Category Archives: Economic development

Leveraging Offshore Gas Drilling to Build Offshore Wind

Can allowing this…

The Trump administration is opening up the East Coast of the United States to oil and gas drilling, but it’s not clear how much enthusiasm there is. A recent sale of drilling rights in the Gulf of Mexico has attracted only “moderate” interest, reports the Financial Times, an indication that the oil & gas industry is more focused on expanding production in the country’s vast shale basins.

… help us get to this?

Last year the Department of the Interior cut the royalty rate it had been charged on production from leases in shallow water (less than 200 meters deep) from 18.75% to 12.5% in the hope of stimulating greater interest. But drillers submitted bids for only 148 of 14,000 tracts offered.

If the Trump administration can’t gin up much excitement in the Gulf of Mexico, where a mature oil & gas exploration and drilling infrastructure exists, it’s unlikely to do any better in the southern Atlantic states where no such infrastructure is to be found. Also discouraging interest is the reality than any effort to start drilling would ignite a firestorm of opposition. Why bother when shale can be fracked elsewhere with minimal fuss and muss?

But that’s today. Who can say what economic conditions and public opinion will look like in three or four years? What if public opinion could be swayed to look upon offshore drilling as a pathway to developing a viable offshore wind industry?

Environmental groups and Virginia Beach civic interests oppose offshore drilling, raising the specter of another Deepwater Horizon disaster — even though (a) any drilling off the Virginia coast would be in shallow water, while Deepwater Horizon occurred in… you guessed it… deep water, and (b) most, if not all, of the drilling would be for natural gas. I’ve never heard of a natural gas spill, and neither have you.

Indeed, the Commonwealth’s official energy policy supports offshore oil and gas drilling, with the caveat that no drilling occur within 50 miles of the shore. A 2005 study by the Virginia Secretary of Commerce and Trade found that natural gas exploration was safe, although if oil is discovered that the Commonwealth must “carefully consider the risk of spills.”

Is it not possible to work out a compromise that could allow drilling to move forward when market conditions permit while providing tough environmental safeguards? Here’s how we can do it.

First, let’s just take oil drilling off the table. Let’s make it official Virginia policy to permit no oil drilling because we want zero risk of oil spills. Drilling and production should be limited to natural gas only. (Do some wells produce both oil and gas? Can the gas in such wells be extracted while the oil is kept in the ground? I concede that some technical questions may need to be answered.) The vast majority of the energy wealth off the Atlantic coast is natural gas, so imposing an anti-oil restriction should not cripple the economics of offshore energy production.

Second, Virginia should get the first-mover advantage of establishing an East Coast offshore drilling industry. As the largest metropolitan area on the Atlantic coast between Miami/Fort Lauderdale and New York — and one with a large ship repair industry, at that — Hampton Roads would be the logical location for offshore companies to set up and do business. Thus, Virginia could get a significant economic-development bonus from the opening up of offshore drilling.

Third, an offshore drilling industry was the precursor in Europe to developing an offshore wind industry, and it could be the precursor in Virginia, too. The two sectors share many skills, competencies, services and specialized equipment. If Hampton Roads can develop an offshore drilling industry, it can lower the costs and risks of getting offshore wind companies to locate here. The lack of an existing industry is perhaps the biggest barrier to developing Virginia’s offshore wind resources — a desiderata of environmentalists and economic developers alike.

The immediate hold-up to large-scale development of wind resources is the need to test the performance of wind turbines in the Atlantic Ocean, which has different seabed conditions and is subject to hurricanes. That won’t happen until the State Corporation Commission approves Dominion Energy’s proposed VOWTAP project, two costly test turbines that could never be justified on the basis of their electricity production alone.

But if the SCC approved VOWTAP, and if the turbines proved their efficacy in Virginia offshore conditions, and if a gas drilling business ecosystem had a toehold in Virginia, then the chances would improve immeasurably to persuade European wind companies to invest in Virginia for the purposes of building and maintaining a fleet of offshore wind turbines at an economical price. Virginia then could become the hub of offshore wind production for much of the entire Atlantic coast.

If we play our cards right, it should be possible to fulfill former Governor Bob McDonnell’s dream of making Hampton Roads the energy capital of the East Coast while not only protecting the environment but improving it.

Subsidies for Thee, but Not for Me

Jamestown Settlement — tax thyself!

The economy of the Historic Triangle — Williamsburg, Yorktown and Jamestown — depends heavily upon heritage tourism. Visitor spending reached $1.08 billionand employed 11,000 workers in 2012, according to one report. But last year tourism and hospitality officials were complaining that growth had stagnated.

So, what do you do to boost the region’s No. 1 industry?

