noted that the “Mid-Atlantic” region, which includes Virginia, would, with California and New York, see the greatest population gains.

Bacon’s bottom line: This is an important paper. I firmly believe that the links described by Herkenoff et al are real — land use regulations restrict the housing supply, which drives up housing prices, which hinders geographic mobility, which hurts productivity gains and economic growth.

These linkages shed light on a two ongoing debates about American society.

Slowing rate of economic growth. Economic growth in the Obama business cycle was the slowest in the post-World War II era. The debate over the reasons for the slowdown has almost totally ignored the land use-housing shortage-migration connection. Economists look for national reasons — aging workforce, dearth of breakthrough technologies — to explain national economic phenomena such as national economic growth. Land use is a local phenomena, so it tends to be overlooked. If Herkenoff et al are right, it will be difficult for the U.S. economy to resume a 3% to 4% annual growth rate, no matter how Congress reforms taxes and the Trump administration prunes national-level regulations. (I’m not defending the status quo in taxes and regulation, just acknowledging that they address only a part of what ails the economy.)

Income inequality. The debate over income inequality in the U.S. has largely overlooked the malign effects of land use regulation. Insofar as incomes have become more unequal in the U.S. in recent decades — I think the extent has been exaggerated, but that’s another debate for another time — the slowdown in the migration of Americans from low-productivity (and low paying) regions to high-productivity (and high paying) regions has played a major role.

Land use is the most overlooked and least understood driver of the American economy. The influence of land use upon the economy is even more pervasive and complex than described in the Herkenoff et al econometric model. But their article is a good place to start the discussion.

Toxic Brew: Relativism and Globalism

by Reed Fawell III

For the past six years, I have warned about the damage that unrestrained and hyper-competitive academic research is inflicting on the quality of higher education in the United States. The tenor of my complaints has grown more strident over the years.

Initially, these complaints were jump-started by a May, 2011, memo from University of Virginia President Teresa Sullivan to then-Rector Helen Dragas. Sullivan proposed, in my view, to dramatically dilute the education and teaching of undergraduate students at UVa. in favor of radical increases in faculty research, most particularly in STEM research.

UVa.’s ambition, I felt, was unduly driven by several powerful and damaging trends ongoing in higher education. One was UVa.’s compulsion to climb the rankings of US News & World Report’s “Best Colleges” reports, whose standards and formulas demanded ever higher expenditures on non-teaching activities, be they for luxury student accommodations and cuisine food courts or feeding the expanding needs of highly paid tenured research faculty.

A related contributor, in my view, was the Obama administration’s ambition, announced in 2011, to dramatically increase federal funding of academic STEM research. Rather than making American students more competitive internationally in the STEM fields, the STEM emphasis has fueled hyper competition among institutions and faculties chasing federal grants and favors.

Likely, too, this same impulse powered the rise of the “Strategic (Research) Investment Fund” that abruptly appeared in public at UVa for the first time five years later to most everyone’s surprise (although it was hinted at three or four years earlier for legal reasons). However covert, UVa leadership deemed the fund necessary because university research almost always costs more than it generates in revenue. In the business model of today’s research-driven university, universities often divert student tuition and teaching resources to the research of tenured professors.

Not only do students wind up paying higher tuition and get less attention from senior faculty, professors often requisition their personal time and talents for research projects. In effect, students become low-age apprentices whose exploitation helps faculty rake in massive research contracts, profit from patents, and even launch business enterprises based on new technology.

I was worried six years ago that these practices would undermine UVa’s stature as a nationally recognized institution that specialized in teaching undergraduate arts and sciences that armed students to think independently and confidently, whether they are training in politics, philosophy, entrepreneurship, the classics, history, mathematics or physics.

My concerns grew as I observed various pieces of the plan fall into place. More recently, I have become fully convinced that the emphasis on university R&D and STEM research has infected all tiers of higher learning. The siren call of STEM is drawing colleges and universities from their primary and critical mission to empower students to become independent, well rounded, and effective agents of change.

Instead, over these past six years, I concluded that higher education has undermined the ability of students to stand on their own two feet. As early as the mid-1980s, William Bennett, then Head of the National Council of the Arts and Humanities, predicted the demise of the humanities at our elite national universities. He foretold the infection and destruction of traditional courses in the liberal arts and humanities (history, philosophy, sociology, anthropology, and literature, particularly western literature and the classics) with post-modernist relativism, deconstruction, and critical culture theory. His fears have come to pass.

