Trends

BALANCING ACT GAINS SUPPORT The Reagan administration has thrown its support behind the balanced budget/tax limitation constitutional amendment now pending in Congress. President Reagan had previously endorsed the general idea of such a measure, but it was not clear whether he would back the current bill (S.J. Res. 58, H.J. Res. 350). But on May 19, Office of Management and Budget (OMB) director David Stockman testified before Congress in support of that specific measure.

The result of collaboration between the National Taxpayers Union and the National Tax Limitation Committee, the amendment would require a balanced federal budget each year (unless overridden by a three-fifths vote). Further, it would force Congress to comply largely by controlling expenditures, rather than raising taxes, since it would limit the growth of tax receipts to the growth rate of the economy.

Stockman based his testimony on the idea that the federal budget is out of control (as stated in this magazine's May editorial), backing up this argument with facts and figures. Concluded the budget director, "The spending bias now inherent in the political process cannot be overcome by statute."

Stockman was not originally enthusiastic about amending the Constitution. In March, columnists Evans and Novak released an internal OMB memo listing five generic concerns about such an amendment and five specific concerns about S.J. 58. But the unwillingness of Congress to come to grips with runaway spending has apparently changed OMB's position to one of support for the amendment as the only way out.

SOME ARE FLATTER THAN OTHERS The latest Washington buzz word is the "flat rate" income tax—substituting a single tax rate (say, 15 percent) for today's array of "progressive" rates and myriad exemptions and deductions. What's amazing is the degree to which the idea is gaining supporters, left and right, even though it repudiates the liberal-left principle of taxing according to "ability to pay."

Back in 1960 when economist F.A. Hayek first proposed the idea in his book The Constitution of Liberty, it was considered reactionary to question the morality of "progressive" taxation. That was still the case when William Buckley revived the idea in 1973 in Four Reforms. And things were not much better three years later when William Simon made the case for a flat-rate tax in his Blueprint for Tax Reform. (We presented a discussion of the idea in our own pages with Timothy Condon's "Open Letter to President Reagan," in May 1980.)

But times have changed. The supply-siders have laid the pragmatic groundwork for a new push for the flat-rate idea. Their telling point is the easily understood idea that high marginal tax rates discourage hard work and drive people into tax shelters or the underground economy. Supply-siders like Paul Craig Roberts, Arthur Laffer, and Alvin Rabushka have been making the case for the flat-rate tax for several years now, to increasingly receptive ears.

But it is only in the past few months that the Washington powers-that-be have begun to embrace the idea. In the Reagan administration, both presidential counselor Ed Meese ("the progressive income tax is immoral") and Treasury Secretary Donald Regan have endorsed it. Flat-tax legislation has been introduced in the House by Ron Paul (R–Tex.) and in the Senate by Jesse Helms (R–N.C.). And it isn't just conservatives who like the idea. Neoliberal star Sen. Gary Hart (D–Colo.) and liberal Rep. Leon Panetta (D–Calif.) have also endorsed it. Senate Finance Committee chairman Robert Dole (R–Kan.) announced that his committee will hold hearings on the proposal this fall and urged the Treasury Department to study it before then. Among the interest groups, support is coming not only from the conservative Citizen's Choice but also from Ralph Nader.

Not that there aren't those offended by the idea and still committed to income redistribution. Many of these people are attempting to use the flat-rate bandwagon as a way of abolishing tax deductions and exemptions while retaining escalating marginal rates. Such people range from moderates like Sen. Daniel Quayle (R–Ind.), who proposes a two-tier flat rate (18 percent on incomes from $17,500 to $50,000 and 25 percent above $50,000),to liberal Bill Brodhead (D–Mich.), who urges a three-tier structure ranging from 10 to 20 percent. And then there are neoliberals Bill Bradley (D–N.J.) and Richard Gephardt (D–Mo.), who would retain the politically sensitive mortgage interest and charitable contributions deductions but eliminate most others—including the reduced rates for capital gains. Above a basic tax rate of 14 percent, the Bradley-Gephart bill would impose a progressive surcharge, ranging from 6 percent (at $25,000) to 14 percent (for income over $37,000).