Raise taxes, of course. This year the General Assembly passed a bill backed by Senate Majority Leader Tommy Norment, R-James City County, to impose a 1 percentage point surcharge on the sales tax to raise revenue to be split equally between a new effort to rekindle Historical Triangle tourism and the three Triangle localities of Williamsburg, James City County and York County, reports the Daily Press. Williamsburg would use the funds to roll back the admissions tax and hotel and meals taxes it approved last year.

Sen. Monty Mason, D-Williamsburg, had opposed the tax all along on the grounds that it impacted poor people the most. After the bill sat on the desk of Governor Ralph Northam for three weeks, he prevailed upon Norment to amend the tax. The revised version would exempt the sales tax on food and add a $2-a-night hotel surcharge to recoup the lost revenue.

“I think this could be transformational,” Norment said.

Bacon’s bottom line: I don’t normally agree with Democratic Party politicians, but Mason is absolutely right about this. It’s one thing to tax hotels and restaurants, as Virginia Beach does, to raise funds to pour into marketing, promotion and infrastructure building. Although local residents do pay more for eating out, the tax is largely paid by the industry itself. But levying a sales tax on the general populace to benefit the industry is quite another thing. Such a tax would indeed impact the poor, who spend a disproportionate share of their incomes on food — not eating at restaurants but food purchased at grocery stores.

The workforce of Williamsburg, York and James City is about 70,000. In other words, five out of six people do not work in the hospitality industry. Undoubtedly some businesses provide goods and services to the sector, thus benefiting indirectly from its presence, but major employers like the College of William & Mary and the Anheuser-Busch brewery do not. The tax would represent a massive subsidy for the tourism sector at the expense of everyone else.

Don’t get me wrong — I personally love heritage tourism. I love visiting Colonial Williamsburg. But is that really the future that Triangle localities want to build for themselves? William & Mary, one of the highest regarded public universities in the country is located there. The Kingsmill Resort, which caters to affluent retirees, is located there. NASA Langley and Thomas Jefferson National Accelerator are located a few miles down Interstate 64. For $25 million a year, the community can’t come up with any better economic development initiative than promoting tourism?

As the dominant industry, the tourism sector is converting its political clout into public subsidies in order to perpetuate, even increase, its dominance. While a 1% sales tax surcharge might not seem like a lot, it will have a small dampening effect on economic activity not related to tourism. For example, the surcharge could encourage affluent retirees to select somewhere else to settle down and spend their money, thus impacting Kingsmill Resort-like development in the future and driving away citizens who pay lots in taxes but demand little in the way of government services.

I’m all in favor of not damaging your existing industry by refraining from enacting burdensome regulations and taxes. But if you want to nudge your community into the innovation-driven Knowledge Economy, you don’t do it by taxing the new economy to subsidize the old economy.

Here’s an Idea, Let Maryland Have Amazon

Virginia’s friend: Maryland Governor Larry Hogan

Maryland legislators approved Wednesday an $8.5 billion incentive package to lure Amazon’s second headquarters to Montgomery County. Governor Larry Hogan (R), who proposed the plan, is expected to sign the bill.

I love it! This is the best of all worlds for Virginia. Amazon has estimated that the headquarters will invest $5 billion and employ 50,000. If Amazon puts its second headquarters just across the Potomac River in Montgomery County, Md., Northern Virginia will benefit from many of the positive spillover effects without undermining its tax base to bribe the company into locating there.

Nonpartisan analysts with Maryland’s General Assembly said the incentives would cost the state $5.6 billion in tax breaks, $2 billion in transportation spending, and $924 million in local tax credits, for a total of $8.5 billion. While a solid majority of Maryland legislators backed the package, a sizable minority objected to the massive subsidies, reports the Washington Post.

“Amazon is getting the gold mine and we’re getting the shaft,” said Del. Herbert H. McMillan, R-Anne Arundel. He described the package as “corporate welfare.”

(Virginia has offered an incentive package as well, although nothing that has required approval by our General Assembly. The details remain confidential, despite efforts by anti-Amazon groups to obtain them through Freedom of Information Act requests.)

Let’s game this out. Let’s assume that Maryland’s bribery package is so generous that it outweighs anything Virginia can cobble together under existing legislation and appropriations. Let’s assume that Amazon builds an 8-million-square-foot  headquarters campus in Montgomery County, invests $5 billion, and hires 50,000 highly compensated workers, as it says it will. Where does that leave Virginia?

In the cat bird seat.

