Another budgetary consideration looms large, however: spending cuts mandated by the sequester. The cuts were designed to hit popular programs in an inconvenient way to force a budget deal (that never materialized). The military, federally-funded scientific research and other popular programs were hit hard.

Although the sequester never had the catastrophic effects on the economy that some politicians predicted — the economy has continued to grow — it has adversely affected the military and scientific research. Recently, Army Chief of Staff Gen. Ray Odierno said that only two of the military’s 42 combat brigades are fully trained and ready. And sequester cuts have damaged innovative research programs with the potential to gin up billions of dollars of economic activity for businesses across the U.S.

Although conservatives and liberals may argue about the relative effects of sequester cuts on the economy, there’s a strong consensus that these clumsy cuts are not the best way to go about reducing spending. But no matter how much both Republicans and Democrats dislike the sequester, they equally oppose the other side’s solution to replace it.

California

So what does that mean for California?

A White House report released earlier this year, meant to drum up opposition to the sequester, outlined some of the impacts on California:

In California, the cuts would trim $87.6 million in federal funding for primary and secondary education, and $62.9 million from special education, the Obama Administration’s report said.

About 10,000 college work-study jobs would be eliminated, along with spots for 8,200 children in the public preschool programs Head Start and Early Head Start, the White House report said.

In addition, 64,000 civilian defense employees would be furloughed for some period of time, and army base operations would lose about $54 million in California, the report said.

About $3 million in funds for job support for the unemployed would also be affected.

Although creative accounting softened the blow, many of the impacts described did ultimately affect Californians, such as students who attend schools on military bases.

But there’s more. NASA would likely delay some of its missions:

NASA was able to largely avoid serious consequences from the first phase of sequestration budget cuts, but the next round poses a serious threat to the nation’s space program, according to congressional lawmakers and agency officials.

Those cuts could delay missions and imperil programs that already face tighter budgets and fiscal uncertainty.

“Sequestration will slit the throat of NASA,” said Sen. Bill Nelson, the Florida Democrat who once rode on the space shuttle and represents workers at Kennedy Space Center. “It’ll cut the heart out of the manned space program.”

The cuts would also slow research being conducted at Dryden Flight Research Center at Edwards Air Force Base, which is located near Lancaster.

Those hoping for some kind of a resolution shouldn’t be optimistic: It seems that the sequester is here to stay.

Does Timm bother to consider the possibility that this is sequester theater — another attempt by the Obama administration to make tiny cuts in overall federal spending hurt to build pressure on Congress to raise taxes? Does he consider the angle that the Army Corps could have made cuts elsewhere?

Nah. He’s got his glib, easy thesis and he’s sticking to it. Meanwhile, the Hill newspaper offers insight into why an agency that has a budget that has gone up may struggle to pay for things it used to handle:

“President Obama proposed a one percent pay increase for federal workers and military employees in a pair of letters to Speaker John Boehner (R-Ohio) sent Friday afternoon. …

“In a statement earlier this year, House Oversight Committee Chairman Darrell Issa (R-Calif.) said Obama’s push for a pay increase was ‘not necessary to retain talented employees and just wastes taxpayer money.’

“’Federal employees have continued to receive promotions and within-grade pay increases over the past few years of the supposed ‘pay freeze,’ and voluntary separations from the federal government are near all-time lows,’ Issa said.”

Issa, a Vista entrepreneur and the most successful businessman in Congress, frames the issue in exactly correct fashion: If present compensation is so generous that federal employees almost never seek greener pastures, then pay and benefits are obviously perfectly adequate. Not only shouldn’t they be increased, maybe they should be cut.

But in Washington, as in Sacramento, such logic prompts expressions of horror from unions. Why? Because government’s primary role isn’t to provide services to the public. It’s to provide really good jobs. They’re not mad at Issa. They’re mad at Obama.