So the lesson seems to be: read the fine print when somebody talks about a "flat-rate" tax. It may just be a progressive tax in disguise. Nonetheless, it is amazing to see how many people are finally willing to question the soak-the-enterprising philosophy that's been embedded in the tax code for nearly 70 years.

TRUCKS, TRAINS, AND PLANES—AND NOW BUSES Deregulation has been a big hit with shippers. That's the finding of a survey of 2,200 businesses conducted last year by Boston-based Harbridge House, a management consulting firm. Both lower rates and improved service were cited by the firms that responded.

Many firms had expected deregulation, especially of railroads, to lead to cuts in service or higher prices. But by four to one, firms said conditions improved following 1980's partial deregulation of railroads. Overall, trucking deregulation was viewed favorably by 74 percent, while 21 percent viewed it unfavorably; rail deregulation was liked by 47 percent versus 27 percent opposed; air freight had a 38 versus 23 percent approval margin; and air express rated 37 percent for versus 12 percent opposed.

On the heels of these deregulatory successes, bus deregulation is moving up fast. Last November the House passed such a measure, and in May the Senate Commerce Committee passed a more sweeping version. With the support of both the Reagan administration and the Interstate Commerce Commission (ICC), the bill would reduce barriers to entering the industry, permit easier expansion of bus routes, and allow fare changes without ICC approval after a two-year transition period. The House Public Works Committee has largely agreed to the Senate version.

Meanwhile, second-ranked Trailways is cutting prices aggressively in an attempt to amass more than its traditional 15 percent of the intercity bus market. (Number-one-ranked Greyhound has 65 percent.) Trailways says that its ridership has gone up by 50 percent since the price-cutting began.

LAND SALES LANDS BACKERS Privatization of federal lands to help reduce the national debt (see "Privatize Those Lands," by Steve Hanke, REASON Mar.) is picking up support. A poll of the members of the National Federation of Independent Business found 62 percent in favor and only 30 percent opposed. And the National Association of Realtors has also lined up in favor. Jack Carlson, executive vice-president of NAR, told the Senate Energy and Natural Resources Committee in May: "The federal government has allowed many of its real property assets to lie idle. A private party could not afford to conduct business in this manner. Conveying property to the private sector will ensure the highest and best use of the property."

Late in May Interior Secretary James Watt announced that the presidentially appointed Property Review Board had identified 252 parcels of federal land for possible sale, with an estimated market value of $1.3 billion. The 200,000 acres are scattered around the country and include vacant land, improved property, and some military facilities. The specific parcels were not identified. The front-page article on this issue in the Los Angeles Times (May 25) quoted from Steve Hanke's REASON article on the economic rationale for privatization.

Critics have already begun referring to the plan as "piratization" rather than "privatization." And a front-page New York Times article (Apr. 16) claimed that members of the "sagebrush rebellion" would oppose the plan. In fact, however, one of the leading sagebrush rebellion groups, the States Rights Coordinating Council, has endorsed privatization (see Trends, Feb.). And SRCC president Joseph Lane was among the speakers at a June 21 Heritage Foundation conference on federal land privatization in Washington.

Environmentalists need to remember that it was one of their own, Garrett Hardin, who first pointed out the tragedy of the commons—the incentives for destructive overuse inherent in public land ownership. Privatization is, in fact, the only sensible way to solve that very troublesome problem.

CREATIVE HIGH-TECH The semiconductor industry may be booming, but it has serious problems that may be coming to the fore quite soon. In the last two to three years, the amount of capital investment a company needs merely to keep its technology current has skyrocketed, and it's already beyond the reach of most small firms. In a field where innovation is the lifeblood, semiconductor and related electronics companies are "often forced to duplicate research efforts, compete fiercely for limited expert personnel, and forego long-range innovative research in favor of product elaboration to retain current earnings and market-share," according to a report from California Governor Jerry Brown's office.

In Japan, the government has responded to the need for huge capital investment by getting involved in the financing and planning of semiconductor research. But Pierre Lamond, a pioneer of the semiconductor industry in California's Silicon Valley, thinks he has a better way.