Maryland and Montgomery County hired the Sage Policy Group, Inc., to study the economic impact of an Amazon relocation to Montgomery County. The study finds that a full build-out would support more than 101,000 jobs in Maryland, generate nearly $7.7 billion in employee compensation, and boost economic activity by more than $17 billion. (Presumably these are annual figures, although the study’s Key Findings does not say so explicitly.) Writes Sage:

Complete development of Amazon’s HQ2 will create approximately $112 million in augmented tax revenue at the County level. The bulk of this will flow to Montgomery County through direct income and property tax effects, though indirect and induced activities will also augment local tax revenues as far north within Maryland as Frederick and Baltimore Counties. This tally includes nearly $64 million in property taxes and nearly $34 million in income taxes.

At the state level, tax receipts will increase by an estimated $190 million over the duration of development, including $84 million in sales tax revenues, $62 million in income tax revenue, and more than $10 million in nontax revenues (e.g., fees, and permits.)

Here’s what the Sage study overlooks: the costs associated with an added workforce of 101,000 in an era of full employment.

Unemployment for the Washington metropolitan area was 3.6% in February. That verges on a labor shortage. Indeed, for IT-related jobs, there is a labor shortage. To fill those jobs, Amazon will either (a) induce skilled employees from other metros to move to the Washington area, or (b) recruit skilled employees from local employers, who in turn will have to induce skilled employees from other metros to move to the Washington area. Those people will have to live somewhere, and they will require state and local government services.

The increased economic activity resulting from the Amazon headquarters will more than offset the drain from $8.5 billion in subsidies. But will it also offset the cost of building new infrastructure and providing state/local government services, including schools, to the tens of thousands of households moving into Maryland?

Let’s assume for purposes of illustration that a third of those 101,000 employees joining the Maryland workforce have children, and let’s assume that they have only one child at home on average, and let’s assume that only 75% of those children are of school age. That means we can expect an enrollment increase of 25,000 students in Maryland schools. The average cost per K-12 student in Maryland is about $15,000. Let’s say a 20% of that is overhead and that the variable cost per child is only $12,000. That pencils out to $300 million in added K-12 school expenditures.

Guess what. The total anticipated increase in state and local tax revenues is…. $300 million. That leaves nothing for public safety, public works, higher education, health care, social services, the environment, or the mandatory bloated bureaucratic overhead. Fiddle with the numbers in my assumptions, if you want, but understand the principle: Sage’s economic impact formula considers only tax benefits, not fiscal costs.

By contrast, Virginia will enjoy economic benefits from Amazon in Maryland without the tax giveaways.

The Sage study does not publish an estimate of the economic impact of an Amazon-in-Montgomery-County scenario on Virginia or Washington, D.C. scenario.  I suspect there’s a reason why Sage didn’t disclose those numbers — because an embarrassing proportion of the benefits of an Amazon move to Maryland will accrue to the entire metropolitan area.

“Entrepreneurship related directly or indirectly to e-commerce, cyber-security, big data analysis, and other segments would accelerate,” states the report. As it happens, cyber-security and big data analysis are industry sectors at which Virginia excels. It is inevitable that Amazon will do business with Virginia companies, and it is likely that Amazon or former Amazon employees will seed new enterprises in Virginia.

No doubt some Amazon employees will live in Virginia and drive across the Potomac. We’ll have to provide schools and other public services to them. Here’s the difference: We won’t have to eviscerate our tax base to do so.

5G Wireless: Build, Baby, Build!

The latest wave of wireless innovation is upon us — fifth generation wireless, otherwise known as 5G. The technology will multiply download speeds by 10 times or more, allowing wireless carriers to compete with cable companies for high-speed Internet access. As former FCC trade commissioner Robert McDowell writes in the Wall Street Journal today:

5G will enable advances in everything from driverless cars to the “tactile internet,” in which surgeons can perform operations and builders operate construction equipment remotely, and entertainment can include sensations beyond the audiovisual.

A 5G-enabled Internet of Things will connect people, data and new devices, creating a surge of economic growth. IHS Markit estimates that in the U.S. alone 5G will yield $719 billion in growth and 3.4 million new jobs by 2035.

To deploy the technology, 5G wireless carriers need to deploy thousands of “small cell” antennas the size of pizza boxes. Although these small cells are almost invisible, some state and local governments are treating them as if they are 100-foot towers. Outdated local requirements restrict carriers from placing small cells in local rights-of-way and on government-owned utility poles. Zoning ordinances designed for big cell towers require zoning board approval. Other localities impose prohibitive fees.

It was with a sickening feeling in the pit of my stomach that I Googled “Virginia 5G regulations,” fearing that the Old Dominion still would be living up to the “Old” in its moniker, imposing all manner of unreasonable fees and restrictions. But I was pleasantly surprised. We have been making progress.

Last year Governor Terry McAuliffe signed S.B. 1282, which, according to Wireless Week, removed some regulatory barriers and sped up local permitting processes.