“Instead of holding to its promise to protect the middle class and the working poor, the administration seems determined to contribute to a worsening of living standards for federal workers, disabled veterans, and the elderly,”  American Federal of Government Employees president J. David Cox Sr. told the Alabama Media Group.

The common-sense observations of Issa remind me of one of my many gripes with how reporters cover government: They don’t see obvious issues that are right in front of them. If upper management benefits from the same sort of automatic “step” pay increases as the rank-and-file, that’s a huge conflict of interest that leads to pay hikes. Duh. But do you ever see this mentioned in coverage of government pay negotiations? Never.

There’s also this avenue of ignorance: We continue to witness a productivity revolution in the private sector driven by information technology that began two decades ago and is still transforming industries, white collar and blue collar alike. Shouldn’t this bleed over into the public sector? Of course. The respected McKinsey consulting group has been making this point for nearly a decade.

“The opportunity to improve government productivity is huge … [with] three classic management tools . . . organizational redesign, strategic procurement and operational redesign.”

 But do journalists ever bring this up? Nope. Duh.

As I wrote at the time …

“The Transportation Department, parent to the FAA, has a $73 billion annual budget. Of course Transportation Secretary Ray LaHood could find another way to make his department’s share of budget cuts required by the March 1 sequestration of funds.

“Another word for this is ridiculous. The same Transportation Department has sent $3.5 billion to California for our bullet-train boondoggle.”

Soon after, Congress figured this out and ordered transportation officials to prioritize.

Uncritical regurgitation of Obama talking points

Now along comes a California example of the Obama administration’s attempt to make the sequester as bad as possible — and it finds an accomplice in Ventura County Star columnist Timm Herdt, who in a 700 words doesn’t even raise the possibility that the White House may be to blame for failing to prioritize federal spending or demand smarter decision-making from Army engineers:

“If there is any place in America where one can take a photograph of the obtuse federal process known as sequestration, it is in a small coastal community in Southern California.

“In the city of Port Hueneme, a beach that is typically as wide as a football field has disappeared. The Pacific Ocean is encroaching. It has already wiped out an outdoor shower used by beachgoers and undermined a sidewalk. It is threatening to breach a city street called Surfside Drive. Beyond that are homes, condominiums and public facilities. …

“‘We’re not a beach-resort community,’ says Mayor Ellis Green. ‘We are a humble town.’

“The winter is approaching, which will bring with it storms and higher tides. The seawater is creeping toward what Green calls a ‘catastrophe’ that could cause tens or hundreds of millions of dollars in damages.

“If this happens, it will not be a natural disaster. It will be a super storm brought about by federal budget paralysis.”

Later on, Herdt more specifically blames “leadership in the House” for refusing to ride to the rescue of the Army Corps of Engineers and fund needed work.

Never mentioned: Army Corps’ budget has gone up

Does he mention that the Army Corps of Engineers multibillion-dollar civil works’ budget is higher this year than last year, which certainly suggests what we’re seeing in Port Hueneme is sequester theater?

No.

Does Herdt mention that the sequester was the White House’s idea?

No.

Does Herdt mention the reports that lots of agencies that feared doom and gloom quietly prioritized spending and felt few effects from sequestration, as the Washington Post, Reason and many other publications have repeatedly reported?

No. Hey, Timm, even the Canadians  have figured out sequestration isn’t what it was billed. And note that an L.A. Times report insinuates this is all theater as well.

But in California, if you’re an opinion columnist, your default position is usually to find a way to blame everything on evil conservatives.

And so you conclude that the federal government — which had a $3.5 trillion budget last year and a $3.5 trillion budget this year — can’t handle its customary Port Hueneme protection responsibilities because of House Republicans.

Feel free to groan. And groan. And groan some more.

By Chris Reed

We’ve seen some very good reporting about the bullet-train fiasco from around the state. The two best recent examples are stories outlining the chicanery in the bidding process for the contractor for the first segment and describing how the California High-Speed Rail Authority has lost support from key early advocates of the project.

