California Cannot Afford to Reject Prop 1A
Ever since this blog launched back in March I’ve felt that the most potent threat to Prop 1A’s passage is the budget and economic crisis. Too many Californians, especially in the media, are stuck in obsolete late 20th century thinking that a recession is a time to cut back on government spending, that now would not be a good time to authorize bonds and construction of high speed rail.
Nothing could be further from the truth. If we followed that argument – being advanced in newspapers such as the Pasadena Star-News and the Long Beach Press-Telegram this weekend – in the 1930s then we’d never have built Hoover Dam or the bay bridges. If we followed that advice in the late 1950s when California had a budget deficit we’d never have built the California Aqueduct.
When a state is stuck in a recession the #1 priority is to get the economy moving again. Deficit spending to create jobs is a good way to do that. Borrowing to build infrastructure that provides many decades of value and itself spurs further economic growth is an even better way to do that.
HSR is estimated to create around 160,000 jobs in the short and medium term. A recent study suggested San Diego alone would see 45,000 jobs. Long-term job creation estimates have been around 450,000 for the entire state. California’s unemployment rate stands at 7.7%. These newspapers are irresponsible to suggest California should wait to create these jobs – we need them now.
Another argument against Prop 1A is that with a state budget crisis now isn’t the right time. The Pasadena Star-News makes this explicit:
Right now, though, when we need to find ways to simply balance our budget in order to pay teachers, keep health clinics open and operate other essential services, we’re going to have to wait to get aboard this train.
How exactly is California going to balance the budget if we don’t have jobs? If jobs are lost and tax revenues shrink because people are paying too much money for oil-based transportation?
But even worse is the notion that our choice is between teachers and high speed trains. It’s not. The nonpartisan Legislative Analyst Office reported that California can afford Prop 1A – it will not significantly increase our bond debt beyond what we can afford. The total cost of Prop 1A with interest is likely to be around $19 billion. That will be repaid, however, over 40 years. $10 billion is NOT going to be authorized all at once. It will be spent over the course of ten years as the construction schedule necessitates. Meanwhile new jobs and new tax revenues will help boost the state economy and state budget. California’s budget needs structural reforms, but we can and must pursue them while also building for the future.
More importantly, neither editorial assess the cost of NOT building HSR. They make the same mistake countless others have made in assuming that if we reject Prop 1A, we spend no new money. That is absurd. The cost of expanding freeways and airports has been estimated at around $80 billion. HSR meets the same need at an eighth of the cost (to the state budget). Airlines are cutting flights and raising fares which means additional costs for the state. As our foreign competitors are turning to HSR, it will be more difficult for California to attract new business investment if we lack an alternative to oil-based transportation.
The cost to the environment is also considerable – HSR will cut 12 billion pounds of carbon emissions and save over 12 million barrels of oil per year. Given the eventuality of a carbon tax or cap-and-trade fees that translates into actual money California will have to spend because we rejected Prop 1A. Those costs themselves will be considerable, and will have a negative ripple effect throughout the economy.
Some suggest we wait and build HSR later. When is “later”? When oil prices have shot through $200/bbl? When construction inflation costs have pushed the project’s cost over $50 billion? If we had approved HSR in 1998, it would be ready to go now, ready to provide economic growth and financial savings. The longer we wait, the higher the cost will be.
California’s economic and financial crisis stems from having relied on oil for our economy. When oil prices soared, our economy suffered and in turn our banks became insolvent. If we want long-term recovery, we MUST move beyond oil. It is an absolute requirement for further economic growth. Those who oppose Prop 1A out of a sense of fiscal responsibility are instead consigning California to chronic instability in our economy and in our budget.
California cannot afford to reject Prop 1A. The time to start building a prosperous 21st century California is now.