To avoid the duplication of research and development by semiconductor manufacturers, Lamond and another industry veteran, L.J. Sevin of Sevin Rosen Management Co., are planning to raise more than $50 million to create a for-profit research laboratory, tentatively entitled Megaram. It will develop new technologies and then license them to manufacturers. "We're struggling for a way for the industry to share research costs, like the Japanese do, but without going to the government for help," Lamond told Business Week. With a staff of 50 to 60 scientists, Megaram hopes to develop in four or five years the technology to make "megabit RAMs"—memory chips that can store one million bits of data (the best chips today can store about 65,000 bits).

By maintaining a vendor-customer relationship with its semiconductor manufacturers ("We'll sell technology to Company A or to Company B, but we won't be owned by either of them," Lamond told REASON), Megaram will be avoiding one of the most vexing obstacles to high-technology research in the industry—the antitrust laws. There is a special incongruity in the law. As Rep. Don Edwards (D–Calif.), one of the most liberal members of Congress, has noted, firms with a relatively small market share that could lawfully merge under our current merger guidelines may be fearful of undertaking joint research and development activities. Such a mutual undertaking among competitors could be viewed under some judicial holdings as a per se violation of the Sherman Act, notwithstanding the freedom of such firms to take the ultimate merger step.

Fortunately, there may be a couple of ways around this snag. Edwards, in improbable combination with his traditional adversary on the Judiciary Committee, conservative Rep. Henry Hyde (R–Ill.), is pushing one of them on the federal level. They have introduced a bill that would require the Justice Department to grant "certificates of review" to companies cosponsoring technological research. If the attorney general determined that a project would be unlikely to violate antitrust laws, the companies would receive a certificate that would protect them from criminal antitrust actions and reduce their potential liability in civil actions to actual damages.

At the state level, an interesting initiative has come from the office of California Gov. Jerry Brown. Roger Carrick, Brown's deputy programs and policy assistant, happened upon an obscure 1943 Supreme Court decision, Parker v. Brown, which held that if a company could show that its alleged antitrust violations are actually mandated by state action, the company could use that as a defense and get off scot-free. In a 1980 case, California Liquor Dealers Association v. Midcal Aluminum, the Court held that this "state action defense" can work only if there is a "clearly articulated and affirmatively expressed…state policy" and if the restraint on trade is "'actively supervised' by the state itself."

Based on these two decisions, Carrick came up with the idea of fashioning a state action defense that California's high-technology enterprises could use, and at virtually no cost to the taxpayers. He has proposed a "California State Research and Development Corporation," a state agency that would license joint high-technology research projects sponsored by two or more companies and give them the blessing of being in the state interest if the research would "spur economic progress and thereby preserve the state's economic base for sufficient revenues to meet state public policy needs."

The Carrick plan is a roundabout strategy for circumventing the antitrust restrictions on joint research and development ventures, but it shows promise; if it works, it could very well be emulated by other states. An early version was not reported out of committee this spring, but plans are afoot to reintroduce it in the California Assembly in August.

TALKING COMPETITION More and more voices are being raised in opposition to the idea of continuing the monopoly status of local telephone service (see Trends, May). Most recently, the Federal Communications Commission asked the federal court dealing with the American Telephone & Telegraph antitrust settlement to make basic changes in that agreement. Specifically, the 54-page brief said that limiting the spun-off local phone companies to telephone service only would be "unnecessary and unwise."

In fact, as Peter Passell pointed out on the editorial page of the New York Times (Mar. 29), local phone service is no longer a "natural" monopoly. Cable TV firms can provide two-way voice service, as can the new cellular radio systems now coming into use for mobile phones. Ironically, the proposed settlement would allow AT&T—but not the local phone companies—to offer cable TV service, electronic publishing, and two-way consumer services. These are precisely the kinds of businesses that the local phone companies should be free to engage in, in competition with local cable TV companies. That way, neither phone company nor cable company would be a monopoly. Both could be left free to develop without the constricting hand of regulation.

CHANGING OF THE GUARD "We should move toward a system where reserves provide the bulk of our forces while the actives provide the stiffening skeleton. With this new system, the cost of defense would be lower, and our capability would be greater." So saying, Rep. Newt Gingrich (R–Ga.) endorsed the recommendations of Vista 1999, a study prepared by National Guard officers at Defense Department request. Its basic proposal is to integrate fully the guard's air and ground forces using a "maneuver warfare" doctrine.

