In an effort to better understand the challenges posed by high-speed rail, a delegation of three state Senators spent the Legislature’s spring break in Japan to investigate the first and, arguably, best high-speed rail system in the world.

Senate President Pro Tem Kevin de Leon, D-Los Angeles, Senate GOP leader Bob Huff, R-Diamond Bar and Sen. Hannah-Beth Jackson, D-Santa Barbara, began the four-day trip with a briefing from the U.S. Embassy in Tokyo before moving on to Osaka, Kobe and Kyoto. The delegation also received a tour of the country’s High Speed Rail Operation Center and discussed transportation, seismic safety, clean energy, environment and climate change with various Japanese officials, including Issei Kitagawa, the country’s transportation and tourism minister.

Here at CalWatchdog.com, we don’t think a few state Senators should have all the fun. That’s why we packed our bags and headed to Tokyo to research Japan’s world-class rail system for ourselves.

Japan: World leader in high-speed rail

What makes the Japanese experts on high-speed rail? For starters, it’s the birthplace of high-speed rail. Since its opening in 1964, the Shinkansen has transported an estimated 5.6 billion passengers throughout the third largest economy in the world. The phrase “bullet train” comes from the Japanese translation of “dangan ressha,” which was used to describe Japan’s first high-speed rail system.

“Japan’s high-speed rail system is one of the best if not the best in the world,” Huff explained following the trip. “It has a safety record unparalleled in a seismically active country with a lot of similarities to California.”

Safety, especially as it related to earthquakes, is perhaps the most important takeaway for California. Japan boasts an impressive safety record – with no major injuries in 50 years. During the tragic 8.9 magnitude earthquake in 2011, trains were sent an automatic shut-off command from a control center in Kinkazan. That warning gave 33 trains enough time to safely stop.

Japanese bullet trains, which travel up to 200 miles per hour, are prepared for other natural disasters. When a bullet train in Northern Japan derailed during a 2013 blizzard, none of the 130 passengers and crew on board were injured.

Huff: Rail works with high-density populations

While California can incorporate Japan’s safety protocols into its design and construction, the state will have a harder time matching ridership, in part, due to vastly different transit habits and urban growth patterns.

“The biggest difference is they have a high density population that has not evolved around a ‘car culture’ as we have here,” Huff explained. “Only half of Japan’s population own a car, and all of the associated costs of ownership – parking, gas and everything else – are prohibitively expensive. Taken together that creates the raw ingredients for a successful high-speed rail system.”

As Slate’s Eric Holthaus points out, air travel is ingrained in American travel, with rail barely a blip. “In 2012, Americans traveled nearly 3 trillion passenger-miles by car, 580 billion by air, and more than 300 billion by bus,” Holthaus wrote in January. “Passenger rail was barely even comparable—just 7 billion passenger-miles.”

Supporters of high-speed rail say that U.S. passengers don’t embrace rail because it’s currently too slow. Throughout the world, transportation experts have cited a 3-hour rule for travel– passengers prefer rail for journeys under three hours. In his review of high-speed rail research, Chris Nash of the Institute for Transport Studies at University of Leeds concluded, “Targeting air markets where rail journey times can be brought close to or below 3 hours therefore does make sense.”

California likely to break 3-hour rule

Japan’s well-designed system easily meets that three hour rule, allowing passengers to fly through security and arrive at the station just minutes before departure. A trip from Nagoya to Kyoto, which would have been a two-hour journey by car, took under 40 minutes on high-speed rail. And the rush hour commute to Nagoya station was so bad that it took longer to reach the station than the trip itself.

That’s why Japanese airlines are steadily losing ground to the bullet train. “Six out of 10 travelers on the Tokyo-Hiroshima line used to fly the route, but now the ratio has reversed in favor of the bullet train,” Nikkei Asian Review observed in 2013.

California’s high-speed rail system faces the opposite problem, where airlines can transfer passengers from Los Angeles to San Francisco in under 90 minutes. The state’s planned route has also extended the travel time and will likely break the important 3-hour travel rule.

Last year, Louis Thompson, chairman of the High-Speed Rail Peer Review, testified before a state Senate committee that California’s system would not meet the anticipated trip times of two hours and 40 minutes, according to the Los Angeles Times.

Japanese high-speed rail encourages growth

Fewer riders translates into concerns about profitability. To make Japan’s high-speed rail system more profitable, rail companies own the surrounding land and are encouraged to develop.

The Economist noted that Japan’s system “thrives because of a planning system that encourages the building of commercial developments and housing alongside the railway route. JR East owns the land around the railways and lets it out; nearly a third of its revenue comes from shopping malls, blocks of offices, flats and the like.”

Given California’s environmental laws and anti-development mentality, it’s hard to envision the state embracing new major development projects.

For Huff, the trip left lingering doubts about California’s current high-speed rail plan.

“My takeaway for California is that if Governor Brown intends to continue pushing for a high-speed rail system he might be better served by starting in the big cities and building systems that will help connect people immediately, and then expand later,” he said.

