High-Speed Rails and Electric Vehicles Driving Us Broke

Warning: This post is rated S for heavy use of sarcasm.

We have a unique brand of crazy here in California – a special hubris that believes that regulators and bureaucrats can change the future and steer technology and the economy by sheer force of will.

Just read California news for 20 minutes and you’ll see what I mean. California has a $26 billion annual budget deficit. Not to mention the $10 billion that we are in the hole to the federal government for loans to cover extended unemployment benefits. No worries though, Governor Brown has a plan to squeeze that money out of job creators by boosting employer contributions for unemployment insurance by 9% next year and 14% the following year. It’s not like increased taxes and a higher cost of doing business will drive more businesses out of California though.

Here are two stories that caught my eye this week that may help explain why California and insurmountable budget deficits go together like… well, like politicians and overspending:

1. The California Air Resources Board (CARB) mandates that 15% of all cars offered for sale must be alternative fuel vehicles (AFVs) by 2025. (See LA Times Article).

If you’re like me, the first thing you’re asking yourself is “how can CARB predict / control the number of electric cars that consumers choose to purchase by a date certain?” The answer: They can’t. California isn’t mandating that consumers buy these cars (yet), only that 15% of the cars offered for sale by any dealer at any given time be alternative fuel vehicles. So what if consumer demand doesn’t meet 15% by 2025? (Today less than half of 1% of vehicles purchased in California are AFVs.) Well, either the dealers will be stuck with inventory that they can’t move, putting them out of business, or the government will have to further subsidize the cost of the cars to incentivize demand. Side note, did you know that up to $250,000 in government subsidies (re: our tax money) goes into every Chevy Volt sold? Good thing that Washington isn’t broke.

As a country, there is no doubt that we are moving towards more eco-friendly cars. People want energy independence, to spend less on gas and to be friendly to the planet. But the reality is that the technology for alternative fuel vehicles isn’t quite up to snuff yet. Consumers will buy AFVs in mass when they are price comparable, can go more than 80 miles on one charge, have the infrastructure to recharge quickly on the go (because it now takes 30 minutes), and come in attractive models. The good news? We are well on the way! The wonderful thing about a free market economy is that when the public demands it, the private market figures out a way to provide it. Maybe we will be there by 2025, maybe not. The only ones that know for sure are Carnac the Magnificent and apparently the California Air Resources Board.

2. Governor Brown doubles down on high-speed rail, despite lack of funding and ballooning costs. (See LA Times Article).

In 2008, California voters approved a ballot measure for a high-speed rail in California with a price tag of $25 billion. Today, the final cost is estimated at over $100 billion (not including maintenance costs), with no funding in sight.

Is there demand for the high-speed rail that would make it a profitable or at a least self-sustaining venture? Great question. IDK, no one does, but does it really matter? According to Governor Brown, we need this train to prevent California from becoming a third world country. The governors of Wisconsin, Ohio and Florida all nixed their high speed rail projects over concerns that the projects did not make fiscal sense. They apparently did not understand that without the new trains they will become like Bangladesh or Ethiopia.

Also, we probably shouldn’t use Amtrak as a predictive model. The government spends an average of $32 per passenger subsiding Amtrak and 41 of the railroad’s 44 lines lose money. Does that fall into the category of bailing out failing businesses? I’m just asking….

So anyway, Governor Moonbeam is now the only state leader left in America on the quixotic quest for high-speed rail travel at any cost, whether California commuters will use it or not. Fear not though, Governor Brown is about to close the budget deficit with a combination of $12.5 billion in cuts and $12 billion in tax increases. That is, as long as voters approve those tax increases in the next election. And why wouldn’t we? It’s not like the money could be found anywhere other than tax-payers’ wallets. Matter of fact, the Governor has put together a “Plan B” if the voters reject the tax increases that will take money out of K-12 education, cutting the school year by three weeks. Coincidentally, public opinion polls consistently show that California voters are willing to pay higher taxes if they know the money will be dedicated to public education.

At the same time, a recent statewide survey shows voters remain deeply suspicious of state spending and believe the government should be doing more with less.

Here’s a crazy notion: how about California legislators do less with less?

  • Less education
  • Less police
  • Less firemen
  • Less unfunded high-speed rails
  • Less mandates on business to sell technology that doesn’t exist yet
  • Less taxes on employers

More common sense.

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One Response to High-Speed Rails and Electric Vehicles Driving Us Broke

  1. Luz Sellers says:

    Very interesting article. The options are plain and simple yet so difficult for both our State & National leaders? It’s mind boggling and I hope that we can figure our way out of this mess. Thank you Jaime for sharing!

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