Tuesday, August 2, 2011

The New Debt Ceiling Decision and California High-Speed Rail

The new Debt ceiling agreement is not an FY 2012 budget.  Nor is it an agreement on the six year re-authorization of the Transportation budget.  So, let's not get too exited about the impact of this one event.

However, it is becoming clear that when the Congress reconvenes in September, they will again put on their armor and pick up their swords and spears to fight the battle of the budget.  And, high-speed rail will be a major and highly visible target for the Republicans.

There are many reasons for this, not the least that it is Obama's vanity/legacy program.  It symbolizes his quest for "winning the future." And because it is far more symbolic than useful, it is losing support quickly as reality sets in.  Those still clinging to it are there for the money. Defeating HSR will be a poke in Obama's eye. Yes, among Republicans, he is hated that much, and they will do anything to reduce his re-election chances.  At least that's the agenda.

In all fairness, the Republicans are not so much concerned with budget balancing, their rhetoric to the contrary.  That talk is pablum for the Tea Party base which believes that their personal budget and the national budget are the same thing, only smaller.  

They are, however interested in reducing the size of government, since it's the vehicle for taking money from people who have it, and giving it, in one form or another, to people who don't.  That's called income redistribution and Republicans believe that's what taxes are for. That's why they hate taxes as well as the Democrats who love them.

Before leaving this point, it should be said here that the Republican high-speed rail agenda and mine are exactly the same, regardless of the reasons.

The debt ceiling deal is a preliminary battle anticipating the budget conflicts this Fall, and that's where the real decisions will be made, including over high-speed rail.

What California's Governor Brown will do about all this is not that hard to decode.  The DOT has awarded California over $3 billion, which, coupled with the state's HSR bond funds, will become $6 billion dollars or more for the CHSRA to play with in the state's Central Valley.  I'm sure that the rail authority is already gold-plating several shovels for the September 2012 ground breaking ceremonies.

Will there be more federal funds? Most likely not.  The rail authority hasn't a clue to what they will do when their $6 billion runs out.  They will have cut a 100 mile rail corridor and put down some track. No electrification; no rolling stock. Then what?

But, from California's and the Governor's point of view, the state will have had the opportunity to pump $6 billion dollars into the economy.  And that's what the Democrats care about; not whether a train actually gets built.  

Of course, they and we don't know how much of all that money will actually stay in the state, and how much will be leaving California for other states, or be headed overseas.  But, that's another conversation.

Budget deal could jeopardize high-speed rail, clean-water programs
By Karen de Sá kdesa@mercurynews.com
Posted: 08/02/2011 09:28:05 PM PDT
Updated: 08/02/2011 09:28:06 PM PDT

The federal government may have staved off the imminent threat of default Tuesday when President Barack Obama signed a bitterly fought budget deal, but the woes and uncertainty for states have just begun.

In California, some of the most likely cuts include nutritional programs for low-income women and children, the federal portion of the controversial high-speed rail project, clean drinking water programs, and subsidies for farmers.

Also potentially at risk are federally funded university research projects and military bases, policy-watchers said Tuesday after hastily reviewing the plan to cut national spending by $2.1 trillion over 10 years. None of the cuts have been specified; Congress will decide the first round of $917 billion in the coming months, and a deficit-reduction committee will take a second swipe at the budget later this year.

In an interview Tuesday, Gov. Jerry Brown excoriated Republicans for their "obsessional" opposition to taxes and warned that because the congressional debt limit agreement lacks additional stimulus funds, "the economy will creep along instead of roaring back."

How much pain will be felt at the state level is difficult to gauge, Brown said, but at stake are hundreds of billions of dollars in federal health programs, education, highways and other vital funds.

"The federal government has to balance its books, and it's got to make tough decisions," but "you've got to have revenue as well as cuts," Brown said, referring to the lack of new taxes in the budget deal.

He argued that U.S. lawmakers "should be deferring the cuts by putting them into law and investing in jobs, whether in Civilian Conservation Corps or high-speed rail or bridges."  [It's all the same to Brown. It's not really about the train; it's about the money.]

Had Congress and the president not reached the deal approved Tuesday, it could have led to an unprecedented catastrophe, affecting payments for many, including veterans and Social Security beneficiaries. Instead, the bitterly partisan battle concluded with a plan for deep cuts to social spending and an agreement to raise the debt ceiling.

Precisely which state programs will be affected and when will be fought in the months to come. But targets could well be programs that have raised controversy in the past. Program cuts to states will mostly take effect in 2013, but some might begin this year.

"Some high-profile programs in California could face -- if not complete elimination -- a severe haircut," said Eduardo Martinez, a senior economist with Moody's who covers California.

Construction on the state's 800-mile high-speed rail project is set to begin next year in the Central Valley.
Martinez said the rail line is the most obviously endangered program, given that Central Valley and Inland Empire congressional leaders have been among the $43 billion project's most vocal critics. Add to that several highly critical independent reports questioning the project's cost, funding sources and projected ridership.
California has already secured more than $3.6 billion in federal funding for its bullet train line. But the state needs at least $30 billion more from other sources -- including about $15 billion from Washington -- to build the rail line from San Francisco to Anaheim. [They're going to need a hell of a lot more than that, aren't they!]
Martinez said the joint House and Senate committee charged with finding an additional $1.5 trillion in spending cuts or new revenue will be looking for "low-hanging fruit" -- and "the recent publicity around the high-speed rail program suggests that could come under the ax partially or completely."

Jeff Hurley, a policy specialist with the National Conference of State Legislatures, suggested federally funded clean water and drinking water programs in California also could land in the committee's sights.

Farmers are also worried. The California Farm Bureau expects cuts to direct payments to farmers, subsidies that totaled $149 million last year and which could now face elimination.

State GOP Chairman Tom Del Beccaro called the deal nothing more than "stopgap measures," saying he would have preferred structural changes such as fixes to Social Security and Medicare. "I don't think we're on the road to fiscal recovery from this," he said.

Senate President Pro Tem Darrell Steinberg, noting the narrowly averted effects of a federal government default, said: "There is much for Californians to be concerned about in the agreement reached by party leaders, but the alternative would have been catastrophic."

Gov. Brown argued that the unprecedented move by Republicans to tie the debt-ceiling vote to their agenda is a dire signal that the country's democratic traditions are in danger.

"The specter of a country that can't govern itself is not pretty," Brown said, adding that "we saw that here in California" during recent budget battles. "And while politicians are fighting, the country is suffering."

Staff writer Mike Rosenberg contributed to this report.

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