State Controller John shocked California legislators this week when he sent a letter announcing that the State will run out of cash on March 8th without the legislature agreeing to allow the State Treasurer to delay $2.4 billion in payments to universities, counties and Medi-Cal, plus borrowing another $3.3 billion from Wall Street bankers.

The Controller’s announcement comes just two weeks after California Gov. Jerry Brown gave his State of the State speech to the Legislature, then immediately hit the road in a two-day campaign swing through Southern California to tout his November ballot initiative to raise taxes on all Californians. At a stop with 50 of Orange County’s top business leaders and CEOs, the Governor outlined how he was already making severe budget cuts, reorganizing state government, and implementing a 12-point pension reform plan.

Brown said he offered these actions as credibility before asking business to support his November tax initiative. The Governor added that he welcomed California’s future population growth and assured his audience that the State’s future is bright. Brown reiterated his support for the nation’s first high-speed rail system and for expeditious completion of the environmental review on a proposed project to fix the state’s water delivery system that has devastated Central California farmers.

California lawmakers had been assured by the Brown Administration’s Department of Finance that the State had sufficient cash reserves through the end of the State’s June 30th fiscal year. But Controller Chaing warned that for the first six months of the fiscal year state tax revenues came in at $2.6 billion below budget and spending came in at $2.6 billion over budget.

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On virtually every policy issue and in most sectors of the economy, the left’s solutions call for bigger government. The clear implication of that worldview: We should trust government bureaucrats more than private individuals to innovate, create and provide prosperity and general well-being.

President Obama argued in a recent speech on the economy, for instance, that we need to “make the investments … in things like education and research and high-tech manufacturing.”

And in his blueprint for energy for coming decades, Obama says government must fund and lead the way to new energy solutions: “We can get there by creating markets for innovative clean technologies … the Federal government needs to put words into action and lead by example [my emphasis].” Others on the left agree,  even some on the right and still others go even further, insisting that government must soup up its already pronounced role, and lead the way in medical research, transportation, education and more.

Whatever Barack Obama’s latest claims to Teddy Roosevelt’s progressive mantle, though, history dismantles the notion that without paternalistic governmental guidance, the economy would be left in a morass of confusion and stagnancy. In fact, just the opposite is the case. Government often lags, and even obstructs the ingenuity of the private sector.

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An oft-repeated talking point and applause line has crept into President Obama’s repertoire of class-envy and demonizing rhetoric these days.

“At a time when countries like China are building high-speed rail lines and gleaming new airports, we’ve got over a million unemployed construction workers — many of them Latino — who could be doing the same thing right here in the United States. That’s not right. It’s time for us to fix it.”

Setting aside the ethnic pandering inserted especially for the Hispanic Caucus audience, the blatant coveting of China’s shiny new toys is  shameful.

There is something unseemly about the President of the United States publicly drooling in envy over the Potemkin Village that has been propped up in Communist China.  Yes, they have fast trains and cool airports, but they were put together with little regard for safety and by the equivalent of slave labor.  The central government of China has made a choice.  They have chosen to erect these symbols of modern technological wonder for the sole purpose of impressing foreign rubes like Barack Obama at the expense of the hundreds of millions of people who still live in squalor.

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The Mohair subsidy. The AmTrak subsidy. The Ready to Learn TV Program subsidy. What all of these federal subsidies (and scores more) have in common is that they are on the specific list of federal programs that Republicans are proposing to eliminate to cut the debt and preserve America’s fiscal integrity.

Hey, with the U. S. national debt increasing by $4.1 billion each day, we are faced with national bankruptcy—which has aroused the Republicans from their lethargy. They will agree to raise the debt ceiling if the politicians will agree to restrain their spending appetite by making specific cuts.

What specific suggestions for cuts has President Obama made? Almost none. It doesn’t count to talk about future savings from possible cuts in national defense, or alleged savings from Obamacare. It’s all in the future, and we don’t know if any of it will happen.

For the president to make no suggested cuts in our bloated federal budget is astonishing. Let’s take the more than $100,000,000 annual subsidy to Amtrak as one example. Amtrak is expensive and inefficient, which is no surprise. The first transcontinental railroads—the Union Pacific and the Central Pacific—were built in the 1860s and they ran about $60 million (in 1869 dollars) in debt in building costs, and both went bankrupt (the Union Pacific several times) before the end of the 1800s. By contrast, the Great Northern Railroad, which went from St. Paul to Seattle was built with no federal subsidies and never went bankrupt. The subsidies to the Union Pacific and Central Pacific made them dependent on the government, and helped lead to their downfall. Thus, if the federal subsidies to transcontinental railroads failed when first tried in the 1800s, why should we be surprised that AmTrak loses money every year now. And what does this tell us about the huge subsidies President Obama has planned for high-speed rail?