The maneuver warfare concept has long been advocated by the military reform group in Washington. In contrast to conventional US (and Soviet) attrition warfare—which attempts to dominate an enemy force by continued applications of heavy firepower—maneuver warfare seeks rapid exploitation of enemy weaknesses using flexible air and ground firepower. The study concluded that maneuver warfare is well suited to the guard "since it has older, less complex equipment, which is generally lighter than the heavy equipment likely to be encountered." Vista 1999 recommended procurement of 670 lightweight air superiority fighters—either F-16s or F-5Gs—as well as 750 new-design, close-support aircraft, much lighter and cheaper than today's A-10.

Gingrich has introduced an amendment to the Defense Authorization Bill to direct the secretary of Defense to outline the steps necessary to combine the Army and Air National Guards in accordance with the Vista 1999 recommendations. Military reform caucus founder Rep. William Whitehurst (R–Va.) is supporting the measure.

Another advantage of the shift to improved weapons and maneuver warfare is that it would reduce US reliance on battlefield nuclear weapons—which pose the risk of escalation to a general nuclear war. Gingrich thus sees the move as an important step toward minimizing the risk of nuclear war.

SAVING ANIMALS FOR PROFIT Can free enterprise have a beneficial effect on the animal kingdom? Can the interests of endangered animal species and human entrepreneurs coincide? Read on…

In 1978 the green sea turtle was listed as an endangered species by the US Fish and Wildlife Service and the National Marine Fisheries Service. The listing included a prohibition of all commercial trade in green sea turtle products in the United States. However, the Cayman Turtle Farm on Grand Cayman Island in the West Indies, a mariculture business operation, has been actually helping to conserve the species by careful captive breeding and by not depleting the wild sea turtle stocks. It is after all in the firm's economic interest not to deplete its source of income to the point of extinction.

The Cayman Turtle Farm requested an exemption to the trade prohibition, but in 1979 a US court decision upheld the ban. Even if the Cayman Farm itself wasn't doing any harm to the green sea turtle population, the court argued, the sale of its products in the United States would feed market demand for all sea turtles and make enforcement efforts against smuggling wild turtle products into the United Stated difficult. The turtle farmers are now making another attempt to get the ban relaxed, with help from the Pacific Legal Foundation and the Association for Regional Environmental Alternatives (see Science News, Apr. 17, 1982).

Meanwhile, in Namibia, National Geographic magazine ("Namibia: Nearly a Nation?" June 1982) reports that conservation experts have launched efforts to make game management a paying proposition. About two-thirds of the country's wildlife ranges are on private land, and farmers have been granted an ownership right in the game for trophy hunting and harvesting. The consequence is that "game is now treated as a renewable resource," said Dr. Eugene Joubert of the Agriculture and Nature Conservation Department.

The June issue of Omni carried a feature called "Big Bucks Ecology" on South African John Varty, describing him as "one of a new breed of conservationists in Africa who are choosing profits over passion." Varty and his brother have set up a 50-square-mile wildlife preserve called Londolozi (for "protector of living things"), where visitors pay $40 to $100 daily for rustic accommodations and the opportunity to see giraffes, elephants, sables, and other African wildlife. Projects like this are in grim contrast with wildlife preserves in some other African nations, where enormous parks have been set up by governments: in many instances, the animals in them have been the target of poachers and even of soldiers who gun them down for sport (this has happened in Uganda, Tanzania, Sudan, and the Central African Republic).

"There are many people who believe faith will save the wilderness," says Varty. "I'm into the other point of view. If I'm not successful financially, I'm not successful at all."

GRAVY TRAIN HOLD-UP Passenger trains may be romantic and charming, but they're also, under the present system, a huge drain on taxpayers. While no major form of transportation, with the possible exception of walking and tricycles, is totally independent of government subsidies, the subsidies poured into the Amtrak system are staggering: it is estimated that in fiscal year 1980, the government subsidy per passenger mile for air travel was 26 cents; for intercity bus, 15 cents; for auto, 21 cents; but for Amtrak, $27.91. By comparison, even Chrysler and Lockheed are resplendent examples of free enterprise.