But what’s needed is for someone to focus like a laser on the funding prospects for the second segment of the bullet train before we spend billions on the first. A U.S. Government Accountability Office report in December said that $39 billion more in federal funding would be needed for the project to complete its San Francisco to Los Angeles route, with $20 billion specifically to complete the first segment.

However, as I noted in today’s U-T San Diego editorial, hopes for such federal largesse are now pretty much dead:

“The congressional directive to the FAA to end air traffic controller furloughs strongly suggests the demise of the president’s contention that the March 1 budget sequestration requires proportional cuts across a vast range of departments instead of smart, focused cuts that establish and reflect national priorities. …

“This in turn suggests that we have just begun an era of relative frugality in Washington, D.C., after years of the federal government spending 40 percent more than it took in.

“And what does that mean specifically for California? That the state bullet-train project looks more futile than ever. Discretionary domestic spending is going to pretty much disappear in the post-sequester era. What does a December Government Accountability Office report on the bullet train say will be needed to build the second segment of California’s project after the $13.4 billion in committed state and federal funding is used up? Billions of dollars in federal funding –- i.e., discretionary domestic spending.”

Media ignore link between sequester fight, bullet train

Yet nobody in the California media besides the U-T has made the link between last month’s federal budget showdown and the state bullet train project. If they did, then this would be the conclusion that everyone but rail cultists would come to:

“The California High-Speed Rail Authority has attracted no private investors because such investors want revenue guarantees the state cannot legally offer. The federal government -– or some unlikely foreign benefactor –- is the authority’s only hope for funding to build its grand project. If the federal option is gone, should we really spend billions on an instant white elephant in the Central Valley?

“The answer is, no, of course not. But as long as Gov. Jerry Brown is in denial on bullet-train realities –- starting with but not limited to the death of the federal funding option -– here comes a boondoggle for the ages.”

John and Ken’s preferred shorthand for the project — the Browndoggle — should be what we call the white elephant that’s soon to rise in the Central Valley. Our alleged savant governor is the opposite of a genius on this topic. We’ll soon see a multibillion-dollar monument to his obliviousness.

By Chris Reed

The Federal Aviation Administration’s announcement that 11 air control towers in California will shut down on Sunday, April 7, because of sequestration cuts to the federal budget is offered up by the administration as unfortunate but inevitable. But a Los Angeles Times account was refreshingly tart about what’s really going on:

“Critics have questioned whether the closures were necessary or part of a tactical gambit to gain leverage in Washington’s ongoing budget battles. The contract tower association’s executive director, Spencer Dickerson, said in a statement that ‘aviation safety shouldn’t be politicized.’

“Many smaller airports operate without control towers, with pilots using radio communications to coordinate movements in the air and on the ground.

“Still, local officials responsible for airport operations in Southern California’s busy airspace said the FAA’s decision is worrisome. Los Angeles County Supervisor Michael Antonovich chided the government for a ‘politically motivated decision.’ Shutting down towers would have little impact on spending levels, he said, but a big impact on public safety.”

The Times’ insinuations are welcome. Does anyone truly believe that the Obama administration is dealing with $85 billion in cuts in a  $3.6 trillion budget in a way that reflects best management practices and a desire to maximize safety?

Nah. In the White House’s never-ending attempts to demonize anyone who doesn’t want spending to go up now and forever, we’re seeing scary decisions by the Federal Aviation Administration — decisions that could lead to fatal crashes and accidents.

Wouldn’t a federal wage and hiring freeze make a lot more sense than shutting down air control towers? Of course.

The California-style twist to the federal sequester

Here’s the context to the FAA’s decision that doesn’t get the focus it should. Federal employees aren’t losing their jobs — just contractors:

“The U.S. will close 149 air-traffic control towers run by contractors at small- and mid-sized airports beginning on April 7 as a result of automatic budget cuts at government agencies.”