Academic leftists have weaponized this poison in the form of political correctness, safe spaces, claims of micro-aggression, and politics grounded in race and gender to drive an endlessly growing list of grievances and create a new identity-based hierarchy on the college campus. Much of this ideology has played out in Charlottesville with the UVa administration’s witting connivance, especially in the furtherance of the “epidemic of rape” canard.

Remarkably, efforts to undermine American culture and society went largely unopposed for decades. Leftists have succeeded in hollowing out the center of our culture, and its confidence, and its coherence, and its ability to function. Now it is spreading chaos everywhere. Our institutions of higher learning have, to a marked degree, abandoned not only their roots but their sponsors, their fund-payers, their students, and in some cases the very buildings and spaces they inhabit in their quest for greener fields worldwide.

This they call “Globalism,” which works in tandem with the explosion of research at elite universities to widen the fields of academic research to most everything, and every potential client, under the sun, while ignoring much of America’s past, and its historic culture. Witness Teresa Sullivan’s grand pilgrimage to China, a quest to set up a branch, or perhaps a second main campus, for Mr. Jefferson’s University snuggled up close to the Forbidden City in Peking.

But higher education’s ill-fated embrace of Globalism now runs the risk of leaving the newly constructed university curriculum stranded on shifting sands.   The tides are already running out. Newly constructed departments of global arts and sciences are encountering strong counter currents of resistance here and aboard.

Students in other nations, who take great pride in their own histories and cultures, are not always receptive to listening to American professors talk about their institutions. The globalist agenda of American professors is perceived as another form of Western imperialism.

At home, the problem is different.  American students increasingly feel left behind. They feel cheated out of their right to learn about their own history, people and culture, before being taught or told to venture out into another peoples’ culture. Indeed, American and European academics increasing agree with their students. Hence globalist courses and departments are contracting, not growing, at a time when the movement has just started.

In short, American’s elite research universities must shift their grand globalist ambitions and research driven plans. Federal research funds are shrinking. Teaching is disappearing.  Science itself is under threat. And Americans now want their children educated to live and thrive in the real world, not one invented by other people.

Reed Fawell III, a retired attorney and real estate developer, is an alumnus of the University of Virginia.

Bacon Bits: Campaign Contributions, Bronze Parachutes, and Bus Subsidies

Herewith some follow-ups on stories we’ve been tracking on Bacon’s Rebellion:

Election fallout for electric utilities: Tuesday’s election wasn’t just a rout for Republicans. The General Assembly will be a more hostile place for Virginia’s electric utilities as well. As Robert Zullo with the Richmond Times-Dispatch points out: “Thirteen candidates who signed a pledge refusing to accept campaign cash from Virginia’s two big utilities won seats in the House of Delegates Tuesday. Seven of those support prohibiting Dominion Energy and Appalachian Power from making political donations.”

Bronze parachute for Virginia Tech provost. Former Virginia Tech Provost Thanassis Rikakis, whose resignation was announced last month, is on paid administrative leave through the end of the year and will continue to receive his $414,000 salary through Aug. 10, 2018. Rikakis, who riled up faculty for reasons that still remain obscure to me, apparently will be allowed to take on a new job as a direct report to President Timothy Sands, earning a mere $275,000 a year as “presidential fellow for academic innovation.” The Roanoke Times reports that he will continue to work on initiatives he had launched as provost, such as “Beyond Boundaries, Destination Areas, the PIBB budget model, the Honors College and the Health Science and Technology campus concepts.”

The bus route to nowhere? The Virginia Department of Rail and Public Transportation (DRPT) is subsidizing a Megabus bus service between Blacksburg and Washington, D.C., with stops in Christiansburg, Lexington, Staunton, Harrisonburg, Front Royal, Washington Dulles International Airport and Arlington. Riders boarding in Blacksburg for the full ride will pay $50. According to a 2013 study, reports the Roanoke Times, the route could generate 15,550 riders per year, generate $578,000 in revenue, and run a $417,000 deficit. Virginia receive about $15 million a year in federal funding for rural transportation projects, and is required to set aside $2.3 million for intercity bus service.

“The Virginia Breeze improves mobility choices for underserved communities by offering an alternative to driving along the congested Interstate 81 and 66 corridors, which need travel options,” DRPT Director Jennifer Mitchell said. “Intercity bus travel gets people out of cars and where they want to go affordably, comfortably and reliably.”

Second Year Running: Lowest Recidivism of Any State

Source: Virginia Department of Corrections

When Virginia ranked last year as the state with the lowest recidivism rate in the country, it wasn’t a fluke. The Old Dominion has repeated the performance.  Of the 11,576 offenders released from prison in 2013, only 2,588 wound up back in jail by 2016. The percentage of felons readmitted to state-responsible incarceration within three years was 22.4%. 