An Arizona Transportation Department study took note of these statistics when Amtrak suggested that Arizona's state government help fund new rail service between Los Angeles and Tucson via Phoenix. The report, written by senior economist John Semmens, also noted that, according to Amtrak's own estimates, the proposed daily service would cost Arizona taxpayers about $991,000 the first year and gradually increase to $2.25 million in the fifth year of operation. This, of course, didn't take into account the annual subsidies to be provided by the federal government and the state of California.

The Arizona study went on to compare the true cost of travel by different modes between cities along the Los Angeles-Tucson corridor. Traveling from Phoenix to Los Angeles by rail would cost $283; by auto, $66; by air, $74; and by intercity bus, $42. The costs per passenger for a trip from Tucson to Phoenix would be $81 by rail; $20 by auto; $13 by bus; and $22 by air. Thus, in many cases the government could save money by simply giving travelers free airline tickets—and even paying for hotel rooms for a couple of nights at their destination—rather than running the Amtrak system at the deficit that the Amtrak economists were projecting.

With all this in mind, about 40 Arizonans, many associated with the National Taxpayers Union, started writing letters, calling their representatives, and testifying at public meetings against the proposed Amtrak service. The anti-boondoggle forces didn't exactly have impressive numbers of people behind them (although they probably didn't have large numbers of people opposed to them, either: Arizona Governor Bruce Babbitt's office said it had received a "flood" of letters in favor of the Amtrak service, but when pressed, it could find only two). Still, by persistence and ingenuity, they persuaded the state not to participate in the Amtrak project, and it has now bitten the dust.

Part of the credit certainly belongs to the Arizona Transportation Department's first-rate report (Tucson/Los Angeles Rail Study, available from Semmens at the Department's Transportation Planning Division, 206 South 17th Avenue, Phoenix, AZ 85007). But much of the credit certainly goes to those feisty Arizonans who took the time to fight the proposal.

DIAL M FOR…FORGET IT Remember the dramatic PR about the 911 universal emergency telephone number? Starting in the late '60s and all through the '70s, the telephone companies told us how the substitution of a single three-digit emergency number for those hard-to-remember police, fire, and ambulance numbers would speed help on its way to us, saving numerous lives and much property. The feds kicked in with grants to help build 911 emergency answering centers, and some states (California, for example) added new telephone taxes to help cities do the same.

Only trouble was, few people bothered to ask a simple question: Is all the trouble and expense really worth it? A study of police response times raised a few eyebrows. Back in 1976 a Police Foundation analysis in Kansas City, Missouri, found that cutting down on the time it takes for police to respond would make very little difference in overall arrest rates. But critics retorted that findings from one city don't establish a general rule.

Well, that complaint has now been answered. The Police Executive Research Forum has just released the results of a follow-up response-time study in four more cities—Jacksonville, Peoria, Rochester, and San Diego ("Calling the Police: Citizen Reporting of Serious Crime"). The results confirm the Kansas City findings. The 911 number, found the researchers, is of "marginal value" in improving on-the-scene arrest rates for serious crimes. That's partly because 75 percent of all such crimes are discovered after the fact. Even for the other 25 percent, police are able to make on-the-scene arrests in only 29 out of every 1,000 cases—about three percent. Interestingly, the only city of the four with a 911 system (Peoria) had the greatest extent of delay caused by citizens looking through the phone book to find the police number.

Rather than spending more money on costly 911 systems, the researchers suggested that police departments improve their call-screening procedures to increase the odds of being able to respond at once to crimes in progress (mainly by not responding at once to minor matters), try to make it easier for citizens to report crime, and encourage community anti-crime programs like Neighborhood Watch.

RENT CONTROL SCORED The President's Commission on Housing has proposed that the federal government cease aiding and abetting rent control. Although it backed away from its interim proposal of last January, which called for cutting off all federal housing funds to cities with rent control ordinances, the commission's final report does come out strongly against the practice. Specifically, it calls for federal legislation to "exclude from [local] rent control property on which loans are issued by a federally insured lender." Since the Federal Savings & Loan Insurance Corporation 'insures most S&Ls and the Federal Deposit Insurance Corporation insures most banks, the proposal would appear to exempt most rental property from controls.

