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 Chris Reed

Reports that the California High-Speed Rail Authority and Amtrak are teaming up to buy bullet trains and that the state is preparing for hundreds of eminent-domain property seizures in the Central Valley for the bullet train’s first segment are grim reminders that common sense and fiscal responsibility are under siege in Sacramento and Washington.

But however one feels about the $68 billion bullet train project, its 50-month journey from the California ballot box to the present day should give pause to those who believe in the law, due process and democracy. Both a plainly written state law and crystal-clear federal regulations were supposed to protect taxpayers from the project proceeding if there were warning bells about its viability and prudence. In California, the warning bells haven’t been occasional; they’re so constant as to be deafening. Yet the project keeps moving along.

In November 2008, California voters narrowly approved Proposition 1A, providing $9.95 billion in state bond seed money for a statewide high-speed rail system. Virtually all the promises that were made to win over reluctant voters have proven to be gross exaggerations — whether on cost, ridership, job creation or the likelihood of substantial private investment. But deceptive ballot campaigns for state propositions are legal.

A business plan built around an illegality

However, the state law that was enacted with the passage of 1A is a binding document on the government of California — at least in theory. But the latest version of the rail authority’s business plan, released last May, showed a project on path to run afoul of state law in essential ways.

The business plan continues to assert that there is a likelihood of substantial private investment. But such investment can only be attracted with ridership or revenue guarantees that Legislative Analyst Mac Taylor and others say violate Proposition 1A’s guarantee that there will be no taxpayer subsidies of operating costs. If the guarantees aren’t met, taxpayers have to make up the difference to investors.

Then there is the basic issue of speed. Under the unusually specific language of Proposition 1A, the bullet train is supposed to connect San Francisco with Union Station in Los Angeles, about 382 miles, in a “maximum express service travel time” of two hour and 42 minutes — averaging a minimum of 141 mph. But in order to shave $30 billion off the project’s cost, the Brown administration gave up on bringing true high-speed rail to Los Angeles and its northern suburbs and to Silicon Valley and the peninsula south of San Francisco. The “blended approach” planners now recommend calls for linking the southern end of Silicon Valley with the northern exurbs of Los Angeles with a high-speed rail route that is integrated at each “bookend” with existing rail.

But if the first 50 miles and the last 50 miles of the route are in heavily populated areas where speeds must drastically slow, getting from Union Station to San Francisco in the mandatory 162 minutes or less looks impossible. Perhaps this is why the 212-page business plan is mum on the topic — even though a memo distributed to the rail authority board last year anticipated a three-hour trip, the same estimate that was used in legislative debates last summer before final approval was given to spend $8 billion of state and federal funds to begin building the first segment of 130 miles in the Central Valley.

Once again, the language in Proposition 1A forbidding operating subsidies and mandating minimum train speed aren’t guidelines or goals. They are the law of the state of California.

The ‘betrayal of Californians’ is at hand

In a 2011 interview I did with Howard Jarvis Taxpayers Association President Jon Coupal on KOGO 600 AM, we discussed the protections that taxpayers appeared to have from the boondoggle proceeding. Coupal told me that if Gov. Jerry Brown and the Legislature ignored the safeguards written into Proposition 1A, it would be a “betrayal of Californians.” The betrayal is at hand, Coupal noted last week in an email exchange.

But it’s not just Californians being betrayed by the bullet train project. It is all U.S. taxpayers. Federal regulations governing the spending of the $787 billion 2009 stimulus have the force of law. When it comes to the $3.5 billion in federal funding to be used for the Central Valley high-speed rail segment, these rules are simply being ignored.

The specific rules on the use of stimulus funds for state high-speed rail projects were published in the Federal Register on June 23, 2009. They said states could only receive stimulus funds if “rigorous analysis” showed their proposals had a sound “financial plan (capital and operating)” that reflected well upon the “quality of planning process” and had financial estimates reflecting “reasonableness.”

So much for “rigorous analysis.” The present bullet train’s financial plan depends on private investment that will never be forthcoming and upon tens of billions of dollars in new federal funding in the exact category — discretionary domestic spending — that is likely to wither as Washington acts to reduce trillion-dollar deficits. Its planning process has been chaotic; the decision to build the first link in the Central Valley was imposed on the state rail authority by the Obama administration only after years of planning that anticipated initial work in the state’s most populated areas. And “reasonableness” is not a word that will be associated with the project’s financing, given that it is based on assumptions of private investment that will never be forthcoming — at least without illegal promises of taxpayer subsidies if ridership or revenue is less than projected. This broad skepticism isn’t just from California small-government ideologues. It is shared by, among many others, the editorial page of The Washington Post.