[The bill] stated that localities can’t require special exceptions or special use permits for small cell facilities installed on existing structures where providers already have permission to co-locate equipment, and gives municipalities 10 days to notify carriers of an incomplete application and 60 days to either approve or deny applications. The measure also caps municipal fees at $100 each for up to five small cell facilities on an application and $50 for each facility thereafter. Fees for carrier use of municipal rights-of-way are prohibited, except for zoning, subdivision, site plan, and comprehensive plan fees related to the general application. Additionally, the bill instructs municipalities that “approval for a permit shall not be unreasonably conditioned, withheld, or delayed.”

Consulting firm Accenture had said the wireless industry is looking to make “significant” infrastructure investments in the state, including $179 million in Richmond and $371 in Virginia Beach, reported Wireless Week. The firm also forecast that the investments would create more than 6,000 jobs across the state.

In the 2018 session, the General Assembly passed SB 405, which exempts wireless structures less than 50 feet tall from requirements to obtain special use permits under local zoning laws, as well as SB 823, which establishes an annual wireless infrastructure erected in public rights-of-way. The fee is $1,000 for structures that are 50 feet or shorter.  The bill awaits the signature of Governor Ralph Northam.

Bacon’s bottom line: If Virginia wants to run with the big boys in technology-intensive industries, it needs to encourage wireless operators to roll out 5G as rapidly as possible. What’s extra cool about the technology is that it doesn’t favor just the big metropolitan regions with dense populations. 5G can reach rural endpoints at one-fifth to one-tenth the cost of wireline connections, thus closing one of the big infrastructure barriers to rural economic development.

I don’t see any downside to 5G deployment. It’s driven by the private sector. It will open up high-speed Internet to virtually the entire state. All government has to do is get out of the way. The only losers are crybaby NIMBYs who can’t bare the thought of wireless towers less than 50 feet tall within their line of sight. Waaah. Build, baby, build!

Taxes, Data Centers, and Republican Party Politics

Corey Stewart

Data centers account for 92% of all new capital investment in Prince William County between 2012 and 2017. Now Corey Stewart, chairman of the Board of Supervisors and Republican candidate for the U.S. Senate, wants to raise taxes on them.

Stewart, who is running as a Donald Trump-style populist, proposes to use the $21 million in additional taxes to slash the county’s real estate tax rate. It’s about time, he says, that data centers pay their fair share of taxes, reports Inside Nova.

“The big data center companies in Prince William County are some of the largest, wealthiest corporations in the world,” Stewart said. “And I think people are concerned about data centers because these are big, ugly buildings that employ very few people, push up the cost of commercial land and drive the need for even more transmission lines in the county. We’re giving them a tax break, and that’s not right.”

Data centers used for cloud storage constitute one of the biggest bright spots in Virginia’s economic development efforts as the state struggles to diversify its economy from overreliance on the federal government. Loudoun and Prince William Counties have benefited from their proximity to the surfeit of high-capacity fiber-optic cable in Northern Virginia to attract billions of dollars in data-center investment. Other localities such as Virginia Beach and Henrico County have begun competing for the business by reducing tax rates on computers and peripherals. Even with the lower rates, data centers yield enough in local tax revenues that localities regard them as huge positives for the tax base.

In Prince William, the electricity-hungry data centers have become embroiled in a related issue of how to supply them with electric power. In a bitterly contested case, Dominion Energy has been trying to get approval to build a transmissions line through western Prince William County not only to serve a growing population but to deliver power to an Amazon Web Service data center in the Haymarket area.

According to Inside NoVa, Stewart argues that a higher tax won’t make existing data centers leave. The owners have already spent so much money to build the facilities and install the servers and other equipment that they would not shut them down.

Needless to say, the Northern Virginia Technology Council (NVTC) and its business allies oppose the tax, noting that raising the tariff will discourage future investment by cloud providers. Josh Levi, NVTC’s vice president for policy, says that some data centers fall into the category of “colocation centers” where the owner rents out server space to smaller businesses. If Prince William raised its tax rate, these colocation centers would have to pass on the new cost to their customers and potentially scare away some away. “It’s about dollars and cents, not emotions, for these companies,” Levi said.

Stewart responds that even with the tax increase, Prince William’s computer equipment rate still would be lower than that of Loudoun County, which has seen no diminution of interest by data centers. Cloud providers, he says, are still “pounding on their door.”

It will be interesting to see how Stewart’s tax-hike proposal plays out in the Republican senatorial nominating contest. Traditionally, Republicans could be counted on to take a pro-business, anti-tax stance. But Stewart is inveighing against a group of companies that are taking a beating in the public perception, especially among political conservatives.