More of the economic effects of rent controls are becoming evident in Santa Monica, California, site of the most stringent rent control measure in the nation (see "Socialism: On the Street Where You Live," REASON, Apr. 1981). As renters struggle to contend with the supply problems created by rent control, recent instances of multiple subleasing by Santa Monica tenants have come to light. In one case, tenants were paying $600 per month to live in a unit that they were subleasing from a second tenant who was, in turn, subletting from the authorized tenant. The "legal" rent was $395.

Yet another effect shows up in US Census figures. When rents are held below free-market levels, people have much less incentive to economize on their use of housing—for example, by having a roommate. Thus, it should come as no surprise that the fraction of single-person households in Santa Monica is 45 percent—double the national average of 22.7 percent and much higher than the California average of 24.6 percent. Rent control cannot change the basic facts of supply and demand. But it can produce windfalls for some at the expense of others.

POSTAL SERVICES DELIVER THE GOODS Since last month's issue, there have been more happy developments in the mail liberation movement.

The Paseo Mail Center—the Camarillo, California, store that combines the best features of a post office (but without the lines) and a deposit center for UPS, Federal Express, and Transbox—is entering into an agreement with Sears, Roebuck to establish a pilot mail center in the Sears store in Stockton, California. If the venture is successful, it will pave the way for Paseo mail centers franchised in Sears stores throughout the West and then the rest of the country. Scott Adler, the entrepreneur behind the Paseo Mail Center, is also opening new stores in Ventura and Century City, California, along with the Stockton pilot store, in September.

Even though he's been in business less than a year, Adler's innovations and improvements are snowballing. He's investigating the possibility of combining mail centers with 24-hour electronic bank teller service and securing sites in banks and savings and loan buildings where people can do their banking and mailing in one place. He's already planning to eliminate the $1–$5 fee for 90 percent of the transactions in which the Mail Center computes the cheapest way to send a package and dispatches it. In fact, because of the rebates he's getting from private carriers in return for the business he provides them, Adler in many cases expects to charge customers even less than if they went directly to the private carriers' own deposit centers.

If sending a package in the Camarillo store is already a high-tech marvel, the three new stores will be a delightful excursion to Tomorrowland. You'll be able to present your package and a special card, and in less than 25 seconds, specially designed computers will print your return address on the package, calculate the cheapest available service for sending it (Camarillo handles four carrier services, but Ventura will have 10 and Century City more than 30), record the transaction electronically, and give you a receipt.

Other entrepreneurs are also getting into the act. Wayne Josephson, an investment banker, has opened two street-level stores in Manhattan called Citipostal. Billed as "postal supermarkets," according to Business Week, they sell stamps, rent lockboxes, and send packages via four carriers for a $2 service fee. And Associated Press reports that in Utah, you can send a first-class one-ounce letter via React Postal Service, a private company, for only 18.75 cents instead of 20 cents. The Post Office's rates for delivering mail already sorted according to zip code is 17 cents, and React sorts the mail and keeps the difference. So far, React's service is limited to Salt Lake City, Provo, and Ogden, but production manager Richard Stevenson says, "Just give us a chance [to expand], and we'll do it."

Meanwhile, the Post Office has not been unmindful of its competition. It has printed posters with thick black borders and tacked them up in employee work areas. The posters' caption is, "If We Don't Deliver…Someone Else Will."

CHICAGO TRIES IT PRIVATELY Chicago's garbage trucks, salt spreaders, street sweepers, and tree-trimming vehicles tend to spend more time in the shop than on the road. The blame lies with the creaky bureaucracy that does their maintenance—the Bureau of Equipment Service. Despite spending between $2,000 and $4,000 per mechanic per month on overtime, breakdowns were still frequent.

The final straw occurred in April when the entire fleet of 80 street sweepers was out of commission just when they were needed most. In quick succession, Mayor Jane Byrne announced the resignation of the bureau's director—and the privatization of the whole operation. At press time, it looked as if International Harvester was going to be selected to take over vehicle maintenance on an annual contract basis.

Chicago thus joins the ranks of cities all across the country which have found that better performance (and usually much lower cost) can be obtained by purchasing services competitively from the private sector. The Chicago Tribune supported Byrne's move as a step in the right direction and suggested applying the principle to another area as well: housing. It endorsed a City Club of Chicago proposal to contract out the operation of 2,000 of the city's 40,000 public housing units. The Chicago Housing Authority has been sharply criticized by the Department of Housing and Urban Development (HUD) for mismanagement and corruption. Privatization of housing management could hardly fail to improve the situation.

