California Economics: Just Keep Digging
Its been barely a week since Stockton, California became the largest U.S. city to file for bankruptcy; but that didn’t stop lawmakers of the “Golden State” from approving billions of dollars this week to finance the initial segment of the nation’s first dedicated high-speed rail line.
One might think that a state with a $16 billion shortfall might consider budget cutting rather than spending billions more the prudent move; but alas California Gov. Jerry Brown and the Obama administration know what’s best.
“No economy can grow faster than its transportation network allows,” U.S. Transportation Secretary Ray LaHood said in a statement applauding the legislative vote. “With highways between California cities congested and airspace at a premium, Californians desperately need an alternative.”
California is asking its citizens this fall to approve massive tax increases to address the state’s budget crisis while authorizing the state to begin selling $4.5 billion in bonds that includes $2.6 billion to build an initial 130-mile stretch of the high-speed rail line in the Central Valley. The state’s contribution allows California to collect $3.2 billion in federal funding for the project.
California: Bankrupt Ideas Lead to Bankrupt Governments
Apparently the California governor believes in the Obama philosophy that infrastructure spending is the answer to bloated government. Doesn’t anyone in the Democratic Party learn from past mistakes? Is this just one more shovel-ready project that’ll result in few jobs each costing hundreds of thousands of dollars? Government cannot efficiently create employment; this point is not debatable. The last time the government managed to spur the growth of millions of jobs was during World War II. Unless Jerry Brown is intended to declare war against New Mexico his only hope of changing the downward trajectory of his state is to make California a more economically friendly place for businesses and taxpayers.
Brown completely ignores the failure of the Obama stimulus package to argue that the project is sorely needed to create jobs in a region with higher-than-average unemployment. Does Gov. Brown believe a few people laying railroad track will stem the state’s shrinking population?
Brown doubled-down on the false job creation contention by claiming the stated needed the massive infrastructure project to accommodate expected growth in the state’s population. Precisely who is expecting a state headed for financial collapse, projecting tax increases for the foreseeable future and businesses fleeing for a friendlier home to grow?
Members of the state Senate voted 21-16 along party lines after intense lobbying by Brown, Democratic leaders and labor groups. The bill, which passed the state Assembly on Thursday, now heads to Brown for his signature.
“The Legislature took bold action today that gets Californians back to work and puts California out in front once again,” Brown said in a statement. The governor celebrated with Senate President Pro Tem Darrell Steinberg of Sacramento, a fellow Democrat, in the lawmaker’s office right after the vote.
The first segment of the line will run from Madera to Bakersfield. The final cost of the completed project from Los Angeles to San Francisco will exceed $68 billion.
Republicans blasted the Senate decision, citing the state’s ongoing budget problems.
“It’s unfortunate that the majority would rather spend billions of dollars that we don’t have for a train to nowhere than keep schools open and harmless from budget cuts,” Sen. Tom Harman, R-Huntington Beach, said in a statement.
Sen. Ted Gaines, R-Granite Bay, said the project would push California over a fiscal cliff.
“It will require endless subsidies and will blast a massive hole into our budget,” Gaines said in a statement.
Dan Richard, chairman of the California High-Speed Rail Authority, which is managing the project, said California would have lost billions of dollars in federal aid if the Senate fails to pass the bill before adjourning Friday for a month-long recess. California entered a contract that called for the federal government to provide money for building the Central Valley segment if the state also put up its share.
“Not only will California be the first state in the nation to build a high-speed rail system to connect our urban centers, we will also modernize and improve rail systems at the local and regional level,” Richard said.
California was able to secure more federal aid than expected after Florida, New Jersey, Ohio and Wisconsin turned down money. Perhaps the sun is too strong in California and they don’t understand why other states are turning down matching federal funds? Could it possibly be that these other states are acting responsibly by not spending money they don’t have? A lack of money doesn’t seem to deter the brilliant minds in California. Just because the federal government is acting irresponsibly does that mean we all have to join in?
California’s high-speed rail project sounds like a very worthwhile project and no one is suggesting we not strive to employ technology to better our society; however a rational and responsible government first gets its fiscal house in order before launching into a massive new projects.
California’s Democratic governor and legislature, to their own ruin, has bought into the failed Obamanomics theory that government spending is the way out of every dilemma.
There should be some fantastic real estate bargains after the State of California declares bankruptcy.
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