Recently someone justified the notion that Washington taxpayers ought to start a catamaran ferry service between the University of Washington and Kirkland, a waterfront well-off suburb across Lake Washington, due to the fact that "some of this was federal matching funds, which is kind of use or lose anyway." This type of thinking and this type of mechanism contribute to larger and less efficient government, to the detriment of the majority of the taxpayers.

Let me explain: You are taxed by the federal government through the IRS. The IRS costs money to run so you lose a little in overhead there. The rest gets passed along to various federal agencies. More overhead. Some of these agencies "give" out grants, some "give" out matching funds. These must be used for certain categories of uses that have been deemed politically correct, and neither the funds nor the grants typically cover the costs of the projects. In order to get the money, the recipients must put up additional money from other funds, local taxes, other grants, etc.

The reason they do this is that it allows "leverage" to be claimed by their departments. They can, with a budget of $1 billion, claim that through their efforts $3 billion worth of political correctness was built. Not only may the department that gave out the matching funds claim this, but so will all departments that gave a grant, processed the grant application, etc. The process allows multiple counting of credit for projects by numerous agencies, and they use this to justify increased budgets in the "out-years" by using these leveraged figures as evidence of their cost-effectiveness. These are more than just "bragging rights." These inflated and multiply counted figures are used to justify to Congress increasing federal taxes further, because we get so much for our money, The agencies benefit, they grow in the coin of power in Washington DC, budgetline and FTEs. The overhead also grows.

Now local elected leaders can also benefit politically from the matching and grant game. They can apply for these grants although that increases their overhead. Ever fill out a grant or matching fund application? To get the grant or matching fund, you must typically do something the federal governments way, and document to them that this is what you are doing. That increases overhead too. For matching funds, you must either cutback other services to come up with the matching funds, or raise taxes. The latter is ALWAYS preferable, and is justified on the basis that to do otherwise would turn down the "free money." The completed projects are also used as more than just "bragging rights." They are justification to further increase government (and taxes) in the out-years.

But worse even than the issues above, a system with a "default" for more overhead, more taxes, and less efficiency, the OTHER major problem with the system is the "political correctness." What is "politically correct" depends highly on what industry and special interest lobbies are able to get some member of Congress to put into law. Now I don
ft mean to hurt anyone
fs feelings, but I
fve met a number of Congressmen and Senators and frankly, I didn
ft see rocket scientists there, I just saw politicians. Recently Representative Kennedy of Maine was trying to push a bill that gave a 20% federal tax rebate on Yacht purchases (maximum of $2 million per yacht) in an attempt to jumpstart the yacht industry in his state. This scion of a liberal family was proposing a tax break for the rich for purposes that were "politically correct" for him at the time. And therein lies the problem. This system subsidizes you to do STUPID things.

Now I will define a stupid thing as one that, from a cost-effectiveness standpoint, you would not normally do. Too little bang for the buck, as the military would say (not that they are paragons of virtue in the cost-effectiveness arena, either). Let
fs use a simple analogy. I need basic transportation to get from point A to point B. It
fs too far to walk or bicycle, no reliable way to bum a ride, no reasonable public transportation that
fll get me their in a timely fashion, I decide I need an auto. Looking at the requirements, a used $5000 Honda will do just fine. It
fll provide cheap, reliable transportation. Now suppose my rich uncle says he doesn
ft like me driving a "filthy foreign car." If I will come up with $10,000, he
fll sell me his Cadillac, which is "worth" $30,000. Let
fs say that I do this. Instead of a $5000 car with good mileage, low insurance rates, and low maintenance costs, I
fm driving a $30,000 car, paying big league insurance, paying maintenance bills for a luxury rather than an economy car, etc. Was this a good deal for me? Not really. I was subsidized to do something that was different from my true needs. It would be a good deal only if I could find someone that "needs" a Caddy, and sell it to them. But the rules won
ft let me do that.

Go from that analogy to this situation: Someone decides that it is politically correct to fund light rail. It doesn
ft matter that light rail once existed in many US towns (including Seattle), and went out of business because buses could do the job cheaper and more effectively. The RTA justified light rail because the feds would fund a fair amount of it. The feds justified light rail because the locals were going to back it with a dedicated MVET. The multiple incentives and multiple counting of the benefits by several layers of government obscured the economic realities, which were that the light rail would cost $100 million per mile, and would be no cheaper in terms of operating expenses than the buses that it would PARTIALLY replace. I say partially, because with stations over a mile apart, many of the old bus lines that once ran on this route will need to be kept, to serve as feeder lines to the light rail. While the light rail would be cheaper in direct operating expense than the AVERAGE bus route, at $.46 per passenger mile (compared to $.48 for bus), it was NOT REPLACING an AVERAGE run. It was being placed in the area of most dense transit useage, where the per passenger mile cost was much less than the system average. So the real business proposition was for $2 billion to get spent for a system that in theory was 4% cheaper to operate than the bus, but in reality was more expensive than the bus it would ONLY PARTIALLY replace. It
fs sole advantage of speed, if you call 14mph speed, in comparison to the 13mph of a transit bus, was derived from making fewer stops. In other cities, this has necessitated the development of feeder lines and elimination of competing parallel bus runs, to increase ridership for the light rail. This, of course, makes the overall system LESS efficient. Worse yet, big linear systems take a lot of maintenance. If one bus breaks down, the buses coming behind that one just pass it by. That doesn
ft happen with light rail.

Given that this decision never made sense, why did anyone do it? Easy. Grants and matching funds. The feds could justify it, because they were only paying a share of the capital costs, and would be paying none of the operating costs. The RTA could justify it, because they wanted the federal grants and matching funds. The politicians could justify it at the local level, because they only were responsible fot the local taxes. No one looked at the big picture, that this was expensive and inefficient, compared to what it was partially replacing, and little if any better. The money for it, plus additional overhead for every government agency involved

-- Craig Carson (craigcar@crosswinds.net), November 15, 1999

Answers

Like sinking floating bridges.

-- Jim Cusick (jccusick@att.net), November 15, 1999.