“I am proud of the work my administration has done to pursue policies and initiatives that rehabilitate incarcerated individuals, helping them develop the tools and skills they need to be successful,” said Governor Terry McAuliffe in a press release. “A low recidivism rate means fewer victims, it means safer communities, and it means we are returning offenders to their communities better prepared to be productive, law-abiding Virginians.”

Continues the press release:

Virginia Department of Corrections (VADOC) tailors its programming and supervision to address each offender’s criminogenic risks and needs in keeping with the agency’s mission to enhance the quality of life in the Commonwealth by improving public safety. About ninety-three percent of individuals incarcerated in Virginia will one day be released back into their communities.

“We are in the business of helping people to be better,” said Virginia Department of Corrections Director Harold Clarke. “Virginia’s leading rate is due to the successful reentry programming and treatment offered by the Department of Corrections during an offender’s incarceration, and the effective supervision in the community after release through VADOC Probation & Parole.”

Bacon’s bottom line: Virginia should be proud of its record of low recidivism. Unless people are monkeying around with the numbers (a possibility never to be dismissed), we have the best prison programs of the 45 states surveyed for reintegrating felons into society. (I have written in the past about the special efforts made to ensure that inmates get drivers’ licenses and ID cards immediately upon release from prison, as well as programs in local jails to kick substance abuse, learn anger management, and master other life skills.)

However, I have to call McAuliffe for the boastfulness of his press release. The prisoners alluded to in the 2016 data were released from prison in 2013. McAuliffe didn’t set foot in the Governor’s Mansion until 2014. Whoever deserves credit for their low rate of recidivism, it wasn’t McAuliffe, it was the McDonnell administration. Hopefully, the McAuliffe team built upon the good work of its predecessors. But we won’t really know until McAuliffe is out of office.

The Research Crisis in Higher Ed

Mark Edwards

The modern American research university is in crisis. Perverse rewards and incentives create an unhealthy “hyper-competition” among research scientists and encourage unethical behavior that can lead to bad science. So say Mark A. Edwards, the Virginia Tech professor best known for exposing the high levels of lead in the water in Flint, Mich., and Siddhartha Roy, a Ph.D. candidate at Virginia Tech.

“If the practice of science should ever undermine the trust and symbiotic relationship with society that allowed both to flourish, our ability to solve critical problems facing humankind and civilization itself will be at risk,” they warn in a paper, “Science Is Broken,” in the digital publication Aeon. The Aeon article is abridged from a longer paper published in Environmental Engineering Science.

The pursuit of tenure influences almost the priorities and decisions of young faculty at research universities, write the authors. Recent changes in academia, including increased emphasis on quantitative performance metrics, “harsh competition” for federal funding, and implementation of “private business models” at public and private universities are producing undesirable outcomes and unintended consequences.

Some examples of unintended consequences:

Incentive: Researchers rewarded for increased number of publications.
Intended effect: Improve research productivity, provide a means of evaluating performance.
Actual effect: Avalanche of substandard, incremental papers, poor methods, and increase in false discovery rates.

Incentive: Researchers rewarded for increased number of citations.
Intended effect: Reward quality work that influences others.
Actual effect: Extended reference lists to inflate citations; reviewers’ request citation of their work via peer review.

Incentive: Researchers rewarded for increased grant funding.
Intended effect: Ensure that research programs are funded, promote growth, generate overhead.
Actual effect: Increased time writing proposals and less time gathering and thinking about data. Overselling positive results and downplay of negative results.

Incentive: Reduced teaching load for research-active faculty.
Intended effect: Necessary to pursue additional competitive grants.
Actual effect: Increased demand for untenured, adjunct faculty to teach classes.

The list goes on.

The traditional university culture relied more extensively upon the “old boy network” for hiring and advancing tenure-track professors. That system lent itself to criticism for bias against women and minorities. But Edwards and Roy say that the quantitative-metric approach has created a new set of abuses. “All these measures are subject to manipulation as per Goodhart’s law, which states, When a measure becomes a target, it ceases to be a good measure. The quantitative metrics can therefore be misleading and ultimately counterproductive to assessing scientific research.”

Edwards and Roy also find fault with the way federal research grants are handed out. “The grant environment,” they write, “is hypercompetitive, susceptible to reviewer biases, skewed towards funding agencies’ research agendas, and strongly dependent on prior success as measured by quantitative metrics. … These broad changes take valuable time and resources away from scientific discovery and translation, compelling researchers to spend inordinate amounts of time constantly chasing grant proposals and filling out increasing paperwork for grant compliance.”

