California's budget deficit may be $16 billion (up from $9 billion in January), the state's cities may be keeling over and filing for bankruptcy left and right (Stockton and Mammoth Lakes), and overall container traffic at the Port of Long Beach may have dropped 7.2% in May compared to last year, but at least California is about to get its own monorail. Well, maybe not monorail, but certainly a high speed line between Los Angeles and San Francisco for the low, low price of at least $4.5 billion in debt to start (and much, much more to actually end). The winners: Keynesians and labor groups. The losers: anyone who has ever taken math for idiots. From USA Today: "California lawmakers approved billions of dollars Friday in construction financing for the initial segment of what would be the nation's first dedicated high-speed rail line connecting Los Angeles and San Francisco. The state Senate voted 21-16 on a party-line vote after intense lobbying by Gov. Jerry Brown, Democratic leaders and labor groups." And while nobody really expects the train to actually be built, here is the real reason for passing the legislation: "The bill authorizes the state to begin selling $4.5 billion in voter-approved bonds that includes $2.6 billion to build an initial 130-mile (210-kilometer) stretch of the high-speed rail line in the Central Valley. That will allow the state to collect another $3.2 billion in federal funding that could have been rescinded if lawmakers failed to act Friday." In summary, just passing the bill, gives California a $3.2 billion federal bailout while the actual use of funds may or may not ever appear (or money is on the latter). If still confused think Greece and Germany, because Federal tax collections were just used to give California a very fungible cash injection. Where the money ends up now is anyone's guess.
From USA Today:
"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. He later celebrated with Senate President Pro Tem Darrell Steinberg, a fellow Democrat.
Brown pushed for the massive infrastructure project to accommodate expected population growth in the nation's most populous state, which now has 37 million people. He said the project is sorely needed to create jobs in a region with higher-than-average unemployment.
The bill, which passed the state Assembly on Thursday, now heads to Brown for his signature.
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 would be $68 billion.
There are those who sadly still have their Math for Idiots textbooks lying around:
Senate Republicans blasted the 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," Republican Sen. Tom Harman said in a statement.
Republican Sen. Ted Gaines said the project would push California over a fiscal cliff. "It will require endless subsidies and will blast a massive hole into our budget," he said in a statement.
Cliff... Shpliff. It seems Mr. Gaines has not yet figured out that the only way to survive in a post-Keynesian limit world, in which everyone is bankrupt, is to dig a deeper hole and get as much of whatever bailout money is available first.
Yet don't blame California for this mathematical abortion: the fault lies with the Federal government for creating perverse spend, spend, spend incentives.
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 monthlong recess.
Richard said 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.
California was able to secure more federal aid than expected after Florida, Ohio and Wisconsin turned down money.
States turning down bailout money? What is this world coming to. Yet in the end even some democrats realized what utter insanity the project is.
One dissenter, Democratic Sen. Joe Simitian said public support had waned for the project, and there were too many questions about financing to complete it.
"Is there additional commitment of federal funds? There is not. Is there additional commitment of private funding? There is not. Is there a dedicated funding source that we can look to in the coming years? There is not," Simitian said.
At the end of the day, who cares: by the time the next bailout installment is needed, the EFSF/ESM will be fully operational and Germany (whose citizens will be "mandated" to retire not sooner than Yoda) can just step in and save California as well.