That background confirms Druckenmiller as someone who gained both understanding and experience in handling very large sums of money in the real world. As such, he has a clear understanding of the impact the proposed $3.5 trillion “infrastructure” spending bill will have on Americans if it passes.

He has been making the rounds on Capitol Hill to warn politicians about the astronomically large spending bill. He warns they will guarantee “dire consequences” that harms low and middle-class Americans if they pass it. On July 23, 2021, he spoke with MSNBC’s Stephanie Ruhle on that topic, telling her what he’s been telling lawmakers.

What Druckenmiller Fears from Biden’s Infrastructure Bill

Here is the video of the segment:

To be sure, many people will focus on Druckenmiller’s comments describing how Darth Vader would destroy the U.S. economy by unleashing inflation through excessive spending. But he describes the real risk he sees from the infrastructure bill’s excessive spending near the end of the clip:

It’s going to cause a financial crisis. It’s going to cause inflation and nothing is going to hurt the poor more than that. And by the way, if it does, every dollar we’re spending now, that in my opinion we don’t desperately need, is not going to be available in a future crisis, whether it’s another pandemic or economic decline that’s hurting the poor or middle class.

That’s the consequence of the Biden-Harris administration’s unsustainable fiscal path. Achieving true fiscal sustainability requires treating the national debt like an emergency reservoir. Now that the crisis is past, spending growth needs to be restrained and the economy needs to grow to replenish the reservoir. Doing so will make it possible to weather the next crisis much more easily.

If there is one thing to be learned from history, it is that there is always a next crisis.

The post “Dire Consequences” for Most Americans from $3.5T Infrastructure Bill appeared first on The Beacon.

Aside from the unique combination of extremely high infrastructure costs, extremely high operating costs, and extremely low demand by commuters that make passenger rail unattractive as an investment, today’s passenger trains are also slow. Joe Biden knows this, so he is promoting faster passenger rail service.

What we’re really doing is raising the bar on what we can imagine. Imagine a world where you and your family can travel coast to coast without a single tank of gas on a high-speed train close to as fast as you can go across the country in a plane.

Lessons from California’s Bullet Train Boondoggle

The biggest, most well-developed high-speed passenger rail project in the country is in California. Construction on California’s high-speed rail lines began in 2015, with the plan to connect the state’s two most populated cities, Los Angeles and San Francisco. It soon became the largest public works project in America.

Just as soon, it proved too expensive and too difficult to build as envisioned. In February 2019, Governor Gavin Newsom admitted the original project would cost too much and take too long to build. He trimmed it back to connect the cities of Merced and Bakersfield, with a stop at Fresno in between. Not because that makes sense, but because he was counting on the federal government to keep giving California money to build it. Altogether, California’s bullet train project ballooned to a cost of $100 billion before it was scaled down.

President Trump had other ideas and stopped payment of a $929 million federal grant to fund the project in May 2019. But rather than pulling the plug and stopping the state’s fiscal bleeding, Newsom let California’s bullet train infrastructure project keep limping along in zombie mode.

“Amtrak Joe” to the Rescue?

President Biden has decided to give California the $929 million grant as part of his vision for American transportation. Reason produced a video to explain what the President should have learned from California’s bullet train boondoggle, but clearly never did.

Thanks to “Amtrak Joe”, California’s zombie bullet train project can now creep along at a faster cash burn rate.

You might think that’s harsh, but can you think of a more fitting metaphor for the Biden administration?

The post “Amtrak Joe” Tries to Resuscitate California’s Zombie Bullet Train appeared first on The Beacon.

For the new span of the San Francisco–Oakland Bay Bridge, California turned down federal funding and used Chinese steel. The bridge came in $5 billion over budget, 10 years late, and as hearings in 2014 revealed, riddled with safety issues. Expert witnesses testified that the Chinese steel was too brittle and many welds by Chinese workers were defective and had to be done over. One whistleblower called for a criminal investigation but none took place. 

Abolhassan Astaneh-Asi, professor of structural engineering at UC Berkeley, believes the structure is unsafe and declines to use the bridge. Confronted with the safety issues, then-Gov. Jerry Brown famously said, “I mean, look, shit happens.” Californians might add, “when unaccountable politicians use China for critical infrastructure projects.” Those projects could soon be happening on wider scale.

Candidate Joe Biden is also on record as saying: “China is going to eat our lunch? Come on, man. I mean, you know, they’re not bad folks, folks. But guess what? They’re not competition for us.” 