Due to high taxes and regulations, and faulty monetary policy by the Bank of Japan, the country now now is halfway through its third “lost decade.”

This affects California because Japan is the world’s third (formerly second) largest economy and imports billions of dollars of our state’s exports, while also investing here.

Japan’s tax-increase recession also is a warning to California. Unions and others are seeking to put tax increases, beginning with a continuance of Proposition 30‘s $7 billion a year, on the Nov. 2016 ballot.

Already, despite California supposedly being “back,” it still has the fourth-highest unemployment among the states. It seems to be doing well only because the Federal Reserve Board pumped up the money supply, lifting the boats of all states.

But with the Fed now apparently ending the good times — “removing the punch bowl,” as economists say — a recession could strike. If that happens, the $20 billion California deficits could return with a vengeance and the state, ill prepared to thrive because of its anti-business climate, could say “Sayonara” to prosperity.

Meanwhile, Abe announced the second phase of his tax increases was delayed 18 months, but that Sword of Damocles still hangs over the heads of Japanese businesses and workers.

TOKYO (AP) — Japan’s economy shrank more sharply in the second quarter than first estimated and the latest indicators suggest only a modest bounce back since then.

The world’s third-largest economy contracted at an annualized rate of 7.1 percent in the April-June quarter, according to updated government figures Monday. The initial estimate released earlier this month said the economy contracted 6.8 percent. Business investment fell more than twice as much as first estimated.

The economic crash was preceded by a brief “boom” of 6 percent annualized from Jan. to March as people and businesses went on a buying spree to avoid the onrushing tax increases.

If you’re old enough, you remember the threat Japan’s economy supposedly posed to America in the 1970s and 1980s. The late Michael Crichton published a 1992 novel about it, “Rising Sun.” The novel was made into a 1993 movie starring Sean Connery and Wesley Snipes. Ironically, Snipes himself was imprisoned for allegedly violating America’s own preposterous and confiscatory tax edicts.

Then around 20 years ago Japan began committing economic seppuku through high taxes, wild deficit spending and preposterous regulations. One “lost decade” turned into two. Now it looks like it’ll be three.

According to World Bank data, Japan’s national debt is 197 percent of GDP, higher even than bankrupt Greece’s 164 percent and more than double America’s 94 percent.

No wonder China’s economy has been soaring. The governments of its two major competitors, America and Japan, are engaged in a suicide pact to see which first can tax and spend its economy to death.

By John Seiler

Gov. Jerry Brown’s cheery announcements of the state’s budget health are guiding budget spending priorities. As he said in his State of the State address, “The message this year is clear: California has once again confounded our critics. We have wrought in just two years a solid and enduring budget. And, by God, we will persevere and keep it that way for years to come.”

He praised the Legislature for cutting spending and continued, “Then, the citizens of California, using their inherent political power under the Constitution, finished the task. They embraced the new taxes of Proposition 30 by a healthy margin of 55 percent to 44 percent.”

But what if the modest economic recovery in California and the rest of the United States turns sour? What if the tax increases themselves hurt the economy? Not just Proposition 30 and Proposition 39 (taxing out-of-state businesses), but the Obamacare, payroll tax and other federal tax increases?

We won’t have good numbers on these things for another month or so. But until then, there are warning signs that the second part of a “double-dip” recession may be flying overhead like that meteor that just hit Russia.

Internal emails from Wal-Mart executives described February sales as “a total disaster.” Reported Bloomberg:

“Wal-Mart Stores Inc. had the worst sales start to a month in seven years as payroll-tax increases hit shoppers already battling a slow economy, according to internal e-mails obtained by Bloomberg News.

“Wal-Mart and discounters such as Family Dollar Stores Inc. are bracing for a rise in the payroll tax to take a bigger bite from the paychecks of shoppers already dealing with elevated unemployment. The world’s largest retailer’s struggles come after executives expected a strong start to February because of the Super Bowl, milder weather and paycheck cycles, according to the minutes of a Feb. 1 officers meeting Bloomberg obtained.”

So, as we have repeatedly warned on CalWatchDog.com, the higher taxes are taking a toll not just on the rich, but on everybody. Lower sales will mean lower sales taxes collected by the California government.

Global problems

According to new estimates, Europe’s economy shrank by 0.6 percent in the fourth quarter of 2012. And U.S. News & World Report wrote, “Japan’s economy shrank in the last three months of 2012, its third straight quarter of contraction… The 0.4 percent contraction in annualized terms in October-December was worse than expected.”

Those two reports come after the U.S. Commerce Department calculated that the U.S. economy shrank by 0.1 percent in the same period.

Manufacturing, the mainstay of an industrial economy, is stagnant. Reported the Financial Times:

“US industrial production shrank in January after the biggest back-to-back gain in three decades, while factory activity in the New York region unexpectedly expanded in February, in a mixed picture of the country’s manufacturing sector.