Most concerning of all:

There is growing evidence that today’s research publications too frequently suffer from lack of replicability, rely on biased data-sets, apply low or sub-standard statistical methods, fail to guard against researcher biases, and overhype their findings.

Science is expected to be self-policing and self-correcting. But incentives induce stakeholders to “pretend misconduct does not happen.” There is no clear mechanism for reporting and investigating allegations of research misconduct.

The system “presents a real threat to the future of science,” they say. Academia is at risk of creating a “corrupt professional culture” akin to the doping scandal in professional cycling in which athletes felt they had to cheat to compete. “We can no longer afford to pretend that the problem of research misconduct does not exist.”

Bacon’s bottom line: The inability to replicate results from many scientific studies is widely acknowledged to be a real problem. Likewise, the risk is very real that the public could lose faith in science, especially when scientific research intersects with public policy. The idea that government agencies favor and fund research projects that bolster their policy agendas — admittedly, a minor point in the Edwards-Roy essay — is a phenomenon that should concern all Americans.

As research scientists, the authors are most concerned with how the system impacts upon the integrity of the scientific process and the advancement of tenure-track faculty. But their thoughts raise issues of interest to non-scientists who focus on cost and quality issues in higher education. The perverse incentives, along with the research university business model, have virtually severed top faculty from the task of teaching undergraduate students. Universities hire more subalterns — at extra cost –to handle the job of teaching. From the perspective of students and parents, superstar research faculty are superfluous overhead.

An important question left unanswered is the extent to which students and parents are funding this dysfunctional system through their tuition. How much tuition revenue goes to supporting this massively inefficient research edifice in which an increase share of faculty time is spent applying for grants? Perhaps none at all. But perhaps quite a lot. The public doesn’t know. It’s entirely possible that university administrations don’t either — higher-ed accounting could be more transparent. As students, parents and taxpayers, we should insist upon finding out.

(Hat tip: Reed Fawell)

Entitlements, Fiscal Limits and the Looming Age of Rage

Now that Democrats are close to parity with Republicans in the House of Delegates, there is renewed talk of Medicaid expansion in Virginia. Meanwhile, in Washington, President Trump and Republicans are pushing a tax-cut plan that would spur economic growth but, even with stronger growth, would increase deficits by $1.5 trillion over the next ten years. Nobody is talking about the $14.6 trillion national debt except as a cudgel against partisan foes. Even as Medicare, Disability, and Old Age and Survivors trust funds are projected to run out within a single generation, entitlement reform is not up for discussion.

Just a reminder… Here’s are U.S. budget deficits forecast by the Congressional Budget Office without counting proposed GOP tax cuts:

The “on-budget” deficit is what we conventionally think of the deficit. It does not include the draw-down of “off-budget” Medicare and Social Security trust funds. Data source: Congressional Budget Office.

Within eight years, the U.S. will be running $1 trillion-per-year deficits every year, pretty much forever. And the CBO forecast does not take into account the likelihood of a recession or two over the next ten years, in which case deficits will metastasize.

And here’s the off-budget forecast. Payouts for Medicare hospitalization, Social Security disability and Social Security old-age programs exceed tax revenues, but interest income on the assets will keep the respective trust funds in the black for the next couple of years. By 2020, however, the off-budget numbers shift  into deficit mode and plunge rapidly thereafter.

Barring major changes in U.S. spending programs or economic growth, here’s when the trust funds are expected to run out, according to Medicare and Social Security trust estimates:

  • 2028: Disability trust fund runs out of money.
  • 2029: Medicare hospitalization trust fund runs out of money.
  • 2035: Social Security trust fund runs out of money.

Back when the Simpson-Bowles commission tackled the deficit issue in 2010 — the last time Americans thought seriously about entitlement reform — the county had 25 years before keystone social safety net programs imploded. If Congress had acted then, it could have put the trust funds into fiscal balance with relatively minor tweaks (slightly higher payroll taxes, slightly reduced benefits, slightly older retirement ages) that had a large cumulative effect over many years. But a decade of delay will require more painful sacrifices, which means they likely never will be made.

If nothing gets done until the trust funds run out of money — what I call Boomergeddon — the programs will have to cut benefits to match revenues generated. We are only twelve years from massive dislocations to the Medicare program, and 17 years from disruptions to Social Security. Baby Boomers beware, your retirement will be a lot uglier than you realize.

