Crist & Obama at Fort Myers

Florida faces the threat of hurricanes, which wreak havoc across the state’s coastlines. The seasonal damage of hurricanes made homeowner insurance more expensive, as property and casualty insurers adjusted their premiums to reflect the risk. Crist’s solution to Florida’s natural-disaster problem, however, has been an unnatural disaster.

At Crist’s behest, Floridian insurance regulators regularly refused to allow insurers to raise premiums, despite their necessity. For example, State Farm’s subsidiary in Florida reported that in 2008 it lost $20 million monthly, and that since 2000 it was paying $1.21 in claims per $1 in revenue. Nevertheless, the state regulators effectively imposed price controls on insurers, forcing it to take losses.

Crist also spearheaded Citizens Property Insurance Corporation, a “public option” homeowner-insurance plan, whose monopsony power, taxpayer guarantee, and rosy actuarial assumptions allowed it to offer sub-market premiums to property-owners. Given these unfair advantages, Citizens Property has enrolled 1.1 million policies, making it the largest insurer in the state. Private insurers, already hamstrung by price controls, could not compete with the government, and so now are abandoning Florida altogether.

Without private insurance, Florida’s losses from a hurricane are confined to the state’s taxpayers rather than spread among a global industry, where the claims would be painlessly diffused. Unfortunately, Citizens Property is not prepared to deal with such a catastrophe. Its liabilities exceed its assets by nearly $400 billion, meaning in the event of a hurricane it would almost certainly fail to meet its claims and become insolvent. The Florida legislature, ever-eager to pander to the people, has declined to adjust premiums, leaving them artificially depressed beneath market levels. Everything is sunny so long as hurricanes steer clear of Florida, but when the inevitable storm ravages Florida’s coast, taxpayers will bear the burden thanks to Crist’s price controls and public option.

Crist also opened his arms to President Barack Obama’s stimulus, bailing out the state budget in the short run, but incurring costs which will require future taxes from Floridians in the long run. Besides the $4 billion that went to balance the state budget, the most infamous use of stimulus funds in Florida is the proposed Tampa-Orlando high-speed rail, an expensive project without any conceivable benefit. Floridians will be paying for Crist’s endorsement of the stimulus for a very long time.

As a candidate for the Senate, Crist has run a despicable campaign, declining to seriously address public-policy issues in favor of impugning the ethics of his conservative opponent, Marco Rubio, to whom he is deservedly losing. In a purely self-interested political maneuver, Crist vetoed an education-reform bill which would have replaced lifetime teacher tenure – given to over 99% of applicants – with single-year contracts and tied teacher pay to student performance on standardized tests. Just month ago, Crist supported the bill – “I think I would say that this is a bill that really focuses on trying to help children and encouraging better teachers. Pays better teachers more, and that just seems like the right thing to do” – but hypocritically reversed position, perhaps hoping to ingratiate himself to the teachers unions. For the sake of Crist’s political ambitions, students will suffer and taxpayers will be robbed.

Crist has governed erratically without any coherent principles, save remaining popular among Floridians. Ironically, the destructive policies he undertook in order to stay popular have earned him the people’s ire, and now his demise appears inevitable. By betraying former governor Jeb Bush’s strong legacy of conservative reform, Crist has sealed his own fate, though thankfully Florida is not yet doomed.

Tampa

After wasting the past year bitterly battling for healthcare reform, the Obama Administration now claims that it will focus on employment, as if that were not the intent of last year’s $862 billion stimulus. The Administration assured Americans that the so-called stimulus would keep the unemployment rate below 8%, but a year later it was over 10%. In addition to the usual self-congratulatory rhetoric, teleprompter-fed lectures, deceitful claims, and fallacious depiction of opponents that accompany any Obama initiative, the Administration is attempting to put a new spin on its failure by touting some of the stimulus’ most impressive projects. Projects about which the Administration is especially enthusiastic are the high-speed rails across the country, particularly between Tampa and Orlando. Although the Administration considers this rail a success story, it is actually an impending disaster for Florida, and an example of how stimulus spending will burden state budgets.