Why is the president failing to join the current debate? Why is he offering almost no specific cuts?

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Someone must have imagined that my hopes for improved economic understanding might be excessively optimistic and thus needed to be curbed to restore my normal emotional balance, because that person undertook to smash any such hopes to dust by e-mailing me a link to a Huffington Post article by Paul Abrams, “Economically, World War II Was Stimulus on Steroids.” This screed turns out to be an ostensible macroeconomics lesson composed in equal measure of economic foolishness, historical ignorance, and ideological tendentiousness — the veritable epitome of a worse-than-worthless contribution to public enlightenment.

The opening paragraphs indicate the direction of Abrams’s argument:

The next time someone argues that the New Deal failed, and only the Second World War ended the Depression, as ‘proof’ that government spending does not work, one can respond with the details of economic growth and unemployment reduction up to 1940, or one can ignore the claim and thank them for making your case for massive government spending in a deep, broad recession.

Right wing politicians are loathe to credit the New Deal with any success in hoisting the United States out of the Great Depression, but credit World War II for that achievement, believing that that somehow disproves Keynesian economic theory.

That claim, however, undermines their entire premise.

Abrams concludes that “massive government spending at a time of severe economic downturn and dislocation can indeed get an economy humming again,” as World War II shows; the New Deal was merely too timid. He seems unaware that his argument merely restates the fallacy-ridden hodge-podge of conventional wisdom about how World War II “got the economy out of the Depression” that has dominated the thinking of economists, historians, and the public ever since the war itself.

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The key to winning the future in America, according to President Obama, Vice-President Joe Biden and Transportation Secretary Ray LaHood, is High Speed Rail.  According to the President, China is “cleaning our clock” when it comes to infrastructure. Why is this Administration wasting so much time trying to waste our money on something we do not want?

The existing rail systems in this country are heavily subsidized by all of us through gas taxes. The light rail lines in Portland, Phoenix and Charlotte are in deep debt, behind schedule in construction, and causing the local governments to raise sales taxes and cut back on bus service schedules and other vital services. The United States is not unique in this administration’s obsession with mass transportation. This report from The Telegraph establishes that the progressive agenda, in this case in the pursuit of high speed rail, is worldwide.

According to the report, “cars will be banned from London and all other cities across Europe under a draconian EU master plan to cut CO2 emissions by 60 per cent over the next 40 years.”  It states further that “Siim Kallas, the EU transport commission, insisted that Brussels directives and new taxation of fuel would be used to force people out of their cars and onto “alternative” means of transport.”

It is apparent that the high speed rail mania our federal government has been relentlessly pursuing is not unique to the United States.  An article dated February 28, 2011 in the UK Independent describes that “Transport Secretary Philip Hammond today launched a consultation on Government plans to “redraw” Britain’s economic map by building a £32 billion high-speed rail network.”  The words used by Hammond are eerily familiar, as he states “We must invest in Britain’s future” and “We cannot afford to be left behind – investing in high speed rail now is vital to the prosperity of future generations.”  These identical talking points were heard repeatedly from local officials in Tampa during the elections in November 2010.

The British lifestyle is quite similar to ours.

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How serious can the Democrats be about deficit reduction?

From the Associated press:

Amtrak and rail projects in 15 states are being awarded the $2 billion that Florida lost after the governor canceled plans for high-speed train service.

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On today’s edition of Coffee and Markets, Brad Jackson and Ben Domenech are joined by Nick Loris of the Heritage Foundation to discuss smart policy solutions to address high oil and gas prices. Then Pejman Yousefzadeh talks about Barack Obama’s recent decision on Gitmo detainees.

We’re brought to you as always by BigGovernment and Stephen Clouse and Associates. If you’d like to email us, you can do so at coffee[at]newledger.com. We hope you enjoy the show.