As for those $1 trillion+ on-budget deficits every year, they put Virginia at special risk. Any Congressional effort to tame deficits without touching entitlements will require cuts to discretionary spending, the biggest pot of which is related to defense, intelligence and homeland security…. which happens to be Virginia’s biggest industry sector. Son of Sequester will subject the Virginia economy to chronic economic stress and fiscal pain. But instead of dealing with Virginia’s long-term structural issues, the next session of the General Assembly could well consume itself in a renewed debate over expanding Medicaid.

As Americans speak no evil, see no evil, and hear no evil, we hurtle toward an era of brutal fiscal limits, broken promises to millions of Americans, and polarization and rage that will surpass anything we see today.

Sorry, Donald, But Virginia’s Vote Was a Repudiation of You

Clean sweep for Virginia Democrats yesterday.

Donald Trump may be the only person in the world who didn’t interpret the landslide results of Virginia’s election yesterday as a repudiation of him and his policies. “Ed Gillespie worked hard but did not embrace me or what I stand for,” the president tweeted in response to election returns showing that Democrats swept the races for statewide office and made spectacular gains in the Republican-dominated House of Delegates.

But according to exit polls cited in Politico, half of Virginia voters said that expressing approval or disapproval of Trump factored into their vote. Thirty-four percent voted to oppose him compared to 17% who voted to support him. Governor-elect Ralph Northam ran especially well among a key swing group, white women with a college degree, winning the demographic by a 16-point margin, 58% to 42%. Hillary Clinton won it by only 6 points in the presidential election last year.

The statistics back up observations from my social milieu in western Henrico County. My Democratic friends were enraged by Trump’s election, whom they never imagined would actually win in 2016, and they mobilized to support the “resistance,” joining marches, contributing money, and soliciting candidates to run in local races. The level of intensity, formidable after Trump’s election, was reinforced by the backlash against the white supremacist rally in Charlottesville. By contrast, my suburban Republican friends were apologetic, defensive, and dispirited by Trump.

Trump has said that an improving economy will dampen the electoral wildfires, and it might. The respite from eight years of Obama-era over-regulation seem to be giving the economy a little extra oomph. However, in my observation the anti-Trump furies are not close to burning themselves out. Virginia’s election results likely foreshadow a Democratic wave in the national elections next year.

Trump did not factor into my vote. The election was for state and local offices, not a referendum on the president. But then, I’m pretty clearly out of sync with majority opinion in Virginia.

Medicaid Reforms Could Save Tens of Millions

Massey Whorley, policy adviser to Governor McAuliffe

A new forecast of Virginia’s $10 billion Medicaid program supposes that the implementation of managed-care reforms will slow runaway costs, reducing growth in spending to 2.5% in the first year and 3.4% the second year, down from an 7.8% increase in the current fiscal year. While the program still will cost an additional $670.6 million over three years, that’s a lot less than it would have been, reports the Richmond Times-Dispatch.

The McAuliffe administration is expanding the number of people, primarily elderly and disabled, who will receive services through managed-care contracts with private insurers.

“A huge part of [the reduction] is the effect of reforms and the amount of money being moved from fee-for-service to managed care,” said McAuliffe policy adviser Massey S.J. Whorley. The number will swell from about 30,000 people under managed care to almost 200,000. Explains the T-D:

Fee-for-service has been the traditional way of reimbursing providers for services to Medicaid patients in an uncoordinated fashion. Managed care allows the state to shift the risks of serving patients to insurers who are paid a fixed amount per person, per month to coordinate their care. 

“The plans are taking a very substantial risk,” said Doug Gray, executive director of the Virginia Association of Health Plans, which includes five of the six companies that are providing managed care to more than 216,000 elderly and disabled Virginians. “These are very sick people who could have very high costs. The commonwealth has protected themselves from costs over and above the contract amount.”

The attraction for insurers is the potential to lower the cost of care and keep the difference, while saving the state money, but Gray cautioned against expecting an immediate windfall as the state expands managed care to riskier populations. “We are hopeful and optimistic there will be savings, but I wouldn’t want to be overly aggressive about promising,” he said.

House Appropriations Chairman S. Chris Jones, R-Suffolk, said the reforms are working, but he would hesitate to read too much into the initial forecast. “This is the right step to have taken. … There is no doubt the reforms are starting to have an impact.”

Bacon’s bottom line: Everybody cross your fingers and hope this works. Out-of-control Medicaid spending has soaked up a disproportionate share of new tax dollars generated by the state, forcing legislators to under-fund other critical priorities like K-12 schools and higher-ed. The shift to managed care may ease the fiscal pain for the next biennial budget.