“Output at factories, mines and utilities fell 0.1 per cent last month after a 0.4 per cent gain in December, figures from the Federal Reserve showed on Friday. While economists had expected a 0.3 per cent rise in January, revised data for November and December showed the biggest two-month gain since 1984.”

One seeming bright spot is that China’s economy grew 7.9 percent in the fourth quarter of 2012. But that still was below the tepid pace of 10.4 percent in 2010 and 9.3 percent in 2011. And China’s growth rate for 2012 was its slowest since 1999, during the Asian financial crisis.

For California governments at all levels the message is: Be more frugal then ever. The rosy scenario celebrated by Brown fades away once the rose-tinted glasses are removed.

If the double-dip recession hits, then the budget cutting has not ended, but is going to be deeper than ever. And businesses will flee even faster California’s high-tax climate for the refuge of low-tax states.

By Brian Calle

This is the second part of my interview with Steve Forbes, the owner of Forbes magazine and a former presidential candidate. He comments on America heading over a fiscal cliff.

By John Seiler

Why are government pensions going broke? Wayne Lusvardi wrote about recently it in one of our Special Series on municipal bankruptcy, “California counties are more at risk of going belly up.”

In one sentence, he wrote, “No one knows what rates of return pension funds will yield in the future”

In a reply, “Truthsquad” referred to that sentence, and commented,

“Exactly — but we can look at the past and lifetime of the pension systems in our state. Historically the returns have been well over 8 percent. Framing the picture to say returns will be as low as they are during an economic downturn is bogus, and thus undermines the ‘sky is falling premise of the information provided here.”

But look at the following chart.

It shows the performance of the Dow Jones Industrial Average since 1900, but adjusted for inflation. Pension funds generally mirror the stock market.

Look on the right side. The DJIA has shown essentially no growth for about 13 years, since the dot-com bust of 1999-2000. There was “growth” in the mid-2000s, but it was fake growth from the real estate boom — which quickly became the real estate bust.

This dismal record occurred under both Republican President George W. Bush and Democratic President Barack Obama, as well as under Congress when it was controlled, alternately, by Democrats or Republicans. So there’s plenty of blame to go around. And today’s “gridlock” — the Dems controlling the White House and the U.S. Senate, and Reps controlling the U.S. House — isn’t any better, either.

The assumption by “TruthSquad” and other defenders of the existing pension system is that growth will resume, zoom upward, and make up for the recent stagnation. But how can it make up for 13 years of stagnation?

Basically, you would need another Ronald Reagan to come in and cut taxes and regulations. Check out the chart: After he did that in 1981, growth rose sharply and lasted two decades. Bill Clinton, contrary to popular belief, did not revoke Reagan’s policies, but continued them. Clinton did increase taxes once; but he also cut taxes twice. So it basically was a wash — that is, a continuation of Reagan’s policies.

The Bush “tax cuts” of 2003 were temporary, leading to the ongoing extension crises. That means nobody knows what next year’s tax levels will be, thus scrambling business and personal tax and spending calculations. The economy only will grow when taxes are stabilized — with no new taxes; and when the Federal Reserve Board ends its inflationary, low-interest policies.

Moreover, “TruthSquad” doesn’t point out that even CalPERS doesn’t hold to that 8 percent figure. It recently cut its retrun expectations rate from 7.75 percent to 7.5 percent.

And CalPERS itself pays only 3.8 percent for “terminated pension plans” — those seeking to get out of its system. That’s the real amount that ought to be used in its own calculations.

Federal debt rising

Meanwhile, the U.S. government’s debt is $16 trillion and rising. And that doesn’t even include the debt for federal civilian and military pensions, Medicare, Medicaid and Social Security.

Look at this chart from an article on LewRockwell.com:

There’s nothing but economic disaster that can come from such a heavy load of debt. The fedeeral government will have to continue its recent policies of inflating the currency, meaning more economic stagnation.

Imposing President Obama’s “Buffett tax” won’t help. Assuming it works, it would raise at most $160 billion over 10 years, or $16 billion a year, according to the liberal Center for American Progress. But the budget deficit is more than $1 trillion a year. With interest on the $16 trillion debt also compounding, that $16 billion (note the “b) a year is like spitting in the Pacific Ocean.

Another ‘lost decade’

“TruthSquad” expects economic growth to pick up substantially  because it has in the past. But why should it? Japan already is in its third “lost decade.” America has had one “lost decade,” 1999 to 2009; and now is well into its second, 2010-2012. American economic polices, as outlined above, are as dismal as ever.

Unless you believe Mitt Romney is the reincarnation of the Gipper (I don’t), then there’s nothing but more doom and gloom.

The pension funds will cut more deeply into state and local budgets.

If you disagree with me, then there’s something simple to do: Work to end the taxpayer guarantee for pension payments to retirees. Currently, state and local taxpayers are on the hook for shortfalls in pension performance.

Well, if these pension funds are expected to rise by an average of 8 percent per year, then there’s no problem; there’s no need for a taxpayer guarantee.

Memo to “TruthSquad”: As we say in America, Put your money where you mouth is.