Tuesday, December 28, 2010

"Oops" and "O.P.M."

Time to talk politics. The Howard Jarvis Taxpayers Association is closely coupled with Proposition 13, which changed the revenue picture in California forever. We can argue whether for better or worse. Many are still in favor of it, others oppose it.

Here is a HSR article by Jon Coupal, HJTA's president. I don't want to use terms like 'Libertarian' or 'right-wing conservative' since the understanding of such expressions requires careful explication for which I'm not competent.

Until recent years, I always thought of myself at the opposite end of the political spectrum from the "Right." But, we live in very confusing times. What I do know is that whatever other ideological beliefs are embedded in the thinking of the membership of the HJTA, they are uniformly opposed to the California high-speed train.

And, even if I don't agree with many of the other positions that this organization holds, we are in complete accord on this one issue. I say this because I continue to think of myself as a left-wing progressive and cherish my social ideals. However, the enemy of my enemy is my friend. And, like "Jarvis," I want my (and your) taxpayer rights protected, not exploited.

What's the point here? As we've said many times, Republicans tend to oppose the train; Democrats support it. So, I acknowledge this one inconsistency, a Democrat who fervently opposes the train. All this is a context and prelude to Coupal's article, below.

Living in a Blue State, and on a very Blue Peninsula in this State, makes opposition to HSR an act of courage. Our friends and colleagues are more likely to be Democrats than not. And, if you oppose the high-speed train, you also, by default, oppose the transfer of federal ARRA funds to California which is a central tenet of Democratic policy. It's a dreadful dilemma. Why should a very bad project be the vehicle for restoring economic viability to our state? It's a question that every Democratic politician in the State and on the Peninsula must answer. Even beneficial ends do not justify harmful means.

There are two alternative options to building this boy's toy. We can either not spend the money at all; that is, not have the FRA send the dollars to California, but instead put it back into the Treasury as the Republicans now suggest. Or, the FRA can re-direct those funds where they are needed most, such as in upgrading and salvaging the urban and regional public mass-transit systems in our two major population regions, as well as repair our current debilitated infrastructure.

If they proceed as they currently plan, these funds will be drained off in directions we don't right now anticipate. For example, all the Parsons Brinkerhoff profits (and they will be generous) will be sent to the UK, where PB is based. A lot of material, like rail stock, etc. and certainly rolling stock, will come from overseas. Remember, the US has become the shopper on this planet, and the rest of the industrial world is the marketplace where our dollars are headed. How does that bail out California?


Oops and OPM

December 27, 2010

By Jon Coupal

California’s efforts to build a High Speed Rail system is on track (pun intended) to become the biggest public sector “oops” project in American history.

“Oops” is a small word (technically an interjection) that is sometimes uttered when someone makes a mistake. You drop your wife’s favorite serving dish? Oops. (By the way, oops is a word you never want to hear from the guy at the controls of a nuclear power plant).

"OPM" stands for “other peoples’ money.” It is an abbreviation used by fiscal conservatives to describe why public spending gets out of control. It is because elected officials and bureaucrats aren’t spending their own money (with which they would be far more careful).

Rather, they are spending OPM so there is little motivation to be responsible with it.

Throughout history, governments have planned and begun construction on large scale public projects only to later abandon them when it becomes clear that they are not viable.

The problem, of course, with abandoning a project already begun – especially in the public sector – is that it already comes with a built-in constituency dependent on its continued existence. This leads to the common phenomenon known as “throwing good money after bad.”

To be clear, the same phenomenon can happen in the private sector as well, and the same sort of “bureaucratic inertia” might sustain continued capitalization of a project even after doubts about its viability have been confirmed. But the private sector has what the public sector does not: Accountability and a harsh influence known as “the bottom line.”

Sooner or later, a high level executive accountable to stockholders is going to pull the plug on a project that has become an albatross incapable of generating a viable return on investment.

Even though it takes a lot longer to pull the plug on a public project, it still happens when it becomes painfully obvious to everyone except those too emotionally invested to be rational that the project just isn’t going to work. In the early 20 th century, the city of Cincinnati built an elaborate system of tunnels for a subway system. Later described as "one of the city's biggest embarrassments" and "one of Cincinnati's biggest failures," the project was abandoned when it became clear that it was not economically viable.

More recently, fiscal hawk Governor Chris Christie of New Jersey pulled the plug on a super-expensive tunnel project under the Hudson River notwithstanding the fact that billions had already been spent on construction. He did so for a very simple reason: It was too expensive and New Jersey couldn’t afford it.

The cheerleaders of California’s High Speed Rail project long ago ceased to be rational. Study after study now reveals that both ridership and fare revenue projections are so far off what Californians were told when they barely passed the bond measure that the project, if completed, will be a massive drain on the state’s general fund in the form of subsidies just to keep it running. Because massive, ongoing subsidies are a certainty, California would be better off burning $40 billion dollars in a huge pit rather than fund this monstrosity.

The decision to pull the plug on California’s HSR project won’t be easy. The Authority spends a significant percentage of its funding on public relations and lobbying. Between the Board of the Authority, its staff, consultants, lobbyists, the bond industry, contractors and other assorted interests with their noses in the trough, the inertia for continuing this project is substantial.

It will take someone in a major leadership position to bring a dose of reality to the fate of California’s HSR project – perhaps someone who characterizes himself as frugal and who is also facing a massive budget deficit.

Jon Coupal is president of the Howard Jarvis Taxpayers Association -– California's largest grass-roots taxpayer organization dedicated to the protection of Proposition 13 and the advancement of taxpayers' rights.