The best policy to increase employment during a recession is to let the business cycle work naturally, allowing depressed markets to purge excesses and find their bottom. Any action taken to expedite recovery should be to benefit the supply-side of the economy, such as tax-rate cuts or deregulation. Naturally, Obama will not do this, and will likely do the opposite. Since his presidential campaign, Obama has been terrorizing businesses, investors, and entrepreneurs with the threat of anti-growth policies, such as the stimulus, cap and trade, and healthcare reform. Frightened by Obama’s radical rhetoric of redistribution, this productive class is reluctant to take any risks – investing or expanding, for instance – which means employment will stay stagnant.

To increase employment – what last year’s stimulus utterly failed to do – Obama is demanding even more government spending. While most of last year’s stimulus spending went to bail out state and local governments, this year projects more infrastructure projects. Obama is championing a high-speed rail in Florida – between Tampa and Orlando – to illustrate such infrastructure spending. Descending from on high in D.C. to Tampa, the change god pontificated about the virtues of the rail to a congregation of local acolytes.

Florida, a decisive swing state, as well as a battlefield in the war between the GOP’s liberals – Governor Charlie Crist, who betrayed his party to embrace the stimulus and Obama himself – and conservatives – former Speaker of the House Marco Rubio, currently leading in polls – is a fateful place for Obama’s stimulus to make its last stand. If it succeeds, the Obama agenda will be vindicated, its critics shamed and silenced. If it fails, however, Obama’s ambitions will suffer a mortal blow, limping along to die an ignominious death in 2012. Of course, Keynesian policies have been failing spectacularly since the New Deal, and there is no reason to assume that Obama’s oratory will negate the laws of economics ensuring their demise.

The Obama Administration estimates that the high-speed rail will cost $1.25 billion, but this is certainly wrong. Florida’s Department of Transportation estimates $3.5 billion, and a 2009 Government Accountability Office report suggests that costs could be $51 million per mile, totaling $4.28 billion. Since the federal government has only granted its projected $1.25 billion to Florida, Floridian taxpayers will be responsible for the expected cost overruns.

Politicians regularly trout out high-speed rails for different reasons, and this year it is to “create jobs and generate and economic activity.” Of course, these would not be real jobs created in the private sector, but taxpayer-funded jobs protected by politics. In 2014, when the project is completed, the construction jobs will disappear, and the only thing left behind will be needless new costs for Floridians.

The Tampa-Orlando high-speed rail will serve no useful purpose, cost far more than expected, and burden Floridians with new taxes that will jeopardize Florida’s success.

Tampa and Orlando are completely arbitrary destinations; there is no relationship between Tampa and Orland to justify connecting the two. Orlando residents are not regularly traveling to Tampa – to cheer on the 3-13 Buccaneers, for example – in significant numbers. Orlando may be a popular vacation destination due to its amusement parks, but Tampa residents do not visit Disney World any more than anyone else in the United States. Based on this rationale, Orlando could just as logically be connected to Lewisburg.

Driving the 84 miles between Tampa and Orlando takes about 90 minutes on I-4, a federal highway through each city. A high-speed rail would make the trip 30 minutes faster. Rails make more sense when built over long distances – like they are in Europe and Japan – not between two close cities in the same state. Even if the rail only costs Obama’s rosy $1.25 billion, spending that much for a slightly-faster 84-mile drive is wasteful.

Although riding the rail would yield gas savings, there is not enough regular traffic between the two cities to make a meaningful difference. Saving a Tampa family the cost of gassing up the minivan every summer does not justify such an expensive endeavor. Furthermore, without a car, visitors to each city must either call a cab (negating any gas savings) or impractically trudge around town. If the rail connected Tampa to Disney World, this flaw might not be so bad, but Disney is several miles outside of downtown Orlando.

