California’s Governor Plugs Up Jerry Brown’s Water Tunnel Plan

“Governor Gavin Newsom’s administration officially pulled the plug Thursday on the twin Delta tunnels,” the Sacramento Bee reports, and the governor thus fulfills his pledge to “downsize the project to a single pipe as he attempts to chart a new course for California’s troubled water-delivery system.” In one sense, this is good news.

As we noted, previous Governor Jerry Brown wanted two tunnels and the cost had surged to $20 billion. The original cost of $16 billion was still more than 2.5 times the benefits, according to Benefit-Cost Analysis of The California WaterFix, by Jeffrey Michael of the Center for Business and Policy Research at the University of the Pacific.

Before any digging started, the project already struck corruption. According to the state auditor, the Department of Water Resources did not follow state law when they replaced the program manager and selected the Hallmark Group without a request for qualifications. The cost of the DWR’s deal with Hallmark jumped from $4.1 million to $13.8 million, and the DWR was handing out no-bid deals to contractors without vetting them. And the problems were not just financial.

Five Years to the National Debt Death Spiral

According to the U.S. Treasury Department’s Office of Debt Management, the U.S. government is just five years away from the point where every new dollar it borrows from the public will go toward funding interest payments on the national debt.

That is the main takeaway from the Debt Management Office’s Fiscal Year 2019 Q1 Report, which featured the Office of Management and Budget’s latest projection of the U.S. government’s borrowing from the public, shown in the chart below:

FY2019Q1 OMB's Projection of Borrowing from the Public

Comparative Economic Systems

From the 1950s through the 1980s, university economics departments in the United States commonly offered a course in Comparative Economic Systems. The course primarily compared capitalism with socialism, and these courses rapidly disappeared after the collapse of the Berlin Wall in 1989. Perhaps it is time to bring them back.

The Comparative Economic Systems courses taught in the second half of the twentieth century tended to be relatively friendly toward socialism, because academic economists tended to think that economic planning done by experts (in other words, people like themselves) could allocate resources more rationally than when resource allocation was left to the uncertainties of the market.

California Online College a Great Deal for No-Bid Recruitment Boss

California’s master plan for education provides a place for all, and the vast community college system is a favorite of working adults seeking to upgrade their qualifications. While many independent colleges offer convenient online degree programs, California has been slow to get on board. Last year, spurred by outgoing Governor Jerry Brown, state legislators approved the creation of a taxpayer-funded online community college.

This operation is slated to open on October 1, which California Community Colleges Board of Governor’s president Tom Epstein calls “an extremely ambitious timeline” college bosses are “doing our best to meet.” College president Heather Hiles’ “push for approval of a no-bid contract with an executive recruiter – has left some Board of Trustees members and other critics concerned about the quality of students’ learning experience.”

Medicare Trust Fund Is Running Out of Money

According to Medicare’s Board of Trustees, who oversee the fiscal health of the Federal Hospital Insurance (HI) program that provides health care benefits to elderly Americans, the trust fund that pays the cost of hospitalization and hospice care for covered patients through the Medicare Part A welfare program will run out of money in seven years. In their 2019 report, the Trustees project that by 2026, Medicare will only be able to cover 89 percent of the cost of hospitalization for these patients.

The Washington Post indicates that the event will only mark the beginning of Medicare’s fiscal problems:

Medicare’s Hospital Insurance Trust Fund is set to run out of money by 2026, as lower tax revenue and higher payments to medical providers have helped weaken the long-term fiscal outlook of the health care program for America’s senior citizens, the Trump administration said on Monday.

Medicare’s costs overall are expected to continue rising sharply over the next several decades, from about 3.7 percent of the total U.S. economy to 5.9 percent, putting a strain on the federal budget that lawmakers must act to avoid, according to a report produced by the Social Security and Medicare Board of Trustees.

Is the Right to Work “Controversial”?

