California Cities Go Bankrupt, But Bullet Train Barrels On
If we didn’t have California as a case study of fiscal insanity, someone would have to invent it. Nowhere else better illustrates what happens when a populist government fully embraces the progressive policies of tax, spend, and promise-public-employees-fantastic-pensions.
What else can you say about a state whose leading growth industry is municipal bankruptcies, whose leading export is companies and citizens fleeing tax increases, whose political leading lights include Maxine Waters and Nancy Pelosi, and whose leading economic policy initiative is floating government bonds to “invest” in yet more money-losing boondoggles?
Last week the California legislature endeared itself to both construction union leaders and environmentally enlightened central planners by approving Governor Jerry Brown’s $8 billion plan to begin building a $69 billion bullet train. This week San Bernardino declared Chapter 9 bankruptcy, joining Stockton, Mammoth Lakes, and Vallejo among the deadbeats that couldn’t make payroll.
We are only seeing the tip of the iceberg. Just because other California cities have not yet missed a payroll or a bond payment does not mean that they, or the state, are solvent. Quite the contrary. Were governments required to comply with the Generally Accepted Accounting Principles to which private companies must conform, the entire state and every city in it would be operating deep in the red.
And what is the progressives’ preferred solution to the kind of persistent structural deficits caused by their beloved policies? The same one-size-fits-all solution to every problem they’ve ever confronted—more taxing, more spending, and more public employees! If this sounds like circular reasoning, you may not have been clued in to the master plan.
The president will soar over California riding atop his flying unicorn dropping bundles of cash printed by his friend Ben Bernanke—paid for by all those greedy millionaires and billionaires who aren’t carrying their fair share. Problem solved!
The bullet train decision, taken against a backdrop of dire fiscal calamity, is particularly instructive in understanding progressive economics. The talking points used to justify this payoff to key constituents focus on the economic stimulus effect of putting thousands of union construction workers on the state payroll.
Of course, the same could be said for the classic Paul Krugman stimulus plan of digging a giant hole in the ground and then filling it up, save for one thing. At least once the hole is filled it will stop bleeding money. Not so a bullet train, whose chances of attracting enough riders to pay the operating expenses are about as likely as the construction being completed on time and on budget.
Californians must be thinking, “Hey, Boston conned the country into paying for the Big Dig, why can’t we do the same for our Terrific Train?” When Congressman-for-life Tip O’Neill called in his chits and got the Big Dig approved as a going away present to his loyal Bay State voters, the official budget estimate for the whole project was $3 billion. After a generation of union construction workers feasting at the trough, the final bill came in closer to $20 billion, most of it was picked up by Uncle Sam. Apply that same cost overrun multiple to the $69 billion bullet train estimate, and you’ve got an idea of what lies ahead for American taxpayers.
And if you’re a trend-setting Californian, why care about America? The red state goobers who cling to their guns and Bibles can whine all they want as long as the Golden State has the electoral votes. Isn’t seeing who can get the most free stuff what democracy is all about?
Meanwhile, the beat goes on. City after city is now facing up to the grim reality that as goes San Bernardino, so goes almost any town you can name in California. Teachers, cops, and firemen are being laid off, hospitals and nursing homes are closing, dangerous prisoners are being released, and critical infrastructure is crumbling. But it will all be worthwhile when for the price of a Southwest Airline ticket the unemployed can zip from San Francisco to Los Angeles in twice the time it takes to fly.