Prop 1A: Relearning Depression-Era Economics

Wall Street is on a roller-coaster ride with the Dow below 10,000 for the first time in four years, and the amusement park has opened branches in Europe and Asia. At least one popular market pundit, CNBC's Jim Cramer, has warned investors to take out of the stock market "whatever you may need for the next five years."

This is scary stuff, and one of the potential victims of this mess is Prop 1A, California's high speed rail bond. Some voters may be reluctant to support a $10 billion bond for a modernizing infrastructure improvement, but as Robert Cruickshank at Calitics and the California High Speed Rail Blog notes, if we're facing a long term recession, this is precisely the best time to make the plunge:

"The state's nonpartisan Legislative Analyst has determined we actually can afford Prop 1A. Repayment lasts over a 40-year term. The jobs, tax revenue and economic activity created by high speed rail combined with the savings on oil consumption and carbon emissions are likely to outweigh the annual debt service cost."

And he reminds us of the expansive public works projects that were financed during the Great Depression, providing jobs to communities with massive unemployment while making a long-term investment in our state's future:

"It was also a Depression-era project. Built at a time when California barely had enough money to balance its own budget. In 1933 California passed a bond measure allowing money to be spent on the [Shasta] dam - $170 million, a significant sum in those days. By 1935 California had secured federal funds to help begin construction on the dam. The jobs created by the dam project and the long-term value of the Central Valley Project were considerable. Redding got badly needed jobs as well as flood control. California got jobs and a base for long-term agriculture, an industry that remains significant to this day in Redding."

Voters during economic crises like jobs, and nothing on the ballot will do more for job creation than Prop 1A. "Proposition 1A injects a vitality stimulus into California's economy by creating nearly 160,000 construction-related jobs and 450,000 permanent jobs in related industries like tourism," explained Los Angeles Area Chamber of Commerce President Gary Toebben. "These are American jobs that cannot be outsourced."

And unlike most big expense infrastructure projects, these jobs have the added benefit of existing up and down the state. From San Francisco to Stockton to Fresno to Bakersfield to Los Angeles to Murrieta to San Diego, the rail will help reduce our state's unemployment rate (currently at 7.7 percent), once construction begins as early as 2011.

Once constructed, the savings for the consumer and savings for the environment will become obvious. A trip from San Francisco to Los Angeles averages about $120 by air and $86 by car. With the high-speed rail, that trip would cost about $55, and passengers would arrive at their destination in about 2 and a half hours.

The rail would use 1/3 of the energy currently used for airlines and 1/5 the energy currently used for cars. It would reduce annual greenhouse gas emissions by about 12.7 billion pounds, which is the equivalent of removing more than one million vehicles from our roads annually.

For those concerned about the price tag, remember, this is a textbook case of when a bond is appropriate. We're talking about a large-scale infrastructure project with the beneficiaries dispersed over time. It makes sense to spread the initial financial burdeon over decades, in part to remove the need to find significant new revenues in the present, and in part because it is simply fair for current and future residents to share the costs of a project that will have a shared benefit.

Given the hassle of going to the airport these days, why wouldn't consumers prefer the cheaper, more environmentally friendly option? This November, we will be given an opportunity to make an important investment in our state's future. Let's just hope California voters aren't spooked by economic unrest.

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