[p2p-research] Abundance Destroys Profit [was: Tick, tock, tick, tock… BING]

[J. Andrew Rogers]

On Mon, Dec 14, 2009 at 3:54 PM, Ryan Lanham <rlanham1963 at gmail.com> wrote:
> Oil taxes do pay a big chunk of road construction...but the roads were
> financed by the Feds at cheap interest rates Nevada would never see by
> itself.


Nevada's roads were always built on the cheap -- the original highways
were built with a stupidly small budget and prison labor -- but the
quality is pretty good. California pays 12(!) times as much today to
build and maintain adjacent sections of Interstate to inferior
standards. Part of this has to do with the fact that gas tax revenues
are variable and they have no other source, so it forces the Nevada
DoT to be conservative and plan ahead. There is literature (been years
since I looked at it) that shows that the minority of states that use
this model get far better bang for the highway buck so it isn't
surprising.

I used to argue DoT policy issues ages ago. While pretty much
coincidence for this argument, Nevada has often been considered an
exemplar in this domain. For the longest time they managed to expand
and maintain their highways without even needing to raise bonds, just
using gas taxes and use fees.  They are one of the states (among about
a half dozen) that is on record as seriously considering foregoing all
Federal highway funds; the net losses exceed the value of the Federal
gas taxes returned.


> The real industry of the state is vice...and the subsidy was, in part,
> allowing it.  Doesn't bother me, but it is what it is.  It has been
> subsidized by cheap federal power supplies from dams, Nellis air base, huge
> water grants, huge highway grants, etc.


Sure, vice plays a big role. The state is all about tourism and
entertainment. In fact, when they tried to shed their "Sin City" image
(early '90s?), their tourism revenues plummeted and so they went back
to the model that worked and doubled down by targeting the high-end
luxury markets. Good for them. A lot of banking and accounting
operations are also in Nevada for the favorable treatment. Given that
the Federal government has all but killed mining and severely limited
agriculture, there aren't that many options.

The dam was a very large multi-state project, but I don't know how
that is a subsidy -- you would hope Nevada received *something* for
all the resources they sent to Washington DC. It was arguably more of
a subsidy for the other states that actually benefitted from the
water. Contrary to your assertion though, Nevada has built themselves
into an energy exporter, they've been dropping power plants left and
right for years. The Federal government won't let them drill
geothermal, so it is mostly gas and coal. Again, this is largely to
exploit the fact that states like California refuse to allow power
plants to be built in their own state, a purely opportunistic play.
IIRC, Nevada is guaranteed a 25% cut of all power produced in the
state at some very low price should they every want to buy it, but
they don't need it.


And what water grants? Nevada gets 2% -- yes *only 2%* -- of the total
Colorado river basin. Most of it goes to California, Colorado, and
Arizona despite Nevada having the Colorado river as part of its
border. Nevada is in fact at the center of the Great Basin water
district, a desert terminus.  The water that is there doesn't go to an
ocean, it simply evaporates.  Since the water supply in Nevada is
composed almost entirely of Great Basin water sources, how could the
Federal government grant it?  As a point of fact, Nevada has to grant
the Federal government water on Federal land, as it is not owned or
controlled by the Federal government.


Really, you are arguing that if one dollar of Federal tax money
somehow manages to find its way into Nevada it is a subsidy, and
ignores the fact that Nevada has been sending a lot more money to the
Federal government than it has been receiving for most of its 150 year
history.

If we were talking about a state like New Mexico you would have a
point, but Nevada is an atypical case even by western US standards.



-- 
J. Andrew Rogers
realityminer.blogspot.com