‘Federal standards aren’t being met’

“None of the federal standards are being met,” state Sen. Mark Wyland, R-Encinitas, told me in an email. “If improving transportation for Californians is the goal, then we are idling on the wrong track. The federal government needs to realize that this plan is a money pit.”

Unfortunately, the highest-profile legal challenge to the project seen so far has struggled to gain traction. Three lawsuits are being heard in a single trial in Sacramento Superior Court. They allege the project’s environmental impact report didn’t meet California Environmental Quality Act standards and had key details approved in a manner that violated open-meeting laws.

But what’s needed is a lawsuit that is much more basic and builds on the original wording of Proposition 1A. The bullet train has to have a legal business plan, and it has to get from Union Station in L.A. to San Francisco in two hours and 42 minutes or less. If it can’t meet these conditions, that should matter to judges and juries who believe we are nation of laws, not men.

Katy Grimes: The phony green jobs that I have been writing about for several years are just another inconvenient truth in this administration.

The U.S. Labor Department’s Inspector General just released a report on Friday revealing that President Obama’s green jobs training program went up in smoke.

Bad news from the government always is released on Friday.

In addition to a failed stimulus program, the Obama green jobs program wasted another $500 million dollars from taxpayers.

The report found:

In the three and a half years since the stimulus bill was signed, the green jobs program has only placed 11,613 individuals into jobs that have been retained for more than 6 months. That’s only 16 percent of the total goal.

Only 30,857, or 38 percent, were placed into any green jobs at all.

Even with these damning numbers, the Labor Department put out its own statement disagreeing with the Inspector General: “This report does not take into account that nearly half of the grants are still active and thousands of workers are still participating in the program,” a statement said.

The Obama administration’s plan was to create 700,000 green jobs in clean tech energy.

The bad news

According to the newly released report requested by Oversight Committee Chairman Darrell Issa and Oversight Subcommittee Chairman Jim Jordan, the report revealed that the Department of Labor has further squandered taxpayer money since the program was flagged by the IG last year.

“The green jobs training program belongs in the long list of the Administration’s bad investments including the bankruptcies of Solyndra, Beacon Power, Abound, and just this month, A123,” said Issa. “Not only was the program poorly thought-out, mismanaged and dysfunctional, but it served as a slush fund to reward friends of the Obama Administration. Millions of dollars went to groups like the National Council of La Raza, the Blue Green Alliance and the US Steelworkers union,” Issa stated.

Here is the Congressional hearing where Issa learned what a green job really is:

Worse news

DOL trained more criminals than veterans: 9 percent of the people who received training (about 10,000 individuals) had criminal records, while 7 percent were veterans.

Poor results: Out of a target of 81,254, grantees collectively reported 30,857 participants (38 percent) entered employment

Of the 81,354 participants who completed training, 42,322 (52 percent) already had jobs.

Of the 81,354 participants who completed training through the Green Jobs program, 38,366 received 5 days or less of training, of which 17,374 received only 1 day of training.

According to the Inspector General, “Grantees were authorized to train incumbent workers who needed training to secure full-time employment, advance their careers, or retain their current jobs. However, for the 81 incumbent workers we identified in our sample, we found no evidence that they needed green job training for any of these purposes.”

“The sampled grantees were unable to provide documentation for 24 percent of sampled participants reported as entered employment,” The IG reported. “Moreover, they could not provide documentation for 33 percent of sampled participants reported as entering training-related employment and 44 percent of sampled participants tested for retention.”

I really hate to say “I told ya so,” so instead I”ll just ask all of you greenies how it feels to have so much smoke blown up your skirts?

The Inspector General’s report is HERE.

By Wayne Lusvardi

Imagine you can get in a time machine and fast-forward to the year 2032 in the Poway Unified School District, the third largest school district in San Diego County.  In that year, $981 million in deferred interest on a $105 million bond for school facility improvements will become due and payable.  That is nearly 10 times what the school district borrowed in 2012.

Imagine paying a $1 million mortgage for your one-bedroom tract home worth only $100,000 in 2012. (Typically, bonds only have to pay double what was borrowed, just like your home mortgage — not 10 times.)

