Tuesday, February 15, 2011

Who pays the High-Speed Rail piper? Go ahead, guess.

Perhaps the most interesting comments in this article in the San Francisco Chronicle are from Chuck DeVore.  DeVore wrote the "con" ballot argument against Proposition 1A in 2008 that put HSR on track for California. He points out how, if Obama's HSR program proceeds, it will drain funding from both state and nation.  

Let's be clear.  Every dollar spent against the $9.95 billion in general obligation (GO) bond funds will cost the state -- that is, the taxpayers -- two dollars. These dollars can be spent regardless of whether those bonds sell or not.  Right now, it's the worst time to buy California muni bonds which are rated at just a sliver above junk status.  And that's because of California's amazingly bad economy.  The projected state deficit is $25 billion.  The state debt is over one trillion dollars in borrowed and not yet borrowed funds. Including pension fund debts will raise that trillion even further.  And, California taxes are the second highest in the US, next to New York.  The state has painted itself into an economic corner and the high-speed rail bond funds will only buy us more paint.

The general assumption is that while state funding via these bond obligations is "borrowed" money, like a mortgage, the federal funds, such as the stimulus funds, are "free."  We know that the federal debt is above $14 billion thereby carrying an enormous debt service interest payment. In other words, those federal dollars are anything but free. They too are borrowed.  And, so long as we avoid being taxed to repay them, the debt reduction will be postponed, both in Washington and in Sacramento.  That means, kicked down the road for our children and their children to pay.  Is that any way to run a government?

The title of the article says that what Obama has just proposed in this budget parallel's "California's interests."  How can that be?  It is not in California's interest to cut education and social/medical benefits for the old and the poor.  It is not in California's interests to perpetuate this rail project that will cost the state dearly and forever.  Will Washington subsidize this train operation if it ever does get built? Of course not.  We in the state will have to pick up the tab for the handful of riders who we will be subsidizing to ride the train.

One final point.  The article indicates that "California already has received nearly $4 billion for this project."  I don't think that's correct.  They have been "awarded" these funds from the ARRA Stimulus program, but they cannot be actually transmitted until the rail authority complies with time-line requirements, including the CEQA process, next year.  Meanwhile, House Republicans are exploring ways to rescind these awarded but unspent awards.

By the way, you know that huge population increase that is forecast for California and thereby justifies the HSR project?  Actually, there is a projected decline in the 18 - 24 year age group but a 50% increase in the 65 year and up age group (the baby boomers).  So, this train will be great for grandma and grandpa taking the grandchildren to Disneyland.  And, it will cost all of us only around $100 billion to make that possible.

Obama's budget parallel's California's interests

Carolyn Lochhead,Carla Marinucci, Chronicle Staff Writers
Tuesday, February 15, 2011

(02-15) 04:00 PST Washington - --
The $3.73 trillion budget that President Obama requested Monday eliminates funding for the C-17 cargo plane built in Southern California and trims a range of domestic programs, but otherwise tracks with California's interests in high-speed rail, clean energy and research.

However, the administration's proposal to slash by more than half aid to states for incarcerating illegal immigrants drew howls from the Brown administration.

"These proposed cuts couldn't come at a worse time for California," said state Department of Finance spokesman H.D. Palmer. "We have a $25 billion deficit and already spend $1 billion each year incarcerating undocumented felons." The state would lose more than $53 million, but in the past, Congress has restored such cuts. More than 11 percent of felons in state prisons are undocumented immigrants.

Although the proposed 2012 budget would trim or freeze popular programs such as Pell Grants and community development block grants, many of these programs have seen double-digit budget increases from the 2009 stimulus legislation. Sperling said the administration scrutinized all domestic programs for savings and focused "only on what is most essential."

Stimulus aid to states would continue to decline. Obama proposed ending Bush-era tax cuts for high earners when they expire in two years. He made a deal last year with Republicans to renew them in exchange for extended unemployment benefits, helping to push this year's deficit to a record $1.5 trillion. Obama's budget projects a $1.6 trillion deficit for next year.

Obama would continue funding California's Bay Delta restoration effort. National parks would get a small increase, in contrast to the cut proposed by House Republicans.

Because Congress has the final say on spending, Obama's budget serves mainly as an opening bid in negotiations with Republicans that will become fevered when funding for 2011 runs out March 4, and when the $14.3 trillion debt ceiling is reached later this spring.

Republicans are bent on rolling back items such as high-speed rail where the administration and California are making big bets. House Republicans will open debate today on their plan to cut $61 billion from this year's spending. Affected interest groups have begun mobilizing to block the cuts.

To demonstrate his willingness to cut back programs he favors, Obama, a former community organizer, proposed trimming community development block grants, which help fund community organizing.

Deepak Bhargava of the Center for Community Change in Los Angeles said Obama's proposals "will gut critical safety net programs that help ease the pain of unemployment and underemployment."

The $2.5 billion C-17 cargo plane has long been on the Pentagon chopping block, but was rescued in 2009 by Sens. Barbara Boxer, D-Calif., and Kit Bond, R-Mo. The plane is built in both Long Beach and Missouri. Boxer was not available for comment, but her spokesman, Zac Coile, said the move to save the production line allowed sales to India and Australia that saved U.S. jobs.

Former U.S. Senate candidate Chuck DeVore, a California Republican and former aerospace industry executive, declined to criticize elimination of the C-17.

"Over the years, powerful legislative interests will often vote to keep a production line in play as a domestic jobs program rather than as something needed for national security," DeVore said. "My general sense is to defer to the Joint Chiefs. If California lawmakers want to restore it to keep a few hundred people employed in Long Beach, that's the wrong reason. ... It's not particularly efficient."

DeVore, who wrote the ballot argument against high-speed-rail funding in California, said the train service will be "one of the easier things for the GOP majority to stop" in the House. If it proceeds, he said, it will drain funds from the state and federal government. Obama requested $53 billion for high-speed rail over the next six years, and California already has received nearly $4 billion for its project, which is expected to cost at least $42 billion.

E-mail the writers at clochhead@sfchronicle.com and cmarinucci@sfchronicle.com.