Facebook has been roundly criticized from the left for being insufficiently vigilant in protecting the privacy of its users from misuse by Cambridge Analytica, an English data mining company affiliated with conservative figures and the Trump campaign. But conservatives have retorted that Facebook shared far more user data with the Obama campaign. A populist wave building within conservative media contends that Facebook, Google, Twitter and other West Coast tech giants, increasingly politically correct, are suppressing conservative voices on social media. Likewise, President Trump has singled out Amazon for allegedly not paying its fair share of sales taxes. If the revolt against the tech giants continues to build, then Stewart’s tax gambit could play very well in the Republican base.

Bacon’s bottom line: The Democratic Party and the Republican Party both represent coalitions of diverse groups and interests. Increasingly, the Democrats appear to be divided between the leftist “Bernie bro” faction and the establishment Hillary faction. Similarly, Republicans are divided between a populist Trump-loving faction and an establishment faction repelled by Trump’s careless, populist rhetoric.

Those divides are reflected in Virginia politics. Virginia Democrats faced a choice between the establishment candidate Ralph Northam and the Bernie-bro candidate, Tom Perriello in the nomination for governor last year. Having won both the nomination and the election, Northam appears to be in a position to keep the party unified… at least for now. While Republicans also selected an establishment candidate to run for governor, Ed Gillespie, he lost handily, creating a big opening for a Trump-style populist like Stewart. While I question his policy proposal to increase taxes on data centers, I suspect that Stewart’s gambit might be good politics — good enough, at least, to win the nomination.

As the dominant political parties schism, I can’t help but think there is an opportunity for a fiscally conservative, market-oriented, socially moderate and racially/ethnically inclusive party like the Libertarians. Libertarians have yet to identify a demographic constituency upon which to build a political base. But if they find just one leader who can crack that nut, politics in Virginia and the nation are ready to crystallize into a very different form.

Is Mo’ Money the Solution to the STEM Job Shortage?

Governor Ralph Northam. Photo credit: Daily Progress

Speaking at the Charlottesville Regional Chamber of Commerce yesterday, Governor Ralph Northam enumerated the main challenges he sees for Virginia’s business environment: diversifying regional economies, creating more opportunity in rural communities, providing dedicated funding for the Washington Metropolitan Area Transit Authority, and reforming state taxes and regulatory structures. Reports the Daily Progress:

The Democratic governor tied most of these problems to two solutions — well-funded schools at all levels and Medicaid expansion, arguing the federal Medicaid funding would allow more state money to be spent in other areas.

“We need to diversify our economy by understanding what the jobs of the 21st century are,” Northam said, citing biotechnology, data collection and data analysis.

“We do that through having excellent colleges and universities that are affordable to all Virginians, but also through supporting and marketing community colleges,” he said. “There are thousands of good, high-paying jobs that don’t require a four-year education.”

Medicaid expansion might pay for itself, but let’s just say I’m skeptical that it will actually save the state money. How many other states that have enacted Medicaid expansion make the claim that they have freed up spending for other priorities? But that’s a side issue.

Of greater interest is Northam’s observation that there are “thousands of good high-paying jobs that don’t require a four-year education.” He is absolutely right about that. He seems to be suggesting — although it’s not entirely clear — that Virginia needs to spend more money to help ameliorate the problem.

As Bacon’s Rebellion readers know, I tend to be skeptical that waving the magic money wand fixes many problems. I’d like to see an analysis of why Virginia’s educational/workforce training system has been unable to meet the demand for STEM jobs.

It is widely known, for example, that there are widespread job shortages in the IT sector. One plausible explanation is limited teaching capacity — there just aren’t enough college and university courses in which to enroll, and existing classes are so full to the brim that would-be IT practitioners are being turned away. Is that, in fact, so?

If there is a capacity shortage, why is there a shortage? Are colleges, universities and even for-profit career schools too dim-witted to see the business opportunity and expand the course offerings? Or, alternatively, do they see the opportunities but are having trouble recruiting instructors to staff the courses?

What if the supply of students is the problem? It is widely acknowledged that STEM programs have high drop-out rates because many American students can’t handle the work. What if the problem is that high schools are not preparing students for college-level STEM work? What if American students don’t have the self-discipline to perform demanding work with right-and-wrong answers?

Finally, what kind of workforce credentials are needed to fill these STEM jobs? Do employers crave workers with certifications that can be obtained at community colleges or for-profit career schools? Or do they need employees with B.A.-, M.A.-, or Ph.D.-level degrees obtainable only through advanced programs? Presumably, both are needed. But what is the proper mix? If more funding is the answer, what is the proper distribution between community colleges and four-year institutions?

I’ve not seen any of this analysis. And I have no confidence that we truly understand the nature of the problem or how best to invest public dollars. Virginia doesn’t have the luxury of throwing dollars at problems we don’t understand. We need to act upon hard evidence, not conjecture.

What Is a College Degree Worth?