That’s Bloomberg’s lead to its March 22 story. So public employees are insulated from the consequences of government budget chaos.

How very California of Washington.

By Chris Reed

President Barack Obama’s re-election has led some California small-government types to pull back on their criticism, perhaps thinking that the Chicago Republican must be doing something right if he can win the Golden State’s popular vote by 23 percent with the state economy in such terrible shape.

But the California electorate’s conclusions can’t hide the wreckage from Obama’s years in the White House. He’s been one of our worst presidents, a smug faculty-lounge smart guy who has no understanding of or sympathy for the private sector — as well as being the epitome of the liberal big-spender who thinks you can print borrowed money for years on end with little consequence. And on the management front, for all his political savvy, the president’s administration is loaded with examples of incompetence and wastefulness.

Case study: the Federal Aviation Administration. When the stimulus bill’s $800 billion was being spread around, the FAA was insanely wasteful, according to an internal probe released in August 2009:

“Officials in the U.S. Department of Transportation have allocated millions of dollars in stimulus funds for small airports, even though the projects did not qualify for funding under the criteria established by the agency. The findings were uncovered by the Transportation Department’s inspector general, whose August 7 advisory reported that 50 projects were given money despite the fact that they scored less than the minimum required 62 on a 0-100 scale created to determine eligibility for federal stimulus funds. Inspector General Calvin Scovel III said the Federal Aviation Administration chose low-priority airports for stimulus money so that every state got at least some of the funding.

“One example cited in the IG’s report was the new airport in the remote Alaskan village of Ouzinkie on Spruce Island, population 167, which received $14.7 million even though it already had a gravel airstrip, landing area for sea planes and access to cargo barges. Ouzinkie averages 42 flights a month.

“An airpark near Dover, Delaware was given $909,806 to design (rather than build) a runway because that was Delaware’s only ‘ready-to-go’ project.”

Before that report came out, Pro Publica and CBS News also had this stomach-turning scooplet:

“The Federal Aviation Administration has now allocated all of its $1.1 billion in stimulus money for airport improvements. But the complex set of rules laid out in the recovery act has led to some counterintuitive results.

“The biggest winners aren’t the busiest airports. And more than $100 million is going to airports that have fewer than one flight an hour—airports that cater to recreational fliers, corporate jets or remote communities.”

Prudent cuts? Nah! Let’s endanger people!

By Chris Reed

The fallout of the sequester continues to be widely discussed, with the conventional wisdom being that President Barack Obama and his political team made a rare and serious miscalculation with their attempts to panic the American public over a 2.4 percent cut in a gigantic, bloated federal budget.

But here in California, there has been no analysis that I’ve seen that notes what post-sequester politics could mean for the MOAB (Mother Of All Boondoggles) that is the California bullet-train project.

In the national press, I have seen several stories that accept as a given that the president won’t try to fight to have the $85 billion in cuts restored with new revenue. Instead, there will be small-ball efforts to change the sequester cuts to make them smarter. And there will be a big-picture focus on trying to craft the old “grand bargain” on entitlement changes paired with tax reform and tax hikes.

Senate Democrats accept spending restraint as given

But having blinked on the sequester, the White House is unlikely to keep fighting for big discretionary domestic spending on stimulus-type (alleged-stimulus-type) programs like federal funding for the California High-Speed Rail Authority’s adventure in the Central Valley. That inclination to spending restraint extends to the Senate. This is from today’s Washington Post:

“Senate Democrats said they were ready to pass a spending measure to pay for day-to-day federal operations through September. The measure would impose automatic cuts of 5 percent to domestic agencies and 7.8 percent to the Pentagon.”

Obviously that is a ploy to get House Republicans to the table because the cut is harsh for their beloved Pentagon. But it implicitly accepts as a given that going forward, domestic spending isn’t going up.