Presidential candidates Bernie Sanders and Kamala Harris both want to ban the right-to-work laws that some news organizations describe as “controversial.” Sanders and Harris have never been actual workers, who might have a different take.

The vast majority prefer to work without becoming a member of a union, and right-to-work laws allow them to do so.

In closed-shop arrangements, particularly in government, workers have been required to pay agency fees to government employee unions, who use that money to support candidates and causes with which the independent worker might disagree. That is what should be “controversial,” along with the whole concept of government employee unions, a bad idea even in the view of big-government liberals such as President Franklin D. Roosevelt. In traditional unions, the workers negotiate with management for a bigger share of the profits. By contrast, government employee unions exist to implement government policy and union bosses negotiate with politicians for more taxpayer dollars. Government unions are simply part of the governments’ spending mechanism.

Governor Newsom and CARB Queen Mary Nichols Like High Gas Prices

Fresh off a trip to El Salvador, California Governor Gavin Newsom wonders why gasoline prices are so high, averaging more than $4.00 a gallon. The governor blames “inappropriate industry practices,” and some legislators hint at a “mystery surcharge,” but as Christian Britschgi noted in Reason, the reason lies elsewhere.

“As lieutenant governor, Gavin Newsom supported a 2017 bill increasing the state’s gas taxes,” Britschgi explains. “When running for governor in 2018, he opposed a ballot initiative that would have repealed that same increase.” In addition, “California imposes the second-highest gas taxes in the country. A state excise tax currently adds $.417 per gallon, a rate that will increase to $.473 come July. On top of that, the state imposes a 2.22 percent gasoline sales tax.” And for good measure, “California has adopted a low-carbon fuel standard and a cap-and-trade scheme for carbon emissions which together increase the state’s gas prices by $.24 per gallon above the national average.” Therefore, Britschgi concludes, “state government policies are a huge component of the final price everyone is paying at the pump” and “absent these policies, the state’s gas prices would be lower.”

NFL Draft Drama

With the 25th pick in the 2019 National Football League draft, the Baltimore Ravens selected wide receiver Marquise Brown from the University of Oklahoma. As he mounted the podium, Brown could not hold back the tears. He stands some five-foot-ten, weighed in at under 170 pounds, and had suffered injuries. Still, there is no rule against running fast, and Brown can cover 40 yards in 4.3 seconds. So the Ravens made him a first-round pick.

With the 31st pick of the draft, the Atlanta Falcons selected Kaleb McGary of the University of Washington, and the offensive lineman was overjoyed to hear his name called. The family had lost their farm to foreclosure and Kaleb wound up living in an RV. Yet McGary had played on, and the six-foot-seven, 317-pounder impressed the Falcons with his speed and vertical leap of 33.5 inches.

Wave of Red Ink Set to Strike Social Security

Beginning next year, a wave of red ink is set to strike Social Security as the total amount of benefits paid out to the program’s beneficiaries will begin to regularly exceed the amount of money that working Americans pay into it.

The Wall Street Journal reports on Social Security’s deteriorating fiscal situation:

The Social Security program’s costs will exceed its income in 2020 for the first time since 1982—two years later than officials projected last year—forcing the program to dip into its nearly $3 trillion trust fund to cover benefits.

But by 2035, those reserves will be depleted and Social Security will no longer be able to pay its full scheduled benefits, according to the latest annual report by the trustees of Social Security and Medicare released Monday....

The costs of both programs are projected to rise substantially as a share of the economy over the next 16 years, as a wave of retiring baby-boomers boosts the number of beneficiaries, and lower birth rates over the past few decades weigh on employment growth and economic output.

A Check-Writing, Wealth Redistribution Machine

When you think of all the ways that the U.S. government spends money, which of its functions do you think tops the list?

USA Today‘s John Merline reviewed several decades of the U.S. government’s annual budgets, including the latest budget proposal from President Trump, and has arrived at an inescapable conclusion:

  • Catalyst