Bryan Caplan

Bryan Caplan doesn’t just think outside the box when it comes to higher education. He stomps on the box and mashes it into the ground.

How much of what college students learn in class do they retain later in life?

Remarkably little, says Bryan Caplan, an economics professor at George Mason University. And thereupon lies a tale with massive implications for higher education policy in Virginia and nationally.

Students are subject to “fade out,” the diminishing memory of facts, figures, theories, and languages learned in the classroom that receive no reinforcement in life after school. The fact is, the vast majority of what students learn — whether history, English lit, psychology, calculus, French, or astronomy — is irrelevant to their workplace preoccupations as employees, and it is soon forgotten.

In other words, argues Caplan in his book, “The Case Against Education: Why the Education System Is a Waste of Time,” from a societal perspective the vast majority of college-level schooling represents squandered time and money.

The primary value of earning a college degree is to send a signal to the employment marketplace that the bearer of a sheepskin is intelligent enough, diligent enough, and conformist enough to undergo the multi-year trial of completing the requirements. “For the individual, higher ed helps get you a job and make more money,” said Caplan in an interview with Bacon’s Rebellion. “But for society, the benefits are very overstated.”

Some colleges and universities teach advanced vocational skills such as engineering or law. Students in those fields do learn skills they will apply in their jobs, but Caplan argues that most disciplines teach little that’s relevant in the world outside the ivory tower. A degree in history, for instance, trains the student to become a historian but not much of anything else. By his spitball estimate, 80% of the career-preparation value of a college education comes from signalling, only 20% from content they master.

Reflecting upon my personal experience, I would have to acknowledge that I have forgotten the vast majority of what I learned while earning B.A. and M.A. degrees in history. I recall only the barest of details from my courses in the history of China, Japan, Latin America, the West Indies, Africa, and European overseas expansion. Forty-plus years later, I know more about these topics than the average Joe, but what I’ve forgotten could fill an encyclopedia. Why? Because in my journalism career in Virginia, I never called upon that knowledge and it faded from memory. By contrast, even though I took only a single college course in American government, I retain a storehouse of knowledge about state and local government in Virginia because I call upon it constantly.

I depart from Caplan in my belief that I did learn something of enduring value at the University of Virginia — how to think rigorously and analytically. But then, I must concede, that skill came mainly from two honors courses in historical methodology co-taught by two extraordinary professors and from the experience of writing a senior thesis, not the vast majority of my courses. Most UVa history majors did not take the honors courses and never benefited from the exceptional give-and-take of that particular program.

Caplan would concede that, yes, college students do learn something of enduring value that benefits them later in life, just not much. If the goal is preparing people for the workforce, as so much of the emphasis is today, most Virginians could learn a lot more during four years on the job than they could in four years of college.

“In the real world, most of what you learn is on the job,” Caplan says. “People get good by doing. … Nobody gets good at anything by taking critical thinking classes. They get good by doing.”

Why, then, do millions of Americans collectively spend tens of billions of dollars to attend college? The main reason, Caplan says, is to get a good job. Higher-ed institutions are adept at sorting applicants by intelligence by using such measures as SAT scores and class rankings. But if that were the only value colleges supplied, businesses would select employees on the basis of IQ tests. The ability to complete a four-year program of 40 or so courses also tells employers about a student’s diligence, self-discipline and willingness to conform to institutional demands. Students who fail to complete a college degree — whether because they are not smart enough, are too lazy, or reject institutional norms — are significantly less likely to make good employees.

Caplan makes a prediction fraught with significance for public policy. The State Council of Higher Education for Virginia (SCHEV) has set a goal of making Virginia the “best educated state” in the country by 2030, which means putting the public education system on a trajectory to produce thousands of degrees more than it would have on its previous path. If the supply of Virginians with a college degree exceeds the demand, the workforce won’t become any more productive Caplan suggests. But employers will separate the wheat from the chaff by increasing the educational criteria they require — credential inflation — thus requiring Virginians to devote even more time and expense to obtaining those credentials.

Caplan has another concern about setting arbitrary goals for the number of degrees and workforce credentials. Too many students are ill prepared for higher education as it is. American colleges are already full of students who aren’t capable of college-level work. Many of them are taking remedial classes, re-learning what they should have learned in high school. The fact that Americans have more educational credentials than ever says nothing about the quality of education they are receiving.

“If you could actually get schools to turn out people who can read or write, that would be an accomplishment,” Caplan says. “There are plenty of college graduates whom you’d be shocked by how poor their literacy or numeracy is.”

I asked Caplan if he saw any value in higher education as a consumer good — not just earning a degree but enjoying the residential campus experience, including everything from football games and dormitory bull sessions to ample opportunities to indulge in alcohol, drugs and sex. Instead of giving their kid money to backpack around Europe for a year, are parents paying their kids to enjoy four years of maximum freedom and minimum responsibility before embarking upon a lifetime of toil?