So after the present $3.5 billion in committed federal funding is spent, bye-bye Uncle Sam as source of cash. In the looming, overdue era of budget austerity, lawmakers from 49 states aren’t going to want to print tens of billions of borrowed dollars to help out California.

And since Uncle Sam is the only source of money for the project after California blows through its $9.95 billion in bond funds from the 2008 ballot measure, we’ll have a white-elephant first segment in the Central Valley and nothing more.

Unless, of course, Gov. Jerry Brown finally figures out how insane his beloved project truly is.

By Chriss Street

Last week in my article here, “Misery Index about to soar in CA, US,” I warned that a rise in a combination of inflation and unemployment, known as the Misery Index, could “distort financial markets.” And it could result in “significant capital losses” on their huge bond investments of the U.S. Federal Reserve. These distortions and losses would slam the economy, especially in California.

This week, Morgan Stanley heightened those concerns by stating that, if the economy contracted and inflation continued to rise, the U.S. government could suffer a loss of $547 billion on the Fed’s massive portfolio.

Given California’s heavy dependence on federal spending, the state’s treasury would be hit hard. According to a study by the California Budget Project, “In federal fiscal year (FFY) 2010, which ended September 30, 2010, $333.8 billion in federal funds came to California. Most of those dollars went directly to Californians without passing through the state budget.” Most of that money went to Social Security, Medicare, military pensions and other direct payments to persons.

Also, the study found that, for the state government, federal spending was “$91.5 billion in the 2010-11 budget — approximately 40 percent of total state expenditures.”

If the Fed’s portfolio loss leads to reduced federal-budget expenditures, California would lose the most of any state.

Bernanke testimony

In his semi-annual testimony to Congress on monetary policy and the economy this week, Federal Reserve Chairman Ben Bernanke was forced to try to reassure financial markets that there was only a very low possibility of an imminent financial crisis.  He calmly said, “Where the problem still remains unaddressed is in the longer term. And so it doesn’t quite match to be doing tough policies today when the real problem is a somewhat longer-term problem.”

Bernanke went to great lengths to make the case that central bank money printing and bond speculation were prudent stimuli to reinvigorate the American economy. He specifically pointed out that Fed’s easy-money policies have held down interest rates and helped a revival in the housing market and car sales.  The chairman also pointed out how a weak job market was more responsible than the Fed for keeping inflation low.

But as I had pointed out, the low inflation rate reported in of the Consumer Price Index has been dramatically understated because 41 percent of the index is real estate returns, which have been down over the last four years. And according to the McKinsey Global Institute Commodity Price Index; the prices for food, raw material, metals and energy prices rose over the last four years to historic highs.

During the same period, the price of a gallon of gas rose by 132 percent. And recently the costs of food rose by 8.1 percent. Now that the Fed money-pumping is providing below-market interest-rate financing, real estate inflation is jumping and the CPI will soon spike higher.

Sequestration

President Obama has been desperate over the last two weeks to try to avoid the 2 percent federal spending cuts that are part of the financial sequester.  But even after this modest reduction is implemented, the Congressional Budget Office projects that, over eight years, his administration will have engaged in $7.5 trillion in deficit-spending  and the national debt will almost have doubled.

Bernanke tried to help the president’s cause by uttering the usual concerns that suffering by millions of long-term unemployed was good reason to not make cuts until the economy recovered.

Bernanke was given good marks for his congressional performance.  The stock market rebounded and Diane Swonk, chief economist at Mesirow Financial in Chicago, said of Bernanke’s testimony, “Those worried that the Fed may end large-scale asset purchases prematurely should be reassured.”  But as I remember, those nice folks from Chicago were also very positive in November 2008 with the election of Barack Obama.

Wasn’t that right before the last financial crisis, where the stock market lost 50 percent of value and unemployment skyrocketed to more than 13 percent in California?

CHRISS STREET & PAUL PRESTON

Present “The American Exceptionalism Radio Talk Show”
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