On January 20, Joe Biden will become President of the United States, the most powerful man in the world. Once in power, politicians have been known to reverse themselves, so Chinese companies may be involved in more stateside infrastructure projects, and the Bay Bridge span is hardly the only example of Chinese participation. 

As CalMatters reported last April, Gov. Gavin Newsom spent $1 billion to buy face masks from Chinese company BYD, which manufactures electric buses. Newsom said the deal will provide California with 200 million masks per month, “but his administration has declined to release the state’s contract with BYD.” In November, the governor was photographed sans mask as he cavorted with more than 20 colleagues at the upscale French Laundry restaurant in violation of state guidelines. 

Meanwhile, as Mary Theroux notes, California is already showcasing what Americans nationwide can expect between now and 2024: unlivable cities, disappearance of the middle class, the end of independent contracting, and a lot more.

The post California Already Showcases Chinese Infrastructure Influence, and a Lot More appeared first on The Beacon.

Gov. Brown wanted two tunnels, but Newsom scaled it down to one. In January, Newsom issued a notice of preparation for the project, the first step in environmental review. As of June, the state Department of Water Resources “continues to advance the Delta Conveyance Project” and requested authorization for activities in the waters of the United States. The DWR website provides no cost estimates, and as KCRA reported in January, “state officials don’t know how much it will cost.” Taxpayers can find estimates in past tunnel activity. 

Gov. Brown’s two-tunnel plan would have cost in the region of $16 billion. The Public Policy Institute of California’s Water Policy Center wanted a single tunnel as a “grand compromise” but failed to nail down the total cost. A report from California’s State Auditor, The Unexpected Complexity of the California WaterFix Project Has Resulted in Significant Cost Increases, pegged the planning costs alone at $280 million as of June, 2017. The audit found that the state Department of Water Resources, “did not follow state law when it replaced the program manager for the conservation and conveyance program.” The DWR selected the Hallmark Group “without advertising a request for qualifications,” and “the cost of DWR’s current contract with Hallmark has tripled from $4.1 million to $13.8 million.”

The digging had not even started when the project hit corruption. More is doubtless in store, and total costs remains elusive. As a general rule, with government everything always costs more and takes longer. The new span of the Bay Bridge, for example, came in $5 billion over cost and ten years late. With the tunnel, costs are not the only issue.

“We anticipated that there might be an effort to employ a list of efficiency, conservation, and other measures to reduce dependence on a tunnel before moving forward on such a massive and environmentally harmful project,” Sierra Club California Director Kathryn Phillips told KCRA in January. “Now we’ll have to focus a lot of time and energy on battling the tunnel again.”

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You may imagine that because you paid taxes, obeyed laws, or carried out other duties laid on you by the various governmental entities, you have a rightful claim to partial ownership of public property. But these governments beg to differ with you, and they stand ready to back up their own claims as de facto owners with force and violence if need be.

In short, mis amigos, you don’t own squat—not the country at large, and not its public lands or infrastructure, either. Indeed, in a substantive sense you don’t even own your so-called private property, because you hold such property only subject to payment of stipulated property taxes and compliance with untold regulatory requirements. On this range, amigos, you are little more than a milch cow for your masters—and that’s not a mooot point.

The post Our Land, Our Infrastructure, Our Country—a Lot of Loose Talk appeared first on The Beacon.

While economists point to “sticky wages” that limit labor market adjustments in bad times, compensation packages can only remain sticky for so long. Not only have there been lay-offs in many cities, but now there are also pay cuts. Voters and leaders in other cities have noticed.

The latest California developments are auspicious and a clear departure from politics as usual. Most politicians have short time horizons. Always-looming elections tempt them to be generous with supporters and constituents; they are prone to invoking rosy scenario budgets that seemingly make it all work. And they have been able to get around the constraints imposed by budgets and borrowing restrictions by making commitments to city workers in terms of promised (but usually underfunded) pension benefits. The formal research corroborates this view. Chris Edwards has published a study (2010) which shows that public sector unions push up public sector labor compensation costs by eight percent on average. He argues that California is above average. In a recently published academic paper, U.S. Bureau of Labor Statistics economists Maury Gittleman and Brooks Pierce ask “Are state and local government workers overcompensated?” The authors acknowledge the complexities of the apples-vs.-oranges comparisons and work to overcome them. They find that, “After controlling for skill differences and incorporating employer costs for benefits packages, we find that, on average, public sector workers in state governments have compensation costs 3-10 percent greater than those for workers in the private sector, while in local government the gap is 10-19 percent.” John Matsusaka (2007) has found that, “When public employees are allowed to bargain collectively, wages are about 18 percent higher.”