Some parents may be motivated by nostalgia for their own college experience, Caplan conceded, but he doesn’t think it’s an important factor in why they insist their kids get a degree. Most people attend college to advance their prospects in the job market. “Suppose college grads didn’t earn anything extra, how many people would still go? … College would be just for rich kids.”

Caplan sees considerable value in on-the-job training such as internships and apprenticeships — programs in which employees gain knowledge that they apply directly to work. I asked if he subscribed to the idea of “just in time learning” —  taking courses and mastering skills as they are needed. 

“From the point of view of taxpayers, that makes a lot more sense,” he says. Even then, he’s guarded about the value of acquiring knowledge by taking college courses. Say an aspiring manager wants to learn project management. How can he or she learn the discipline most effectively — by attending lectures and doing homework, or by shadowing someone on the job? Still, taking courses as needed is less wasteful than sending someone to college for four years and “consuming this giant buffet of stuff they’ll never need again.”

U.S. Electricity Demand Falls Again

Source: Oilprice.com

U.S. electricity consumption fell 2.1% in 2017, according to Oilprice.com. As energy-efficiency measures have taken hold, electricity sales have declined seven in the past 10 years. Such numbers do not bode well for electric utilities banking on increased demand growth to justify construction of new power plants. A big question is the extent to which national trends apply to Virginia.

Virginia’s economy differs from the national economy in one important way: The Old Dominion has become a dominant player in the data-center business. Indeed, one could argue that data centers are the biggest economic-development success story in Virginia of the past 10 to 20 years. Data centers consume vast amounts of electricity. And if we want more data centers, which provide a handful of highly paid jobs and loads of tax revenue, we will need to ensure a reliable supply of electricity, preferably renewable.

Dominion Energy Virginia has based the long-range planning in its Integrated Resource Plan (IRP) on an anticipated 1.5% annual growth rate in electricity demand — considerably stronger than demand growth nationally. PJM Interconnection has suggested that Virginia’s growth rate will be slower, but Dominion defends the forecast based on a more aggressive projection in the number of data centers.

The public interest calls for sufficient electricity supplies to accommodate the growing data-center industry and, down the road, a surge in demand from electric vehicles — but not so much as to burden rate payers with excess capacity.  Clearly, the trend in electricity demand bears close watching.

Forgotten Battles, Missing Landmarks


by Cliff Page

On an abnormally warm early Spring day, I took a 150-mile motorcycle ride from Portsmouth to Stony Creek, Va. That’s where my Great Great Grandpa was captured by federal forces in 1864. He rode with the South Carolina 6th Insurgent Calvary (Aka: the Dixie Raiders), which fought in nearly every major engagement in Virginia from 1862 until the surrender.

Before visiting Stony Creek I had no idea of the importance of the place. I presumed that it was just an outlier to the defense of Petersburg. But from talking to some old timers who live there today, I learned that Stony Creek was a critical logistical hub for the Army of Northern Virginia and a focal point of the lengthy siege of Petersburg, the loss of which precipitated General Lee’s calamitous retreat towards Appomattox and the end of the Civil War.

Stony Creek lies to the west of Interstate 95 between Emporia and Petersburg. During the siege of Petersburg between June 1864 and March 1865 nearly all the supplies to the Confederate defenders — including those from Wilmington, N.C., the only Confederate port not blockaded on the East Coast at the time — came up the Petersburg and Weldon (now CSX Railway) into the Stony Creek depot. Goods were offloaded from the trains and put onto wagons and hauled on plank roads through the back woods and swamps to Petersburg, 25 miles to the north.

During the siege of Petersburg, a largely static affair, a series of engagements were fought over Stony Creek. In June, the Confederates turned back a Yankee cavalry foray, but not until the raiders had torn up 60 miles of railroad track. General Grant ordered another raid in December, which the defenders likewise repulsed. But the attack disrupted the vital supply line, doubling the distance supply wagons had to travel and exacerbating the Army of Northern Virginia’s shortages of ammunition, food, and medical supplies.

By March it was clear that Lee could no longer hold on. After a series of reversals, he evacuated Petersburg. In full retreat, the Army of Northern Virginia would fight only a couple more engagements before being forced to capitulate at Appomattox Court House on April 3rd.

I don’t know exactly where my Great Great Grandpa Randolph Page was captured at Stoney Creek, or where he was imprisoned. Many Confederate Calvary POWs were incarcerated on the Eastern Shore. But one thing is recorded – he was given ten dollars in gold, at discharge and walked on foot back to Landrum, S.C. Upon arriving at his log cabin and farm, he stripped off his lice-infested uniform, burned it, shaved off his hair and scrubbed his body down with lye soap in the creek. Thereafter he returned to the plow and put the war behind him.