By 2032, nobody can sell their home in the Poway area due to the huge property tax liens on every property.  And the large proportion of over-mortgaged homes — also called “underwater mortgages” — is still depressing home values in 2032 in the Poway area.  The $105 million borrowed in 2012 to improve school buildings stimulated the local economy.  But, by 2032, the Poway economy is now stagnant.  The largest industry is financial-disaster tourism, like in Detroit today.

Poway cannot attract new teachers because their pension plan is broke.  Local churches have had to take over the school system so that the education of a future generation is not lost.  The school board now leases the former renovated school buildings to churches for a dollar a year in rent.

No bond investors will loan funds for any public improvement project in the area, such as repaving roads or repairing broken water pipes. The burden of bond debt is too high for any more debt to be added.

Poway is a local example of present-day Detroit. Detroit still thinks that every Starbucks is an economic jobs multiplier worth $1 million and that corporate bonds for the unionized auto industry will be paid back by some federal bailout.  Poway’s unionized school district is the equivalent of Detroit’s unionized auto industry.

‘Capital appreciation bond’

The mechanism in this future economic disaster is something called a “capital appreciation bond.”  It is the bond equivalent of a “negative amortizing home loan” where the interest owed is just added to the loan principal for 20 years.  A capital appreciation bond is worse than an interest-only loan where the repayment of the principal amount borrowed is deferred to the future in a so-called balloon loan.

In a “capital appreciation bond,” the interest just keeps growing, and both the principal and the interest become due in 20 years. By then, the $105 million originally borrowed by the Poway School District has become $981 million by 2032.  And it won’t be paid off until 2052.

The official statement of Poway’s School Improvement Bond makes no mention that it is a capital appreciation bond and does not disclose the terms and conditions of payment of the bonds.

Capital appreciation bonds are the 2012 equivalent of what “sub-prime loans” were to low-income borrowers and “collateralized mortgage bonds” were to lenders during the Housing Bubble of the last decade. Capital appreciation bonds are highly risky debt instruments for local governments only with tax-exempt bond financing.

The Poway Unified School District has become the local government equivalent to Lehman Bros. or Countrywide Financial.  The bond houses that may fund such debt will become the new Fannie Mae and Freddie Mac.  The California State Debt Advisory Commission has become the new Standard and Poors bond rating firm.  Mark Saladino, the Treasurer-Tax Collector of Los Angeles County, has prepared on open letter warning about capital appreciation bonds.

Poway 2032

In 2032, Poway will have become a public joke.  Hedge funds were the rich man’s way to make money in risky investment markets during the Housing Bubble from 2003 to 2008.  Sub-prime home equity loans were the poor man’s way to make money during the Bubble.

Now, capital appreciation bonds are the “poor community’s” way to borrow its way out of insolvency in the aftermath of that Housing Bubble.  Hence the term: “the right way, the wrong way, and the Poway” or poor way.

In 2012, the Poway school district is betting that future population growth, housing development, and increases in property values will bail out what appears to be an un-payable debt.   The state of Michigan has had to ban school districts from issuing such “capital appreciation bonds” for areas like Detroit ,where the old auto industry economic base collapsed.  But apparently, in the economic disaster zone of California, for local government and public schools there is no such restriction.

What is worse, by 2032 the cancer of capital appreciation bonds may have spread to the gigantic Los Angeles Unified School District.  Seeing what little Poway was able to do, Los Angeles may be tempted to swallow such a poison pill in the hope of curing its financial cancer.

Some 63.9 percent of voters in the Poway area approved a second school improvement bond for $179 million in 2008.  This would not have passed had the two-thirds supermajority vote requirement for taxes under Proposition 13 been in effect. But that was overturned by voters and replaced with a lower 55 percent voter threshold for bond financing of school building improvements.

Ironically, Prop 13 could have prevented the future disaster that the Poway school district is headed for.  But in 2012, teacher’s unions and the Democratic Party erroneously claimed that the money problem that public schools faced was due to Prop 13.

In California circa 2012, there is the right way, the wrong way, and the Poway to bail out debt-laden communities.  Foreclosures, short sales, reformed public pension and health plans, cutbacks of “categorical” jobs and political earmarks, and budget austerity rather than bailouts would be the right way.  The wrong way would have been to continue with the status quo.  But the Poway was to pile more debt on top of existing debt in the hope of a magical self-bailout that can only end in disaster.