In addition to financing the high-speed rail’s busted budget, Floridian taxpayers will also be responsible for operating and maintaining the rail. Floridians understand this, and so have voted three times – as recently as 2004 – to reject plans for a high-speed rail. Floridian voters are against the rail because they know it is impractical, expensive, and would threaten their state’s unique appeal. Florida’s warm weather and beautiful beaches are not its only attractive quality. Low taxes – no income or estate tax, for example – have promoted strong economic growth, making Florida one of the most prosperous states in America. Over-taxed residents from other states (like New Jersey) move to Florida to avoid oppressive tax rates, and businesses invest in Florida because their after-tax return is higher there than elsewhere.

Property and sales taxes were Florida’s main source of government revenue, but have been undermined by the housing crisis and recession. Last summer, Florida struggled to balance its $66.5 billion budget, relying on $4.7-billion stimulus bailout, as well as a new revenue from tobacco taxes and gambling. Given the precarious condition of Florida’s economy and budget, new multi-billion dollar spending should be out of the question, yet that is exactly what the high-speed rail will bring. Construction of the rail is not financed beyond the federal grant of $1.25 billion, which means the state will raise taxes or cut spending to afford the rail. Once the rail is built, Floridian taxpayers will also be responsible for the maintenance and operation of the rail, which will require additional revenue or savings. The most recent budget dispute, however, suggests that the government is more likely to increase taxes than decrease spending.

Florida has succeeded because its low taxes encourage investment and expansion. Projects like the high-speed rail, however, threaten Floridians with higher taxes, compromising the state’s economic growth. A state income tax on “the rich” to pay for the rail, for example, would diminish Florida’s appeal to businesses, investors, and other over-taxed Americans. Instead of moving to or investing in Florida, they would select states where they have the sense not to punish their most productive citizens. Fortunately, Florida is currently one such state, though it is poised to forfeit that advantage. Rather than clamoring for stimulus funds it cannot handle from D.C., Florida should continue to uphold its pro-growth policies, trusting the free market to triumph over the central planning of politicians. An even-faster trip to Disney World may be a child’s dream come true, but its cost is an adult’s worst nightmare.

As if this were not bad enough, White-House court jester Joe Biden described this multi-billion train wreck as mere “seed money” to lay the foundation for more federal meddling in Florida, such as another connecting rail to Miami. An expensive and useless catastrophe careening towards taxpayers, the high-speed rail may darken Florida’s sunny future.

Naturally, Obama blames the need for such deficits on the Bush Administration. Obama did indeed inherit a deficit, though as a senator in a Democratic-controlled Congress, he voted with a majority of other Democrats for legislation that created the deficit, such as TARP. As President, however, Obama has only worsened the deficit situation, presiding over a $1.4 trillion deficit in 2010, now proposing a $1.56 trillion deficit for 2011, and projecting future deficits for the rest of his term.

There is also a great deal of grandstanding about the budget’s “freeze” on some discretionary programs. This proposal, which applies to only 17% of the budget for three years, conveniently occurs after large increases in appropriations to discretionary programs. Despite the fact that it will have a negligible effect on the projected deficits of the United States, Obama is peddling the gesture as evidence of his commitment to fiscal responsibility.

This budget is based on the mistaken economic theory that government expenditures – in this case, deficit-financed expenditures – have a beneficial macroeconomic effect by increasing “aggregate demand,” and thus output. Government spending, however, must be financed by taxes and borrowing, which undermines the net effect of any expenditure. For every dollar of spending, the government confiscates one dollar from the private sector, canceling out any supposed benefits.

Taxes and borrowing also distort the economic activity upon which they are levied, leading to microeconomic inefficiencies in the markets. This “efficiency cost” reduces economic activity, ultimately decreasing the economy’s output and the government’s tax revenues. To increase output and tax revenue simultaneously, the government should implement policies that promote economic activity, particularly supply-side incentives.

Obama’s 2011 budget is oblivious to the abject failure of the government’s stimulus efforts, and is a grave threat to future generations of Americans. Fortunately, for all their power, politicians cannot repeal the laws of economics.