Today Stony Creek is a little rural community in sad shape, and hanging by a thread. Cars and trucks whiz by on I-95 and and pay no mind. The BBQ pit and little antique shop, once easily accessible on old I-301, are off the beaten track. The billboard next to the BBQ displays the rust of over 50 years, as worn sign paper and gauze wisp gently in the breeze like curtains to the past.

The town’s history is being forgotten as those who remember get older. But the rail that brought in supplies and ammunition is still there, as are the winding roads where muleskinners ported supplies from the depot to Petersburg. A cannon abandoned in the swamp rests on the main street. The one-room Sappony Baptist church — where Confederate infantrymen fought off a company of Yankees before friendly cavalry ran them off — still stands. The church bears the scars from where a Yankee cannon ball punched through the front wall and a bullet hit the church Bible. Today, the wall’s hole is patched with tin and the church is sided with vinyl.

A wealth of knowledge about the Civil War resides in small communities like Stony Creek, but it is dying. I talked to the locals and encouraged them to print a flyer with a brief history of Stony Creek and a map showing the battlefields and the plank road routes that channeled supplies to Lee’s defenses. Virginians in communities across the state should do likewise, and put up materials on a common statewide History and Tourism website. Tourists could download and print these maps and history as guides or view them on their smart phones.

This would be a great project for the Sons of Confederate Veterans, indeed a project in which all Southern states could participate. Creating a platform for small communities to tell their story of Virginia’s defense and the Confederate cause would lift local spirits and stimulate tourism. History could be brought to life for a new generation, as folks discover the little places, now forgotten, that played significant roles in history.

Stony Creek is a great day trip on a motorcycle or an open convertible on a warm sunny day. I encourage Virginians to visit the place and learn about the history of which we all are apart.

Cliff Page, a sculptor, lives and maintains his studio in Portsmouth. 

After 400 Years, the Pamunkeys Shall Rise Again

Pamunkey Chief Robert Gray. Photo credit: WTJU

Wow, ever since winning federal recognition as an Indian tribe, the Pamunkey Indians are on a tear. Last week I  highlighted PamunkeyNet, a proposal to bring broadband Internet service to rural counties in the Chesapeake Bay region. Now, we find out that the Pamunkeys are thinking bigger… way bigger.

According to Daily Press, the Pamunkey Indian Tribe is looking for land to build what it envisions as a $700 million gaming center that features shows, a spa and a hotel. The project would employ some 4,000 full-time workers and would have a $200 million payroll. Not bad when you consider that the Pamunkeys number only 380 members!

It’s hard to know what to make of all this activity. Since securing their federal recognition, the Pamunkeys have been conducting negotiations with investor groups that specialize in helping Indian tribes launch similar ventures. The value proposition of Indian tribes is their ability to access federal funds and their exemption from many state and local restrictions.

I’ll be the first to admit to an anti-Pamunkey bias, dating back to 1675 and the original Bacon’s Rebellion. Nathaniel Bacon led a movement comprised mainly of poor farmers and white and black former indentured servants against the corrupt regime of Governor Sir William Berkeley. The Pamunkeys sided with Berkeley. The frontier was notorious for tit-for-tat raids and retaliations between English settlers and Indian tribes, and it is fashionable among historians now to accuse Bacon’s forces of making indiscriminate attacks on innocent Indians, including the Pamunkey. Bah! Politically correct thinking infects everything! I reject it. Cross Nathaniel Bacon for whatever reason, and you’re on my black list.

I bear modern-day Pamunkeys no ill will for the deeds of their misguided ancestors. But I find myself astonished by the sudden good fortune about to be showered upon a handful of tribesmen by virtue of their ancient lineage. Whether they succeed in building a casino or not, it seems they have hit the proverbial jackpot.

Judging by the Daily Press article, the Pamunkey tribe has an enlightened attitude. It is using its privileged status to help the broader community by expanding senior housing, rural broadband services, and job creation.

“We don’t live in teepees; we’re just your neighbors,” said Chief Robert Gray. “We’ve got jobs in Richmond, Mechanicsville, Williamsburg. We’re retirees, kids … right now we can use HUD (U.S. Housing and Urban Development) funds, the Indian Health Service. But wouldn’t it be great if we paid for our own health care — more self-sufficiency, more self government.”

The Pamunkeys sound like good neighbors. And I respect the fact that they have managed to maintain a distinct identity for hundreds of years. But in the irony of ironies, they are adopting a strategy that’s become as American as mom and apple pie — working the leviathan state for privileges and favors. They’re joining the ranks of the rent seekers. What a shame.