By Wayne Lusvardi

President Barack Obama’s “stimulus” flying saucer landed in California in February 2009. This isn’t something from Steven Spielberg’s “E.T.: The Extra-Terrestrial.” It’s the actual description from Paul Krugman, the Nobel Prize-winning economist and New York Times columnist.

Krugman is quoted in the new book, “Debacle: Obama’s War Against Jobs and Growth,” by John Lott and Grover Norquist. Lott is a well-known economist at the American Enterprise Institute. Norquist is the president of Americans for Tax Reform, a taxpayer advocacy group.

Krugman:

“If we discovered that space aliens were planning to attack and we needed a massive buildup to counter the space alien threat, and really inflation and budget deficits took secondary place to that, this slump would be over in 18 months.  And then if we discovered, oops, we made a mistake, there aren’t any aliens, we’d be better off.”

Thirty-eight months later, there is, as predicted, a growing state budget deficit and looming inflation from California’s new green laws. But there is no significant economic recovery, either.  In fact, California may be headed for a double-dip recession in 2013 and 2014. What happened?

We thought by now that the space aliens from “Planet O” would have won California’s war over global warming, its water wars and its war against Proposition 13.  For as former White House Chief of Staff Rahm Emanuel said, “You never want to see a crisis go to waste.”  So the Mortgage Meltdown of 2008 was used as an excuse to run around Prop 13, home rule, and eventually California’s Constitution.  Government avoided having to adjust wages, home prices and public pensions from inflated levels during the Mortgage Bubble.  Now it has announced it is running a $16 billion deficit. California’s budget flying saucer just doesn’t want to come back down to planet earth.

The federal stimulus program ended in July 2011.  But 2012 is an election year.  So Obama and California Attorney General Kamela Harris have shaken down commercial banks for another $18 billion bailout in the guise of a foreclosure fraud settlement.  To do this, California must circumvent its State Constitutional ban on giving a “gift of public funds” to homeowners. But who cares about the rule of law? Obama will do anything to get elected. Obama’s economic stimulus movie might as well have been written, produced and directed on a stage set in Hollywood.  But it died at the box office.

California’s decline due to stimulus

Lott and Norquist have written a well-documented book on why Obama should not be re-elected, due to his poor track record on jobs and economic growth.  Though they don’t provide any specifics on California in their new book, the chapters of their book could easily be applied to California:

Chapter 1: The Financial Crisis — California is ground zero of the foreclosure crisis as shown by the $25 billion foreclosure settlement funds coming to California.

Chapter 2: The Worst Recovery on Record — California is lagging behind every other state in economic recovery.

Chapter 3: The Stimulus Made Things Worse — the stimulus postponed the reduction of government wages, home prices and public pensions resulting from the Mortgage Bubble that would have brought about a rapid recovery.

Chapter 4: Would the Economy Have Been in Worse Shape without the Stimulus? — The foreclosure fraud settlement will prolong California’s recession and circumvent the constitutional prohibition against giving homeowners a gift of public funds.  The federal Department of Energy’s $535 million loan guarantee to California-based solar panel manufacturer Solyndra ended up with the company taking the money and jumping on a flying saucer as soon as the loan was approved.

Chapter 5: Regulatory Thuggery — Due to a federal EPA crackdown on fracking permits — oil drilling by hydraulic fracturing of rocks — California’s oil well permits dropped from 71 in 2009 to 7 in 2011, a 90 percent drop.

Obama’s war against jobs and growth

When Obama was elected in 2008, it gave Democrats a supermajority.  Obama signed Sen. Dianne Feinstein’s H.R. 146 — San Joaquin River Restoration Act — as part of the Omnibus Lands Act of 2009.  This bill transferred contracted water from San Joaquin Valley farmers to commercial fishing, recreation, lodging and real estate development interests in a water grab.

The amount of data and documentation Lott and Norquist have amassed won’t convince their opponents if all the reader reviews at Amazon.com are any example.  No matter how convincing this book is, the text is bound to make opponents only more prone to denial and strengthen their opposition. Social psychologists call this “cognitive dissonance” — information at odds with one’s core beliefs that threaten one’ livelihood or social status typically results in one’s beliefs only getting stronger.

But reality still intrudes. As Lott and Norquist show, another four years of Obama would drive the economic train off a cliff — with California riding in the first car.