JITNEYS FOR LA Fifteen-passenger private-enterprise minibuses may soon be competing head-on with government mass transit on 27 routes in Los Angeles. Two groups of entrepreneurs have applied to the state Public Utilities Commission (PUC) for permission to begin Los Angeles's first legal jitney service since World War I.

Francisco Medinilla and his two brothers are patterning their Express Transit after successful jitney services in their native Mexico. And Maxi Taxi founder Boris Gorbis recalls the jitney routes in the Russian city of Odessa, his birthplace. Both sets of entrepreneurs have amassed the support of private investors, who see a real need for the service.

Transit economists such as Charles Lave have long maintained that one of the easiest ways to cut the huge deficits of government transit systems is to permit competition so as to reduce the peak-hour transit load (see Trends, Sept. 1981). For the Southern California Rapid Transit District to have enough buses and drivers to provide good service at rush hour means having large numbers of $150,000 vehicles and expensive drivers idle most of the day. A PUC staff report agrees with that point, despite the RTD's vociferous objections. The RTD contends that jitney service would "skim revenues" from public transit. But PUC official Victor Weisser replies that jitneys would skim transit agency deficits, not revenues.

The Los Angeles Times and the League of Women Voters have endorsed the jitney proposals. The PUC's decision was expected by midsummer.

MILESTONES • Play it again. Four years after Proposition 13, Californians again defied the politicians' threats of fiscal doom and approved tax-slashing measures on the June 8 ballot: one to index the state income tax to inflation, and two competing constitutional amendments to end state inheritance taxes. The voters also overwhelmingly defeated the Peripheral Canal water project (see REASON, June).

• No city hall TV. The voters of St. Paul, Minnesota, overwhelmingly defeated a ballot proposal to have the city government run the cable TV system, financed by $65 million in municipal bonds. The local bureaucrats' dream of a BBC on the prairies is no more; and the city will ask private cable companies to submit bids for an exclusive right to wire the city.

• Kiddie rule limited. Although it is now illegal in California to discriminate in the rental housing market against households with children, the State Court of Appeals has at least ruled that this restriction doesn't apply to condominiums. If condo project associations choose to limit occupancy, by contract, to people over 18, they can.

• Boaters' pork barrel. The Reagan administration has backed down on a plan to raise $800 million annually by charging small-vessel user fees to help cover Coast Guard expenses, according to the Wall Street Journal. Instead, the Transportation Department is now pushing a scaled-down replacement that would charge only for such "nonlife-threatening incidents" as rescuing boaters who run out of gas or get stuck on sandbars.

• Volunteer deductions? There is talk in New York State of providing state tax deductions for people who volunteer their services to nonprofit charitable organizations. One bill would provide up to $500 in deductions for people who contribute at least 100 hours a year. Senate Majority Leader Warren Anderson has appointed a task force to make recommendations, according to the New York Times.

• If Schlitz can…You've probably never seen hard liquor advertised on TV because of a ban by the National Association of Broadcasters, a private trade group. But a federal judge ruled in March that portions of the NAB's advertising code are unconstitutional. The NAB then suspended the code, so you may well be seeing vodka and brandy ads broadcast for the first time this summer.

• False Tooth Ads? Now that the American Medical Association is barred from prohibiting advertising by doctors, Los Angeles Superior Court Judge Harry L. Hupp has cleared the way for advertising by denturists, who make false teeth and bridges. The denturists hope to publicize the actual cost of artificial teeth so patients can compare that price with what dentists charge. They hope to embarrass dentists into lowering their prices.

• Sauce for the Goose…In mid-April, President Reagan sided with FCC Chairman Mark Fowler in opposing the Fairness Doctrine. "It is essential to extend to electronic journalism the same [First Amendment] right that newspapers and magazines enjoy," he wrote. Two weeks later, the Reagan administration invoked the Fairness Doctrine in a request for broadcast time to respond to the CBS News documentary "People Like Us." CBS, also invoking the Fairness Doctrine, declined the request.