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Hard on the heels of his speech to the U.S. Chamber of Commerce, in which he jawboned the owners of private businesses to increase hiring in return for federal tax breaks and other subsidies, President Obama has included in his budget request for fiscal year 2012 a proposal to make a $8 billion down payment on a six-year, $53 billion taxpayer-financed “investment” in high-speed rail.

The president’s budget proposal is a bad idea for at least two reasons. First and foremost, the public sector has little or no incentive to spend the taxpayers’ money in ways that maximize the ratio of benefits to costs. What is more important, no public transit system in the country, with the possible exception of New York City’s subway, generates passenger revenues sufficient to cover operating costs, let alone capital costs. All others gush red ink year after year.

Passenger fares on public transit modes typically are set at rates below full cost in order to maximize ridership and to “prove” that transportation via bus or rail is a worthy public service.

It may be reasonable to assume that high-speed rail transportation in the Northeast corridor, linking Washington, D.C., Philadelphia, New York and Boston, could pay its own way, but that conclusion depends on the relative cost of rail versus air and automobile travel among those same cities.

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President Obama’s proposed $53-billion more for “high-speed rail” (on top of a previous $10-billion) is a testimony to the power of adjectives.

If it were labeled “plain old rail travel” it would lack the pizzazz but would be far more accurate.  Understating costs, overstating benefits, and lots of supersonic rhetoric are the selling points for high-speed rail.

The “high speed” adjective invokes thoughts of bullet trains speeding at 150 mph, 200 mph or more.  The reality of Obama’s plan is—at best—the 85 mph that is the average speed of America’s fastest train, the Amtrak-run Acela.

When Obama claims his trains would reach 100 mph and more, he’s talking about peak speed reached only for short stretches, not the average.

How about pollution savings?  The supposed rail advantage depends on comparing apples to oranges.  If you compare auto emissions on highways, they’re no worse than rail emissions.  Rail has an advantage only if you compare long-distance train trips with car emissions from stop-and-go driving in the city.

An exhaustive Department of Energy analysis by Oak Ridge National Laboratory concludes, “intercity auto trips tend to be relatively efficient highway trips with higher-than-average vehicle occupancy rates — on average, they are as energy-efficient as rail intercity trips. Additionally, if passenger rail competes for modal share by moving to high speed service, its energy efficiency should be reduced somewhat12 — making overall energy savings even more problematic.”

The lack of energy or pollution savings leaves us with the key problem:  Huge expense with little benefit.

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Supertrain 2010 = Supertrain 1979!

President Barack Obama has pledged $8 billion in tax dollars to build a national network of high-speed rail—trains that can carry passengers at speeds in excess of 150 MPH.

But the Supertrain fantasy was a mistake back in the 1970s, when it gave rise to one of the most expensive—and rotten—TV shows in history. And it’s just as much of a wreck in the 21st century for at least three reasons:

1. The lowball costs. CNN estimates that delivering on the plan could cost well over $500 billion and take decades to build, all while failing to cover much of the country at all. Internationally, only two high-speed rail lines have recouped their capital costs and all depend on huge subsidies to stay in operation.

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California has the worst bond rating in the nation, hovering just above junk bond status.  A lower bond rating means higher interest rates when selling bonds – and California already spends $10 billion per year in bond principal and interest repayments.

In this, as in many other things, California leads the nation, for better or for worse (repaying the money borrowed for President Obama’s Stimulus will cost every American $280 a month for life).

Some people place a portion of California’s debt problem at the feet of voters who approve nearly every bond initiative, from $3 billion for an embryonic stem cell research bond to $10 billion in debt to build a high-speed rail system.

It’s hard to blame citizens of the Golden State for voting for debt when the most famous Californian, Governor Arnold Schwarzenegger, proclaims bonds “a gift from the future.”  It’s also hard to blame voters for approving bonds when the bond ballot descriptions and arguments are chock full of shaky claims.

Take November 2008’s much promoted High-Speed Rail Initiative, Proposition 1A.  Voters approved it by 52-48 after proponents, such as train manufacturers and unions poured $2.5 million into the effort.  As with almost every bond measure, there was no funded opposition.  The measure’s proponents, big business and labor unions, claimed that the trains would offer time-saving travel “AT A CHEAPER COST!” than air travel or car.  And that, the train would, “give Californians a real alternative to skyrocketing gasoline prices and dependence on foreign oil while reducing greenhouse gases. Building high-speed rail is cheaper than expanding highways and airports to meet California’s population growth.”

Really?  Who checks these claims?
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