Monday, April 16, 2012

High-Speed Rail in California is like a Gold-Plated Shovel.

Be sure to read other entries before this one as well.  You may be missing some since often there will be several daily entries, not just one. You should check each day.
Michael Kennedy is the Principal of Bethel Christian School in a Bakersfield, California.  His position is somewhat that of a fiscal conservative and I have no trouble with that if it's not ideologically driven or extreme.  In this case, he takes on the economic implications of the California high-speed rail project to illuminate its financial shortcomings and hazards, including harm to employment elsewhere.

That last point surfaces when you look at the intentions of the high-speed rail authority which seeks to seduce its expected train ridership out of flying between San Francisco and Los Angeles.  Will this shift in business, from air to train, not also result in air carrier layoffs as their short-haul in-state business declines?  Is this a zero-sum game that the rail authority doesn't want us to think about?

Kennedy's basic argument is such a zero-sum position. Every tax dollar spent on HSR won't be spent on something else, and that something else may be far more critical to the state's well-being than building a luxury train ride for the affluent.  

Also, if jobs are to be created by this project, the high costs of this construction will drain funds away from other projects, or even existing institutions, thereby obliging lay-offs and creating a labor pool surplus; that is, more unemployed. To put that as simply as possible, every dollar spent on HSR won't go to the schools, which, in California are in critical shape, near the bottom of all the education systems of all the states. 

We must stop thinking that this project exists in a vacuum and in total isolation.  It enters the economy as a fiscal drain. The advocates persist in claiming that the ultimate benefits will outweigh any costs.  

At best, that's wishful thinking.  This train will be icing on a cake, when we can barely afford the cake.  It is, to use another metaphor, gilding the lily, when the State doesn't even have a lily to gild. 

The Governor and the others who stand to personally benefit from this high-speed rail project, directly or indirectly, represent the project as iconic; that is, a symbol of California and its restored might. They say things like HSR will restore our leadership and win the future. That is unmitigated and unsubstantiated BS.  

It's the difference between the gold-plated shovel used at dedication ceremonies, and real shovels, which work much better and cost far less.  High-Speed Rail in California will be such a ceremonial and useless "gold-plated shovel." 

I consider this a commendable article worth reading.
Sunday, Apr 15 2012 11:05 PM
Will high-speed rail result in higher taxes and fewer jobs?

Michael Kennedy

Over the last century, the fiscal nature of our American society has drastically changed. My grandfather often reminisced of a nation and people who refused to accumulate debt unless there was a means to repay it. This was a time in our history when there was little need for a contract, as a man could take out a small loan on a handshake, and he or his heirs would make sure that the debt would be paid. 

Our present-day culture is far removed from this former age. In fact, some would argue that our society is the complete antithesis of this prior time and place. This sharp change in American fiscal ideology has destroyed many families, business ventures, and it has also eroded our once sound view of U.S. economics. It is this change in ideology that has brought our state to the precipice of economic ruin. 

Years of economic decline have already resulted in a state where the net interstate migration has reversed, and public employees face an unfunded pension and retiree health care program. California also has one of the highest tax rates in the nation.

Nevertheless, many California citizens are in denial. This denial is evidenced by the willingness of the citizenry to spend more and accumulate billions in high-speed rail debt and debt servicing, in addition to a looming $250 billion of debt that Stanford University experts estimate will be accumulated by the under-funded state CalPERS system. On top of this emerging debt, one must also add the billions in deficit spending and budgetary referrals over the last decade.

It is unfortunate that the media, partisan politicians and a small portion of the public are actually buying into a high-speed rail program. With no private investment in HSR and little federal assistance, there is no doubt that higher state taxes are inevitable if the HSR project moves forward. Maybe this is one of the reasons Gov. Jerry Brown is pushing for a $31 billion ballot initiative that will increase taxes.

However, it should be noted that even with an increased tax rate, continued spending on this failed government program will force our elected representatives to cut state-funded public programs and necessary public services even more. Thus, local redevelopment projects will be halted, quality programs will continue to be cut from our schools and universities, firefighters will not receive the equipment and vehicles needed to fight fires, and law enforcement will be bound by limited government funding. 

Excessive HSR spending will also trickle down to negatively impact public health care benefits and other miscellaneous programs for low-income families.

This will also affect state government employees. While High-Speed Rail Authority officials have promised thousands of jobs to construction unions and government officials throughout the state, they have failed to calculate in the 2012 Revised Business Plan how many state jobs will be lost if private funding fails to materialize with this expenditure. We are currently exceeding our state budget by only a few billion dollars, but this shortfall has caused major furloughs, pay cuts and layoffs for thousands of state employees. 

Last month alone, more than 20,000 teachers throughout the state received preliminary pink slips. This prompts the question, "How many additional jobs will be lost when the state amasses over $68 billion in high-speed rail debt?" With state unemployment at 12.5 percent, this is not the time to lay off employees, reduce pay or mandate furloughs in order to invest in a high-speed rail project, which, according to transportation researchers, is divorced from any reality.

Californians should be cautious when faced with the sleek car salesman antics of Gov. Brown and the High-Speed Rail Authority. The project is a lemon that will never be self-sufficient and will forever drain the income of our citizens. State spending is soaring and high-speed rail debt is piling up by the billions. We must stand up and say no to the project, as this is saying no to huge debt, much higher taxes and to an irresponsible burden on coming generations.

Michael Kennedy of Bakersfield is the principal of Bethel Christian School. 

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