Like most people, investors experience mood swings. They can be too sanguine in good times and too pessimistic in bad times. This accentuates the boom-bust cycles that markets experience. But the same happens in the public sector. Politicians see revenues grow and are happy to fund questionable programs and projects.

The boom-bust now being experienced here and abroad will some day sort itself out. But what then? Will local governments fall into the old trap of making foolish commitments to favored constituencies in good times? Or will voters as well as elected officials be a little chastened?

Size and scope have to be re-thought. Anything that can be metered can be privatized. Modern technologies make metering easier than ever. (The UCLA faculty senate recently voted to privatize that school’s MBA program.) This is the worst time to discourage private efforts in infrastructure or in social services. Over the past decade, California-based foundations gave away $6 billion—in spite of two recessions. There are many wealthy and generous people in California. Peter Diamandis and Steven Kotler (in their recent book) report a quadrupling of active foundations in the U.S. over the last twenty years. Philanthropists should consider social services innovations prizes, perhaps modeled on the X-Prize for scientific innovations. Charles Murray manages to end his doleful analysis in Coming Apart on an optimistic note, citing Nobelist Robert Fogel’s The Fourth Great Awakening (2000) which includes the rise of philanthropy in America geared to promoting equality of opportunity.

These trends point the way to a re-evaluation of state and local government size and scope. There are ways to separate various infrastructure and social services from politics.

The post Push Has Come to Shove in Some California Cities appeared first on The Beacon.

Naturally I was thrilled to see my tax dollars at work, although honesty in reporting compels me to add that not much actual work seemed to be going on at the sites I witnessed. Most of the men visible there were just standing around. Of course, such standing is typical of public construction sites, so I do not suppose that what I saw was in any way owing to ARRA in particular.

This huge legislative enactment provides for a great variety of increased spending and some reduction in taxes over a period of ten years. The Congressional Budget Office computed that the net amount of money to be injected into or not removed from the economy as a result of the law’s provisions totals about $787 billion. At the time the bill was being debated and discussed, a common plea in its defense had to do with funding so-called shovel-ready projects to repair or replace public infrastructure—roads, bridges, and other structures—widely taken to be in a state of decay or disrepair. This plea made an appealing talking point, inasmuch as most Americans place at least some value of the services derived from such infrastructure.

Alas, only a tiny proportion of the funds expended so far has been directed to this well-advertised objective. According to the government’s website for tracking expenditures made from ARRA (Recovery.gov), as of October 1, 2010, $452.4 billion has been made available to a long list of government agencies, and $307.9 billion has been spent. Of the total amount disbursed, $88.3 billion has been expended by the Department of Health and Human Services, $63.0 billion by the Department of Education, and $62.5 billion by the Department of Labor. These three departments account for almost 70 percent of the total federal spending so far. The Department of Transportation’s outlays come to $20.5, or 6.7 percent of the total.

Shovel-ready infrastructure projects have evidently proved difficult to find. Small wonder, then, that President Obama recently confessed to having “realized too late that ‘there’s no such thing as shovel-ready projects.’” Despite this realization, the president has not proposed that ARRA be repealed. Perhaps he had other objectives in mind from the start.

Among other leading spenders of “stimulus” money are the Department of Agriculture ($17.5 billion), the Social Security Administration ($13.7 billion), the Department of the Treasury ($7.6 billion), and the Environmental Protection Agency ($4.0 billion). A common element of these government departments and agencies is their shortage of shovels, not to mention shovel-ready projects. They also excel at dishing out subsidies to undeserving but politically potent private-sector recipients and at paying handsome salaries and benefits to drones and wreckers on the government payroll. The EPA also more than pulls its weight in impeding genuine economic progress, by adding costs and risks to all sorts of construction projects and many forms of ongoing production.

So far the National Aeronautics and Space Administration has spent $711.4 million of the more than $1 billion allocated to it. Is it possible to shovel outer space? No doubt the General Services Administration, the Department of Veterans Affairs, the National Science Foundation, the Railroad Retirement Board, and the National Endowment for the Arts are shoveling something. I leave it as an exercise for the reader to ascertain exactly what they are shoveling.

Yet, as I have affirmed, some work evidently is going on in Mississippi and Alabama to fix the roads and bridges. Honest. I saw it with my own eyes.

The post I Now Report Sightings of Shovel-Ready Projects appeared first on The Beacon.